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Las Vegas Sands Corp (NYSE:LVS)
Q2 2019 Earnings Call
Jul 24, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Laura, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Las Vegas Sands Second Quarter 2019 Earnings Conference Call. [Operator Instructions]. Speaker Daniel Briggs, you may begin your conference.

Daniel Briggs -- Senior Vice President, Investor Relations

Thank you. Joining me on the call today are Rob Goldstein, our President and Chief Operating Officer; and Patrick Dumont, Executive Vice President and Chief Financial Officer. Before I turn the call over to Rob, please let me remind you that today's conference call will contain forward-looking statements that we're making under the Safe Harbor provision of Federal Securities Laws. The company's actual results could differ materially from the anticipated results in those forward-looking statements.

In addition, we may discuss non-GAAP measures, a definition and a reconciliation of each of these measures to the most comparable GAAP financial measures is included in the press release. Please note that we have posted supplementary earnings slides on our Investor Relations website, we may refer to those slides during the Q&A portion of the call.

Finally, for those who would like to participate in the Q&A session, we ask that you please respect our request to limit yourself to one question and one follow-up question, so we might allow everyone with interest an opportunity to participate. Please note that this presentation is being recorded. With that let me please turn the call over to Rob.

Robert G. Goldstein -- President and Chief Operating Officer

Thank you, Dan and good afternoon, everyone and thanks for joining us today. We want everyone to know that Sheldon is doing fine. Patrick, and I were there last week in Israel, and he is in great spirits. We look forward to him rejoining our next conference call in October.

Let's get to our results, we had another strong quarter across all of our markets. Company adjusted EBITDA was $1.27 billion. In Macao, adjusted property EBITDA was $765 million, up 2% over the prior year. We grew our mass table and slot revenues by 6% over the prior year with record volumes in the base mass table segment. Our market share for the quarter was approximately 23% consistent with prior year. More importantly, our profitability continues to lead the industry with EBITDA margins at 35.6%, up 20 basis points year-on-year.

The Parisian Macao had a strong quarter with adjusted EBITDA of $139 million with mass win per day growing by 27% year-on-year, aided by the introduction of our new suites. During the quarter we celebrate the 15th anniversary of the Sands Macao opening, which really marked the beginning of Macao's amazing transformation. Sheldon's vision more than decade ago to create the critical mass of integrated resorts in Cotai with hotel, entertainment retail and MICE facilities positions us well for the future.

There is no better market in the world than Macao, with regards to continued deployment of our capital. We look forward to making additional investments in Macao as it contribute to Macao's diversification and evolution in the Asia's leading leisure and business tourism destination. With the opening of the Hong Kong Zhuhai and Macao Bridge and the ongoing development of the Greater Bay initiatives, which we believe, Macao has the potential to become the MICE capital [Phonetic] of the Asia and we fully intend to contribute to that goal, both through our existing assets and future investments.

Let's turn to Singapore, adjusted EBITDA was $346 million, normalized EBITDA was consistent with prior year at $384 million. Rolling volumes increased by 23% over prior year, while mass win per day was consistent year-over-year in Singapore dollar terms. The hotel continues to enjoy strong occupancy and the retail sales per square foot increased by 10%. Our Las Vegas operations had a very strong quarter with adjusted EBITDA of $136 million. During this quarter, we completed the sale of the sale of Sands Bethlehem. This project has been a great success for the Company, not just financially, but in terms of positive impact on the wider regional economy and local community. It's a great example of our developments can drive economic growth for our host communities. I'd like to thank all the team members of Sands Bethlehem for their dedication and professionalism over the years and wish them the best of luck in the future.

Finally, we continue to increase the return of capital to shareholders. In addition to our regular dividend and we repurchased $180 million of stock in the quarter. Thanks for joining us today. Let's go the questions. Dan?

Daniel Briggs -- Senior Vice President, Investor Relations

Operator, we're ready to begin the question-and-answer session.

Questions and Answers:

Operator

[Operator Instructions] We have a question from the line of Felicia Hendrix from Barclays. Your line is open.

Felicia Hendrix -- Barclays Capital -- Analyst

Good afternoon. I'm pleased to say good morning. I think it's because the new fonts on your deck through me, Dan. So just looking at your mass results with the base up almost 15% and premium mass down about 4%. Rob, just wondering if you could talk about the complexion of the premium mass declines? Was it mostly in the premium mass with it across the whole segment? And also just wondering if you could talk about the performance fees of either ramping premium product in the market? So I'll stop there and then I'll ask my follow-up.

Robert G. Goldstein -- President and Chief Operating Officer

Thanks Felicia and apologies for Dan's font. I show you pain. Let's put base mass and premium mass segments in perspective. Our drop in the second quarter, I think it was about $6.1 billion that was up year-on-year and also quarter-on-quarter. So think about that for a second. Second quarter drop actually exceeded our first quarter, despite Chinese New Year and the seasonality issue. And I think you all know that Q2 is typically our weakest quarter. We have the largest base mass business by far in Macao and this quarter's performance was exceptional. On the largest base in the market, we grew another 14.7% year-on-year. I think the bridge has been helpful, but the real story here resides in our capacity and lodging, gaming, entertainment and retail assets. We dominate the base mass segment and our competitive advantage is undeniable and live on for quite a few years, I believe.

