MGM Resorts International (MGM) Q2 2022 Earnings Call Transcript

MGM Resorts International (MGM 0.02%)
Q2 2022 Earnings Call
Aug 03, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the MGM Resorts International second quarter 2022 earnings conference call. Joining the call from the company today are Bill Hornbuckle, chief executive officer and president, Corey Sanders, chief operating officer, Jonathan Halkyard, chief financial officer and treasurer, Hubert Wang, president and chief operating officer of MGM China, and Andrew Chapman, director of investor relations. [Operator instructions] Please note, this conference is being recorded. Now I would like to turn the call over to Andrew Chapman.

Please go ahead.

Andrew Chapman -- Director of Investor Relations

Good afternoon, and welcome to the MGM Resorts International second quarter 2022 earnings call. This call is being broadcast live on the Internet at investors.mgmresorts.com. We've also furnished our press release and Form 8-K to the SEC. On this call, we will make forward-looking statements under the safe harbor provisions of the federal securities laws.

Actual results may differ materially from those contemplated in these statements. Additional information concerning factors that could cause actual results to differ from these forward-looking statements is contained in today's press release and in our periodic filings with the SEC. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise. During the call, we will also discuss non-GAAP financial measures in talking about our performance.

You can find the reconciliation to GAAP financial measures in our press release and investor presentation, which are available on our website. Finally, this presentation is being recorded. I will now turn it over to Bill Hornbuckle.

Bill Hornbuckle -- Chief Executive Officer and President

Thank you, Andrew, and thank you all for joining us this afternoon. Our second quarter results represented our highest adjusted property EBITDAR quarter in the history of Las Vegas, both on an absolute and same-store basis, and the highest second quarter in our regionals ever with seven of our U.S. properties setting all-time records. I again want to sincerely thank our employees for their continued hard work, commitment to excellence and dedication to creating world-class experiences for our guests.

Thanks to them, our company's service scores have improved sequentially each quarter, both overall and across all the metrics we track. I could not be more proud of the progress we have seen in servicing our customers. Before I dive into our results in more detail, let me reiterate that our long-term strategic planning remains unchanged. We're focused on continually improving our guest experience, delivering operational excellence, investing in our people and planet and allocating capital responsibly.

So let's turn to those results. We took another meaningful step in April to simplify our corporate structure and complete the monetization of our real estate assets with the closing of our strategic transactions between MGM Growth Properties and VICI. This transaction brought us $4.4 billion in cash, which we intend to use to invest in our core businesses while continuing to pursue meaningful growth opportunities. One such opportunity was the acquisition of The Cosmopolitan of Las Vegas that officially closed in May.

I've had the opportunity to spend some time at the property and have met a number of the CoStars. I cannot say enough about the strength of the team at the Cosmopolitan and the exceptional service culture that has been created there. Our focus now is on integrating the operations of the property into MGM Resort's portfolio and working together to maximize the future success of this world-class resort. We also recently announced another strategic divestiture in our portfolio.

In June, we reached an agreement to sell the operations of the Gold Strike Tunica to the Cherokee Nation for $450 million. As a company, we felt this was an opportunity to sharpen our focus in Mississippi on Beau Rivage and take advantage of an attractive valuation. Gold Strike is a very special property. I'd like to, again, to thank every employee in Tunica for consistently delivering amazing first-class gaming entertainment experiences to our guests.

We look forward to seeing Gold Strike continued success with the Cherokee Nation, and we expect this transaction to close in the first part of 2023. The divestiture follows our prior announcement to sell the operation of the Mirage, would still also stay on track for close later this year. Consistent with our strategy to grow our international online gaming footprint, we announced in May a tender offer for LeoVegas, a leading global online gaming company with licenses in eight jurisdictions, primarily in the Nordics. LeoVegas has a talented management team, a cloud and mobile-based technology platform and an appreciable growth plan that we'll execute on as we develop our digital gaming presence in Europe.

We also expect this transaction to close in the third quarter of this year. Shifting now back to focus on our brick-and-mortar development pipeline. We are hopeful that New York will solicit applications by the end of the year for one of three additional casino licenses. We are eager to respond and expand our existing property in Empire City, which is less than 15 miles from Manhattan with an attractive footprint for development and growth.

If we do receive a license, we look forward to working with the state of New York, Yonkers in our surrounding jurisdictions to drive jobs and economic growth to that region. In Japan, we submitted our area development plan to the Japanese government in April and are optimistic that we receive an approval decision in the fall of this year. Following that process, we will share further details about the project. And in the U.A.E, we continue to make progress on bringing the MGM brand family to Dubai, where we have a management agreement for a nongaming integrated resort that has been developed in partnership with Wasl.

The project has broken ground and work continues on the development progress, and we will watch with great interest what does or doesn't happen around gaming in the region, hopefully, in the near future. Turning to BetMGM. Adam Greenblatt and the team provided a comprehensive update at their analyst day reaffirming their long-term road map and path to profitability. The team at BetMGM is also working on a comprehensive refresh to improve the interface and customer experience later this year.