So let's look at our premium mass business, which you referenced as well. Again, we have the largest premium mass business in Macao and the largest margin in that segment. Volumes were consistent and that's with Q1, our miss came in the whole percentage not in the volume. The volume is there, the whole percentage wasn't. To put in perspective, our mass business and premium mass business exceeds $25 billion a drop annually, based on current run rate. So a miss in whole percentage of a point or two or perhaps three creates a massive impact on our results. I guess this is demonstrated by the results in this segment from Q1 versus Q2.

You can do the math and realize the swings here are in the hundreds of millions of dollars on annualized basis. But let's discuss we're doing about next couple of years. While others are talking about what they're going to build down the road, we are building. We are building 1,200 exceptional suites of Londoner and the Four Seasons and these are large, very large stunning suites of the highest quality will open throughout 2019, some opened actually this fall throughout 2020 and these suites are laser-focused on the premium mass customer at the highest level.

our suite product SCL, our suite product will exceed most of our competitors total key count by the end of 2020. Macao rewards quality product and scale and we have the product to drive exceptional premium mass play as a result of our products. We expect to dominate that segment in the same manner, we dominate base mass play. The future Macao today and tomorrow is mass and premium mass and we believe rolling in junket business will be helpful, the real future lies -- our growth relies on mass and premium mass growth. The profit drivers remain these segments and the absolute driver of these segments is product, product of scale and quality.

We made on this phone call, a couple of years ago, a very large strategic bet on the future Macao and we decided to invest over $2 billion at a time others were unwilling and uncertain. We made that bet. That decision we fund the center next year as we complete the Four Seasons suites. We'll have approximately 3,000 suites in the Macao and that excludes the 750 square foot suites at the Venetian. If you include those, our portfolio is over 5,500 suites. Macao's future growth will be in the mass segment. Our structural advantage is already evident in the base mass. This will not change, our goal is to extend the advantage in the premium mass segment. In the next 18 months, we'll see the introduction of the product that is superior from a design perspective, but also on a scale perspective.

And that proved -- that will be proven out in the next few years in our performance as we get stronger and stronger in this premium mass segment. We are very sure about how we feel that this product and how we will perform in the market. So maybe add some color to the volume issue as well as the whole percentage issue, Felicia.

Felicia Hendrix -- Barclays Capital -- Analyst

Yeah, it is, and just to kind of follow up on that. I mean you guys actually did come in under the mass side better than we were expecting on both mass and both the volume and the whole, the win rather. But just kind of looking sequentially, both at your mass market share and even your VIP share it looks sequentially like you did lose some share and I'm assuming that is kind of what you were alluding to in those comments on that premium mass side and on the VIP side, there is some new product now and you're rolling years out next year, so maybe you could just...

Robert G. Goldstein -- President and Chief Operating Officer

I think to that point, we -- again we'll be real clear about this. Our success this quarter is at 14% year-on-year growth in base mass shows the power of these products we have currently in the market. But I think our future success will dominate base mass, but I think for the next five years, I don't see anything else happening in the market that would hurt us in terms of that growth, but we really want to focus and be laser focused on that premium mass customer. We believe that customer responds to product. So you open the Londoner with approximately 5,800 keys, a brand new facade, brand new casino floor, you get that Four Seasons building open with 290 super large suites of quality. The same thing with the suites in Londoner on the Apex side and all of a sudden you had a product that probably undeniable to our suite capacity along with out retail and the other products we have in that market entertainment.

I think it puts us in position for the future, it's dominant. I just believe that I think the success at Melco and Morpheus is evident. We've seen that time and time again product works in this market. We are dedicated to give you not just large-scale product, but a great quality product and I think our success of Parisian as evidenced by the call via comments in the opening, we opened that hotel to about $100 million run rate per quarter is now more $140 million, $150 million, $160 million, it's a $600 million store performing very, very well and the growth there comes at a premium mass in that new suite product at the Parisian. We expect the same to happen. We've seen this at Venetian. We've seen the Parisian, it will happen again at Four Seasons, think about a brand new Four Seasons building with gaming capacity, 290 exceptional suites and then on top of that we opened Londoner. Our portfolio is going to be in a very different place inside the next 18 months.

Felicia Hendrix -- Barclays Capital -- Analyst

Okay. But for this quarter what place are you and just in terms of some of the competing product that's out there?

Robert G. Goldstein -- President and Chief Operating Officer

Well, I think you see that we're still number one in the market in both base mass and premium mass. The growth again this quarter the lack of growth is more tied, our volumes were fine we're consistent Q1 was consistent with Q2, which I think is a great statement. What we've missed is in a quarter. What you call it normalized whole percentage and how you address that these days is confusing that's evolving. That whole situation and what do you think is 22%, is it 24%, is it 25%, people raise estimates, but our miss again is tied to our whole being different in Q2 than Q1 and that's the whole difference. Our base mass was extraordinary. It's our premium mass that missed in whole -- especially at Venetian [Indecipherable].

Felicia Hendrix -- Barclays Capital -- Analyst

Okay, great. Thanks for all the color.

Robert G. Goldstein -- President and Chief Operating Officer

Thank you.

Operator

Another question from the line of the Thomas Allen from Morgan Stanley.

Thomas Allen -- Morgan Stanley -- Analyst

Good afternoon. So just on Singapore a bit, the increase entry libraries went into effect at the beginning of April. How are you seeing that affect play? Thanks.

Robert G. Goldstein -- President and Chief Operating Officer

It's negative in terms of -- we've had some push back against the [Indecipherable], but has an effect our volumes very much. It's been -- it's been nominal. You would expect with the price increase to see some push back and has been from the lower end of the customer base. It has already stabilized and probably on the upswing, but the impact is negligible. It's a few points maybe of drop on the non-rolling, and I think you'll see it come back in Q3 and Q4 like anything we price it up is going to be initial negative reaction. No one is celebrating the increase of [Indecipherable], but it's not material and not impactful.

Thomas Allen -- Morgan Stanley -- Analyst

Helpful, thanks. And then just in terms of Vegas your background business was really strong in the quarter. Recognizing you had a soft 2Q '18, but it just stands out where it was strong in the face of how the market weakness in some of your peers, talking about weakness in that segment. Can you just talk about how your perception of what's going on there? Thank you.

Robert G. Goldstein -- President and Chief Operating Officer

Sure. We're very proud about Vegas performance. I think it's the best in our history or if not as close to it. Everything worked in this quarter, from a gaming and lodging perspective, the rates were strong, the occupancy, our business was very good. The backlog grew and I think again, we'll use the term highly concentrated. Our future in Las Vegas, I think is less and less dependent on the super high-end and more dependent on slot ETG and premium mass -- mass kind of mimics [Phonetics] .

Again, as you know, this is primarily lodging market. We remain strong in the lodging, a piece of our business quarter-after-quarter we faltered in the gaming point, a lot of volume and some it's been whole percentage. This quarter we held, OK. Our volumes were better. I wouldn't call it a trend. I wouldn't try to extrapolate how it plays across the market in Las Vegas. I think this mark remains -- you can make a lot of money here as you focus on the hospitality piece. And if you have the right gaming mix and you run your four property, watch your costs, we had a good quarter and we're very proud of that. We have, but in the first half the we're tracking close to [Indecipherable] EBITDA, so we could have a record year here in Las Vegas.

But again, I think on the Baccarat piece, Thomas, less inclined to believe that's going to be a trend that we're going to see quarter after quarter of strong performance. I do think we'll see our -- our overall table and slot business ramp up, especially in the premium mass side. We're building product for that. We're just not in the casino floor. We're very -- we've run our business we're very close. That's -- at everything we can do in the Florida maximize profitability, in this quarter it really paid off, an ideal perhaps the rest of the year.

Patrick Dumont -- Executive Vice President and Chief Financial Officer

One thing to note is that we have been reinvesting significantly in Las Vegas over time. So we'd like to believe that through those investments both in room product and the casino floor both on the Palazzo side, food and beverage operations as well as the rest of the campus that you see some growth in cash flow. So hopefully this can continue, because we're going to continue to invest and hopefully grow the market.

Thomas Allen -- Morgan Stanley -- Analyst

Makes a lot of sense. Thank you.

Operator

Your next question comes from comes from the line of Joe Greff of JPMorgan.

Joe Greff -- J.P. Morgan -- Analyst

Good afternoon, guys. Rob, my question really relates back to the Macao premium mass result. Just from understanding all your comments, which we appreciate you were saying premium mass volumes in the 2Q were consistent with the 1Q. So I'm presuming you're seeing that's flat sequentially. What we're seeing in that ...

Robert G. Goldstein -- President and Chief Operating Officer

I think it's down 2%, 3% as I recall.

Joe Greff -- J.P. Morgan -- Analyst

Okay. And what was the -- what would it be on a year-over-year basis. So just not taking into account variations in whole percentage?

Robert G. Goldstein -- President and Chief Operating Officer

You're asking premium mass drop in Q1 '18 -- Q2 '18 versus Q2 '19?

Joe Greff -- J.P. Morgan -- Analyst

Correct.

Patrick Dumont -- Executive Vice President and Chief Financial Officer

That's not really something that we -- that we put out publicly. Just in terms of the way to compare it with that -- with that break down. So I think just in general, you should look at the win for guidance and just see that the business itself is healthy. In the long run, it's going to continue to grow based on the investment that Rod referenced in the earlier question around how we see the business and what our positioning is. In the long run, this is something that will do quite well, right. I think the key thing here is, if you look back the bet that Sheldon made more than a decade ago, this brilliant bet to invest in scale, to invest non-gaming amenities, to really create a critical mass that allows people to show up and have a lifestyle type experience, but they can go to show, go to retail, go to the best restaurants they've been to, and then stay some of the highest quality suites that are offered in the world. You're going to realize that with the additional suite product that Rod referenced, we're going to have premium mass growth.

We're going to see the best customers available, come to us because of the amenity mix, because of the experience we offer to them, because the high quality gaming environment that we have. So we don't typically get this granular on premium mass drop and the way they split it, because at the end of the day, the business is managed in aggregate from the standpoint of production on return on invested capital. And so when you look at our results over time, we think we've been very good at capital allocation. We think we've been very good investing in the right assets to the right quality level. We're getting better at it and we think this next step that Rob referred to is going to really leverage the initial bet that Sheldon made years ago in scale and propel us to the next category.