Following a successful launch in Ontario in April, BetMGM announced a partnership with Carnival cruises -- corporation to provide onboard ship betting and gaming under the BetMGM brand. BetMGM operates now in 23 markets in the United States and Canada, across retail, online sports and iGaming operations. In May, BetMGM committed 21% share in the active markets in both U.S. sports betting and iGaming, which puts us in the #2 position.

BetMGM is the clear leader in iGaming and having reached 29% market share in May. And looking forward, with the addition of Ohio, most recently Massachusetts, as well as the potential for California, we continue to see great opportunity for expansion with BetMGM. We're accessible to those three states over 45 million addressable audience. Our investment in BetMGM is an important enabler to our omnichannel strategy and a key competitive advantage that allows us to drive incremental earnings between our brick-and-mortar and online channels.

Early results of this strategy have been positive with a strong acquisition story with over 43% of our MGM rewards sign-ups coming from BetMGM versus 33% in Q2 2021. Of these sign-ups, we have seen substantial growth in those who are visiting MGM property for the first time. Turning to Macau. Our operations were affected by limited visitation to the region, obviously due to the COVID restrictions.

As you've likely seen, the Macau government closed all nonessential businesses in July in the face of rising case counts, which impacted our properties. Last week, we saw operations reopening on a limited basis, and we're working to minimize our operational costs in the short term and position our properties to capture more than our fair share of premium mass business as demand returns, hopefully, in the long term. We're also working on our concession renewal. We are pleased to have received the terms of this tender last week with no surprises with all the submissions due by September 14.

The Macau government will then review the submissions and grant new concessions hopefully by year-end. We remain confident in the future of Macau and are proud to be partners in shaping the future of one of the world's premier tourist, entertainment and gaming destinations. While our second quarter results were nothing short of spectacular, we are, of course, mindful of the marketplace concerns of a potential recession. We also recognize that starting in the back half of the year, we'll be lapping strong comparisons driven by pent-up demand around our reopenings.

With all of this in mind, it is important to highlight that we've built an incredibly agile business over the last few years due to COVID and other factors, and we will adjust and pivot quickly if we see any signs of consumer demand slowing. That said, we sit here today, our business and forward-looking pace remains extremely strong. In fact, looking ahead, we continue to be quite bullish on our domestic business outlook based on a number of tailwinds coming in the new year, including a rebound in our convention business, the return of international travel and the lineup of exciting events to Las Vegas. Let me touch on a couple of these points a bit more.

First, in '23, we expect to grow our convention mix and rate year over year. Also in the terms of citywides, we look forward to welcoming CES back in better form and once again the CONEXPO trade show to Las Vegas in March of 2023. This will be their first return post the COVID-shortened 2020 event. One in rotation, this is one of the most well-attended citywide events of the year with historical attendance well north of 130,000.

Add to that, the return of international visitation to Las Vegas, which in 2021 represented only 3% of visitors, then 10% to 15% in pre-pandemic year, and our international customers have longer stay patterns than domestic guests, and we expect these guests to return in force as international flight capacity will reach over 80% of 2019 summer levels. And finally, the event calendar in Las Vegas is arguably the best the city has ever seen, and MGM will be primary beneficiary even at our scale and positioning. Las Vegas is now truly a powerhouse sports destination with the Golden Knights and Raiders calling Las Vegas home. Looking ahead in '23, the city will host the Sweet 16 and Elite 8 rounds of the NCAA's men's tournament and our first ever Formula One race.

And then in early February of 2024, we'll play host to the Super Bowl. When you put it all together, the business case is incredibly compelling for continued growth and momentum in our business. And as Jonathan will describe, we see tremendous value potential in the shares of MGM Resorts. With that, I'll turn it over to Jonathan to discuss the details of the quarter.

Jonathan Halkyard -- Chief Financial Officer

Thanks very much, Bill. I, too, would like to express my sincere thanks to all of our employees for the incredible results we achieved this quarter. We truly have the best team and the best talent in the business. I also want to acknowledge and thank the employees at the Gold Strike Tunica for their contributions to this great property and also extend my welcome to the CoStars of the Cosmopolitan of Las Vegas.

So let's discuss our second quarter results in a bit more detail. Our consolidated second quarter net revenues were $3.3 billion, an increase of 44% compared to 2021, despite a $168 million negative impact from MGM China due to the COVID-related limitations to visitation Bill mentioned in his remarks. Our net income attributable to MGM Resorts was $1.8 billion, benefiting from a gain related to the sale of MGM Growth Properties. Our second quarter Las Vegas Strip net revenues were $2.1 billion, and adjusted property EBITDAR for the strip was $825 million.

Our same-store net revenues in Las Vegas, which excludes Aria, Vdara and the Cosmopolitan in 2022 increased 60% versus the second quarter of 2021. And same-store adjusted property EBITDAR in Las Vegas was up 51% versus the second quarter last year. Now unlike the visitation or the variation month-to-month that we experienced in the first quarter due to Omicron, our second quarter occupancy, ADR and profitability were consistent through the quarter. Second quarter occupancy was 92%, continuing the strength that we saw when we exited March.