So I think, you look at this year-over-year in 2Q '18, you see that we -- our mass table win with $663 million, it's a great -- it's a spectacular number. And then we did $635 million this quarter, again there is some hold in there. There are some other factors in there, but as a practical matter, the business continues to be very healthy. So I think we have to think about this as a long-term business and you have to think about the trajectory that we've experienced over the last couple of years, particularly as the inbound or the outbound tourism growth from China has been occurring. So we feel very strongly about.

Robert G. Goldstein -- President and Chief Operating Officer

So I think -- just to comment further on the ecosystem, we have there, besides the new Apple store, and theater and the retail and the endless advantages we have, I do think, we have to pay attention to suite mix in Macao. Again, a lot of people are talking about, they're going to build this and they're going to build that, and I don't blame them, the most coveted asset in the Cal today is rooms and suites. The one thing every wants more it rooms and suites. And I think it's clear to see where our trajectory has been last four or five years in that segment. We just keep growing year after year, whether we missed by a quarter, by a point or two or grow by a point or two, the fact is, we're approaching this year probably $25 billion in those two segments based on premium. You put that against anyone else's business, there is no comparison. When we get lucky or we hold at the high end of the range, we have a $800 million, $900 million opportunities. If we don't hold lucky, we hold down the $750 million or $740 million range. But in the end, if you look at where we're going with our product offerings in our suite and table, our entertainment, our retail, scale and size and quality, I think it is undeniable where we're going to go in this premium mass segment. We won't be a dominant as clearly as we do the base mass, but I think it will come off of close.

Joe Greff -- J.P. Morgan -- Analyst

Got it. That's helpful. And then just my follow up -- I think I know the answer to this, but I just want to get clarification from you guys. When I look at Sands Cotai -- Sands Cotai Central's performance in the 2Q run. Would you say anything there is being negatively impacted by any renovation disruption or any pre-planning or anything related to the Londoner?

Robert G. Goldstein -- President and Chief Operating Officer

Yeah, you've got 1,200 keys were ripped apart and being transformed in the 600 keys, you've got a massive problem in terms of just -- it just happens. You can't do it quietly, when you have the disruptions at Conrad as a result of the transformation of force of the holiday into the Londoner Suite product and then any facade issues are sort to happen out there, I wouldn't call it an maximum problems, but I would call that as absolute disruption to some degree, coming out of the transformation of holiday into Londoner and the adjacent Conrad and the noise, etc. It's still a 1,200 room transition to 600, has a lot of banging and hammering and this [Indecipherable] upset about it. You can't avoid disruption when you're transferring your building like we're doing that and it's going to get worse, I think as we get into this further in the year.

Joe Greff -- J.P. Morgan -- Analyst

Great, thank you. I appreciate the comment.

Operator

Your next question comes from the line of Shaun Kelley of Bank of America.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Hi, good afternoon everybody. Rob, sorry to beat the dead horse on this a little bit, but just on the premium mass side, I mean I think we all have a pretty good feeling for how concentrated some of the VIP business is, especially in markets like Singapore and Las Vegas. Can you just give us a little bit more color, maybe at a broad level on the customer base that you're seeing in premium mass in Macao? And just, you talked about the sensitivity around how important a couple of point to hold here can be. Is it -- is it just a fragment of the customers that are able to move the dial across the whole business just -- or how how concentrated is it just to give us a little bit more color in terms of what to expect from the volatility perspective going forward?

Robert G. Goldstein -- President and Chief Operating Officer

Let's begin with apples and oranges. You've heard expression apples and oranges, VIP in Las Vegas and VIP premium direct rolling in Singapore is night and day apples and oranges versus pretty mass in Macao. Macao is a mass premium market with thousands and thousands of customers. In Las Vegas, when I say concentrate, I mean concentrated, especially in the baccarat Asian piece, that's a very different audience. Same thing in the -- in Singapore. I wouldn't mix those two up. It's very important. What you see in China, in Macao is extraordinary. It is -- think about the comment and all these years I have done this, there is never a market and never will be a market that one Company does $25 billion of roll -- of drop of the year. Think about it how staggering that number is $25 billion in premium mass. It's not one, it's not 10, it's not 50, it's thousands of people coming in. That's why we're building all these suites and all this product. It's laser-focused on getting our fair share, in fact beyond our fair share. We want to punch above our weight.

And so in Singapore, that's the game plan there as well. Be very careful when you alluded to the VIPs, because writing a VIP in Singapore, I think is a very concentrated direct rolling customer, premium mass is a horse of a different color and that customer, we are targeting with our new expansion in Singapore. But our showing -- you know how we're thinking about this is clear. We want to be the dominant player in Asia in the premium mass baccarat and mass baccarat business. These assets, we're constructing, we're designing for that audience. We've already because what Sheldon did a decade ago, the scale business we dominate that. That's pretty clear if the number is 15% growth on a huge base mass platform. But to have this thing, these suites, especially in Singapore as well as Macao, this is not a small market. This is a very large pool of customers coming out of China, but also of the rim and so I wouldn't worry about -- and my point a whole percentage is just that, my point is we don't know what -- the whole percentages are moving. I mean people are constantly updating their whole percentage formula and it's a very complicated evolving process in Asia, especially in Macao.

It's a fascinating market, but it involves constantly the Chinese customer mix, kind of intuitive bets from high position, they play longer. They have a different exit strategies than other customers, large players often at time make, bets are not disciplined, but play their proposition bets with long odds. In the market mix in Asia and Macao and Singapore is so different than the US. And of course gambling in Asia is not as frequent, is not as ever available as is in the US. So when they come to Macao or Singapore, it's more of a -- it's like Vegas was 30 years ago. It's unusual, it's unique. So they stay longer, they play larger. They don't run the table and they get a hit, they bet counter intuitively, it's a very different audience, but please be careful you make that comment about, is the same as Singapore and Vegas, high end, no, it's not. It's a pool of probably tens of thousands of Asian people who play at that level and is the reason why Macao is so incredibly important to be -- to have the product to address that.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Perfect. That definitely answer the question. And then the other thing I just -- from my follow-up. I wanted to touch on to hit on the capital you guys are investing to target this customer more. I believe you mentioned a couple times both in comments and in the prepared remarks that some of the suite product for the Four Seasons is going to open in the fall, is that new and can you give us a little bit sense of how much capacity could come online you sort of a little bit more about how many rooms and what the timing of that might look like?

Patrick Dumont -- Executive Vice President and Chief Financial Officer

Hey, it's Patrick, I think if you turn to Page 16 in the deck, what you'll see is a slight consistent with one that we've published previously, where we lay out exactly the timeline that we see right now around these new suite product coming online. So, if you look at the Four Seasons, we're talking about sometime toward the end of Q1, our goal is Chinese New Year. So that's when you should really start seeing the impact of the Four Seasons [Indecipherable].

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Okay. Sorry, I thought I heard something about fourth quarter, but I appreciate that. Thanks, Patrick.

No problem.

Operator

Your next question comes from the line of Anil Daswani of Citi.

Anil Daswani -- Citigroup -- Analyst

Thanks for taking my question guys. My first one is on the VIP segment. Now, some of your competitors have opened new VIP product and have actually managed to do the opposite of the market trends. Is there anything you can do different to your product on the VIP side to try and take some share from some of your competitors?

Robert G. Goldstein -- President and Chief Operating Officer

Yeah, two thoughts there. We went -- I was there last time in Macao, we toured the new product and it goes at Melco and also when I believe and they're great salons. We are opening it at the Londoner and Four Seasons brand new salons. I think there will be very competitive open next year and a great product. And to your point, yes, we can open salons. However, I would be careful in terms of we look at the numbers in that -- in those salons and the junket business in general of the margin and the flow through. As you see more deck somewhere represents for sub 10% of our business comes out of the rolling, especially the junket segment. We want to be in that segment. We always said, we will be in that segment. We will spend the capital, will compete and will compete favorably. But I would caution people to look at the flow through and the margins coming out of the junket business. With the erosion of that segment up with the margins, it's less advertising for the market, but having said that, we will surely participate, our new salons at the Four Seasons and at the Londoner will be very competitive and we plan to participate, yes.

Anil Daswani -- Citigroup -- Analyst

Thank you. And as a follow-up, can you also tell us what the plans are for the expansion at Marina Bay Sands? Is there a timeline that you can share as to when the new VIP stuff or premium mass stuff in Singapore will be coming online?

Patrick Dumont -- Executive Vice President and Chief Financial Officer

So you're referring to the actual project itself or the stuff that we've mentioned in Tower 1?

Anil Daswani -- Citigroup -- Analyst

I think something you mentioned in Tower 1 as well as the expansion, please?

Patrick Dumont -- Executive Vice President and Chief Financial Officer

Yeah, I think if you go to the deck, we've included a slide that we included previously about the Singapore expansion starting on Page 22. I think the way to think about it is, as we said before, our goal is to kind of open by the end of '23, kind of be in operations, January 2, 2024. We'll see if we can get there. We're working hard to do so. And I think we don't have a precise timeline yet for the Tower 1 activities. But that's going to be dependent on, obviously, the required approvals and some work we have done. We just have to make it happen. So it's probably going to be a year or two before that comes online. So nothing near term. We just have to work through that and get the necessary approvals before we can continue.

Robert G. Goldstein -- President and Chief Operating Officer

[Speech Overlap] I'll just follow on Patrick's comment about what's happening in MBS though. We should mention to you that our mass casino floor is going through renovation currently, and we'll open renovated by summer of 2020. The new super premium mass levels, Level 2 will open in early 2020, each is Levels 2 and 3 in '21. And keep in mind, we're adding additional slot machines late '20 by another 400 roughly and the balance in '21. So 500 more games in the floor in '21 and so the market does $700 to $800 per unit per day is pretty impactful.

Anil Daswani -- Citigroup -- Analyst

Thanks for taking my questions guys.

Robert G. Goldstein -- President and Chief Operating Officer

No problem. Thank you.

Patrick Dumont -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Next question comes from the line of Carlo Santarelli of Deutsche Bank.

Carlo Santarelli -- Deutsche Bank -- Analyst

Thanks guys. Good afternoon. Rob, could you talk a little bit on the VIP side as to where you guys kind of are and I know you're not going to give specific numbers, but where you are with respect to your direct mix of VIP relative to your junket and maybe just benchmark that against prior periods in the history of you guys operating in that business in Macao?

Patrick Dumont -- Executive Vice President and Chief Financial Officer

Hey, it's Patrick. One thing, we don't actually provide that breakdown. We kind of use VIP as a whole -- as a way to kind of think about the management of that business. So just as a practical matter, I think what you'll see is that we're kind of following the trend of the overall Macao market for VIP and unfortunately we witnessed a little bit of a contraction in that business. I think the prior question was about our product. We feel like over time as we continue to invest the substantial capital we're deploying in Macao, that will be much better positioned to grow in VIP when there is a rebound in the future.

This is a business that has seen some cyclicality across years, seen some challenges in the way customers utilize that type of business and over time, it's always been resilient. And so we'd like to believe that we're poised to take advantage of the return when it occurs. And in the meantime, we'll keep servicing the customers there as best we can. But in terms of providing specific breakdowns, that's not really something that we're going to -- we're going to provide at this time.

Carlo Santarelli -- Deutsche Bank -- Analyst

Understood Patrick. And maybe if you wouldn't mind, could you comment a little bit about how you see kind of the junket business shaping up here over the medium term, just in terms of consolidation that's occurred within the junket industry and whether you see that kind of continuing or you see the market may be starting to become a little bit more fragmented as we look out over the next two to three years?

Patrick Dumont -- Executive Vice President and Chief Financial Officer

I'd take that, I don't think it is hard to predict. Obviously, junket is going to a very, very inferior [Phonetic] with what's happened in the last month or so. Yes, it's hard to predict what the junket business ends up being. We're hoping for resurrection to come back. It's what we've done that in the past. I assume the future as well, but there's other markets out there and some of the structures and some of the ways they can gamble makes it hard to figure out how Macao figures into that, I mean it's confusing the things are allowed regulatory wise from other jurisdictions, it is hard for us to really ascertain where the junkets want to go.

They wanted to redirect our efforts to other jurisdictions. I think that's the biggest question. I think the market will be there, demand is there. I assume liquidity will be OK. But where the customers want to go and where the junkets want to send them and so it's hard to -- hard to say. We always know in the end is driven by product is essential. We have the product, but the realities remain, it's a low margin business and it's challenging and I think again it's been challenging structurally for Macao to compete if other jurisdictions do things Macao doesn't allow. And I applaud the efforts of the Macao regulators to keep it the way it should be, which is done with the integrity and quality. The Macao people I think have stepped up and done the right thing and we applaud, their efforts is quite note -- it's noble to run the business properly and not allow things happen that have been happening.

So we're hoping for our come back in Macao. We'll certainly have the product ready for that come back . But as you alluded to earlier, we have another side of our business, new direct and that customers enjoy our salons and our suites. It's in fact the junkets don't participate. But I think we both know Macao is still a very desirable jurisdiction, albeit regulated, regulated properly. So that's the way it should happen.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great, guys. Thank you very much.

Patrick Dumont -- Executive Vice President and Chief Financial Officer

Thank you.

Robert G. Goldstein -- President and Chief Operating Officer

Thanks Carlo.

Operator

Your next question comes from the line of Robin Farley of UBS.

Robin Farley -- UBS -- Analyst

Great, thanks. I Just wanted to, if you could comment on -- I don't know if you have any expectation for the timeline for rebidding on concessions in Macao. Just any expectation of when it might be RFP in the next 12 months to 18 months, anything along those lines? Thanks.

Patrick Dumont -- Executive Vice President and Chief Financial Officer

We currently don't have any information and we're eagerly awaiting what we should do. But that being said, we're very proud of the investment that our Chairman made when we first started building in Macao, and how that blossomed into the largest portfolio of non-gaming amenities. And we also believe that because of our strong relationships and support for small and medium enterprise, we're very well positioned to continue. So we feel like we've been a very good corporate citizen. We've contributed meaningfully to the economy there. We've done the things we've been asked to do to diversify the economy away from non-gaming and we're prepared. So we think we have a great case to make for the future and we're just eagerly awaiting.

Robin Farley -- UBS -- Analyst

I guess one of one of the other concession holders has talked about big non-gaming investment that may be added to the resort, not necessarily anything that would have to be added before a concession renewal would be known about. But do you have -- you're obviously investing tremendously right now in your Macao properties. When you look out a little further, are there additional things that you think about doing or even have room to do that could add as well as outside of what you've already announced for the next two years?

Robert G. Goldstein -- President and Chief Operating Officer

Hi, Robin, it's Rob. I think about it every day. I would like to invest with both hands in non-gaming assets because I think if you look at our history, we've done it without being really -- when they asked us to do things, we over responded and you see the investments made there with the hotels and the entertainment and the retail and all the things that people thought were crazier, pretty not crazy today, but we like to invest in both hands in the future of Macao. We are such believers in the -- we're proud to be there. I think Pat alluded to what was done 15 years ago. I remember watching it and thinking it myself, would this pay off and obviously, Sheldon's scale thought process paid off beyond my understanding. It continues to pay off, and I think we would be thrilled. Sheldon, if you ask him to invest many more billions of dollars, he would ask how fast can you get there?

And so we're eagerly awaiting the government's advices. We are very, very proud of what we've done in Macao. It's been one of the greatest experiences I have ever had in this business and the government has been nothing, but supportive. We're proud to be part of that process there. We're very proud to be part of the -- we talked in our point of view, which is clear. We'd like to see it evolve even further to maybe the greatest non-gaming jurisdiction. Our retail business there, our entertainment business, our non-gaming lodging business, it's just -- we are huge believers and we think we're right at the beginning, not the end for Macao's success. So all they have to his tell us how much and where and Mr. Adelson will be happiest guy in the world to write a very big check.

Robin Farley -- UBS -- Analyst

Okay, great. Thanks very much.

Operator

Your next question comes from the line of Jared Shojaian of Wolfe Research.

Jared Shojaian -- Wolfe Research -- Analyst

Hi, good afternoon, everybody. Thanks for taking my question. Just stick with the premium mass theme for a second. I know this might be hard question to answer, but do you think the conclusion is that links [Phonetic] of play is down from 1Q to 2Q? And then as I think about a normalized run rate for mass win percentage, do you think 1Q was more of an anomaly or do you think 2Q is more of an anomaly?

Patrick Dumont -- Executive Vice President and Chief Financial Officer

Good question, Justin [Phonetic]. Good question. Well, the first question you asked about the time play. I don't think that's worth worrying about. We don't see any evidence of that, if anything in this market -- If you haven't spend enough time there watching the way these customers come and gamble, and again, the only legal jurisdiction available to close to Mainland China is Macao. And in case you haven't been there recently, it's an extraordinary place. I mean, it's a [Indecipherable] place. I think one the reasons Vegas will have a difficult time in the future is, it's such an attractive environment for gamers and it's got all the bells and whistles, all the dining and retail and entertainment if you want, right across the bridge there. So it's pretty extraordinary and the bridge of course added -- gilded that already big lily. So I don't worry at all about Chinese people gambling longer, that's not a problem at all.

As far as that business where it goes, it just gets bigger and better. And I wouldn't worry at all about these people coming and that business growing. As your whole percentage question, I think I alluded to earlier, it's fascinating and that the Chinese market is somewhat counter-intuitive. Having grown up in places like Atlantic City and Las Vegas and Chicago and even the Caribbean, you have this belief that the larger band full of customers would gravitate toward the, let's call it, the better advantage bets, but the Chinese are counter-intuitive, and they make bets on proposition bets, they play sometimes only proposition bets. They play far beyond the time you think they would. With most customers, you worry about to give you adequate time to qualify for complementary or discounts.

The Chinese just wonder if ever going to leave the table. They are much different gamer, much different profile. And I think that lends itself to the confusion about whole percentage. We held -- I think, whatever it was 25% or 24% something in Q1, I don't think is aberrational at all. It's just a question of have some mixture of bets, when you have a -- it all comes down to how they bet the game. This is a math business and when they make these bets, it help the household higher, you're going to hold higher. And what we saw in Q1 is not aberrational. In fact, I can make the argument that whole percentage is gravitating toward the higher end 24%, 25%, 26% versus 21%, 22%.

The PMS, the premium mass customer stays longer, has a very confusing exit strategy. They make bets that don't seem to on the face wouldn't be the right thing to do. So I think you're going to see as premium mass gets stronger, whole percentages trade up and my prepared table is 23% versus 24% versus [Indecipherable], I don't know. And I think again it depends on the mix of bets. The bet pairs and ties. They don't go straight bet bank player over there. They bet the lucky six. They bet things that we find somewhat confusing as operators, but it's an incredible market. Also they come from faraway places and they stay longer.

And so when we get Macao, it not just they're going to go back to their home city, not a place to gamble. So they have outsized gaming appetites. But clearly it's a mathematical equation that we can always gauge. But I don't think anyone's prepared to tell you exactly is it 23%, 24%, 25%. We do know things are trading up though, the whole market is moving toward a higher whole percentage category, which is helpful to us and our [Indecipherable]. So again, as the market mix changes players come from further away, more premium mass. I think you're going to see a whole percentage trade up. Is our first quarter repeatable? I believe it's absolutely repeatable. I think this business is going to evolve further, but no one I've met can tell you exactly what the whole percentage number should do.

Jared Shojaian -- Wolfe Research -- Analyst

Great, thank you. That's helpful. And then can you just talk about the promotional environment on the junket side and specifically if you've seen any changes in commission structures from any of your peers.

Patrick Dumont -- Executive Vice President and Chief Financial Officer

No, I don't think that's an issue today. I think the junket business is in flux. But I don't believe it's about -- it's not promotional. I think is more about where the customers want to go. What the better products are and frankly, it's a jurisdictional decision. I mean, I think some customers are moving toward maybe promotional and other jurisdictions that offer better bet or a better circumstance than we do in Macao. But again I think Macao will stay -- it's a gold standard for the regulatory environment there in terms of keeping it consistent, keeping it accurate, keeping it -- I think, what they've done is exemplary, and I think we are lucky to be part of the jurisdiction. It runs that business in the amount of which the Macao does want it. I don't think it's about promotional within Macao. It may be promotional outside of Macao, the jurisdictions that could be hurtful to the junket revenues.

Jared Shojaian -- Wolfe Research -- Analyst

Excellent. Thank you very much.

Patrick Dumont -- Executive Vice President and Chief Financial Officer

Thank you.

Robert G. Goldstein -- President and Chief Operating Officer

Thank you.

Operator

Your last question comes from the line of David Katz of Jefferies.

David Katz -- Jefferies -- Analyst

Hi, good afternoon, everyone. I wanted to ask about, one of the areas we're constantly trying to monitor is the Chinese economy and the degree to is helping and hurting business and quite frankly, we've seen some mixed signals in that regard. If you could share whatever perspective, you might have in that regard? And my second follow-up is, as I look at the capital that you've laid out between Macao and assuming that you were successful in winning a bid, and with a winning bid in Japan, we've gotten so used to a pristine balance sheet, where might you see that going and where would you be comfortable leverage wise as we look out over the next several years?

Patrick Dumont -- Executive Vice President and Chief Financial Officer

Why don't we address the capital structure first. If you look at our capital structure and if you look at the nature of the way we borrowed, I think the key thing here is that we've been very conservative with the anticipation of having the opportunity to development in Japan. So, we always wanted to make sure that we had ample balance sheet capacity to be able to fulfill our Chairman's highest and best use, which is deploying capital in new projects. And so we would only invest in something that has a high return threshold that meets his criteria and the Board's criteria.

And so for that standpoint, I think if you look at the timing of Japan, look at -- you referenced both Singapore and Macao, you look at the timing and delivery of those projects and the potential cash flow growth that Rob alluded to out of Macao and some of those investments and what our view is on, what the appropriate return is in Singapore. You'd see that the timing actually fits quite well for the growth in EBITDA and the creation of the balance sheet capacity in order to fund the development in Japan.

And so we're very much looking forward to the opportunity. Unfortunately, the timeline is not so obvious, and it's also not so sure. It's possible that it may take several years even before and operator is selected. So during that time, we'd like to believe that our assets in Macao and in Singapore will continue to grow their cash flows as they establish a stronger position in the market and enhance our already very strong offerings. And so from our standpoint, we feel very strongly about our financial -- financial discipline and about our financial policies that we've addressed before.

Our Chairman has said that he is very focused on a 2 times to 3 times leverage level. We're very focused on maintaining and upgrading our investment grade rating. This is something that's very important to us for the long term and we think it has very strong strategic advantages for us as a Company. And so we'll be very careful and very mindful as the Board looks at these issues to ensure that we keep our leverage level and our cash flow profile and our investment level and our assets to the right levels in order to ensure that we get the outcome that we're discussing. And so we are ready for Japan. We're looking forward to the opportunity. It's just not super near term. And so with that we think we'll have plenty of capacity to get it done and stay within the levels that we've discussed.

David Katz -- Jefferies -- Analyst

Got it.

Patrick Dumont -- Executive Vice President and Chief Financial Officer

All right. And I think I'll turn over to Rob a little bit for the Chinese economy question.

Robert G. Goldstein -- President and Chief Operating Officer

David here anecdotally, I don't want to say this is anything to take too seriously, but we are actively from our people work and the casino that customers are concerned of the trade war. It is impacting some of their business, saying more the entrepreneur people. Probably it effects more at the higher end. The people own their own businesses or work for companies that are being impacted by, it's not a good thing from their perspective. We hear a very positive feedback, why can't this war be resolved. But we don't have -- based on our base mass growth and base we're seeing in general, Macao is like it's is doing just fine. I wouldn't want to try to put the trade war, the front and center of any real concerns other than anecdotally occasionally hear from a VIP customer. Hurt is my customer here in Las Vegas recently, a Chinese customer that it's really impactful. But I don't know how clarify that or put a real number that makes any sense against the business again. When you grow 15%, your base mass, the premium mass business, we're going to have record levels this year. How do you complain? How you really find that concern? This is -- now maybe we are wrong. Maybe this will be resolved shortly. I see that there is a couple of things happy in the headlines and maybe that impact our business. It can't hurt us, it probably help us once it's resolved. It's a positive for China, positive for the US and we're hopeful it gets resolve. But to give you real other than occasional anecdotal feedback would be incorrect.

David Katz -- Jefferies -- Analyst

Okay. Thank you very much for taking my questions.

Patrick Dumont -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

Daniel Briggs -- Senior Vice President, Investor Relations

Robert G. Goldstein -- President and Chief Operating Officer

Patrick Dumont -- Executive Vice President and Chief Financial Officer

Felicia Hendrix -- Barclays Capital -- Analyst

Thomas Allen -- Morgan Stanley -- Analyst

Joe Greff -- J.P. Morgan -- Analyst

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Anil Daswani -- Citigroup -- Analyst

Carlo Santarelli -- Deutsche Bank -- Analyst

Robin Farley -- UBS -- Analyst

Jared Shojaian -- Wolfe Research -- Analyst

David Katz -- Jefferies -- Analyst

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