As Bill mentioned, pricing remains strong with ADR in the second quarter at a record $225. On a same-store basis, ADR of $201 was 34% above the second quarter of 2021. Our pricing power is driven by a number of factors: The attractiveness and sophistication of our marketing efforts, the relative value versus other destination markets, midweek conventions returning, and the benefit of certain room renovations, including the Bellagio and the ARIA Sky Suites, which we completed in 2021. Our preliminary results from July are also an encouraging sign for the third quarter with occupancy of 94% and ADR up 6% year over year, this being our toughest comp versus 2021 given the strong reopening trend we experienced last year.

Our gross bookings continue to be robust, with occupancy growth in all future months this year and rate up double digits versus 2021 in each month. In fact, during June, we booked the most rooms per day so far this year. Yes, we really like the demand outlook for Las Vegas. Our second quarter regional net revenues were $960 million, an increase of 12% versus the second quarter of 2021.

We delivered regional adjusted property EBITDAR of $340 million, which was 7% above the second quarter of 2021. Margins were 35%, down approximately 200 basis points compared to last year as we brought back more of our non-gaming operations. Moving to Macau. Net revenues of $143 million in the second quarter represented a 54% decrease compared to the second quarter last year.

Adjusted property EBITDAR was a loss of $52 million in the second quarter versus positive $9 million last year. Public health policies remain a headwind in the region as entrance into Macau has been severely limited. Turning to BetMGM. Our 50% share of BetMGM's losses in the second quarter was $71 million, which is reported as a part of the unconsolidated affiliates line of our adjusted EBITDAR calculation, and we expect to contribute $225 million to BetMGM this year.

Now in the first half of 2022, BetMGM generated net revenues associated with operations of $608 million which is an improvement of 70% compared to the first half of 2021 and well on track to meet our forecast of $1.3 billion. Our second quarter corporate expense, including share-based compensation, was $120 million, which included $21 million of transaction costs. We're strategically investing our corporate expense in growth areas, including improvements to our IT infrastructure, enhanced digital offerings for our guests and, of course, our IR efforts in Japan. So before we wrap up our prepared remarks, I'd like to restate our capital allocation strategy and touch briefly on how we view the valuation of our company.

Our strategy is as follows. First, we'll maintain a strong balance sheet with ample liquidity. Second, we'll invest where we have clear advantages, exercising prudence and measuring prospective returns for our shareholders. And finally, we'll return cash to shareholders.

The transactions we've completed and announced this quarter yet again demonstrate our commitment to and execution of these priorities. We bolstered our liquidity through the closing of the VICI transaction. We improved our portfolio with the acquisition of the Cosmopolitan and the announced sale of the operations of the Mirage and Gold Strike Tunica. We invested in our international digital future with the announced LeoVegas transaction.

We returned cash to our shareholders through share repurchases. During the second quarter, we repurchased 32.4 million shares for $1.1 billion. Since the beginning of 2021 through last night, we've repurchased 104 million shares for $4 billion or 31% of our market cap. This activity brings our share countdown to approximately 393 million shares.

We've been aggressively repurchasing our shares over the past 18 months because of the value we see at current trading multiples. Here's how I think about it. As of yesterday, our share price was $33 and we had 393 million shares outstanding. So this implies a market cap of $13 billion.

If we add our quarter end domestic net debt and subtract the value of our 56% stake in MGM China, then we have the enterprise value of our domestic operations. Divide this by the trailing 12-months EBITDA adjusted for corporate expense, Cosmopolitan, Mirage and Gold Strike transactions, and this implies a trailing multiple of 5.3 times with our stake in BetMGM for free. These deals were announced a few months ago, but our sales of the Mirage and Gold Strike traded at trailing EBITDA multiples of 17 times and 11 times, respectively. But wait, there's more.

Our traditional debt is all fixed rate, and our lease agreements escalate by only 2% annually for the first 10 years, and thereafter, we have a CPI cap of 3%. So we enjoy free cash flow operating leverage by driving EBITDAR growth above 2% or 3%. In the second quarter, our domestic same-store adjusted EBITDAR grew by 33%. Bill, back to you.

Bill Hornbuckle -- Chief Executive Officer and President

Thanks, Jonathan. I know my new chief sales officer is going to come from. As a company, we've been busy this year in our pursuit of our vision to be the world's premier gaming entertainment company. I could not be more proud of the progress we've made, but understand there is clearly more work to do.

Again, I'd like to thank all of our employees for their contribution to everything we have accomplished. There is a lot of excitement in the rest of '22 and beyond. I can't wait for what's to come. I truly believe our best days are yet to come.

And with that, operator, I'd like to open it up for questions.

Questions & Answers:

Operator

[Operator instructions] And our first question will come from Joe Greff from J.P. Morgan. Please go ahead.

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

Good afternoon, guys. Bill, my first question to you is -- and to Jonathan as well. Can you talk about maybe any aspirations for large-scale M&A, particularly in Asia, given the news about your potential interest in Singapore. That to us is a little bit different than some of the other capital allocation activities that you've talked about, but I'll leave it open-ended and you can discuss it as you wish.

Bill Hornbuckle -- Chief Executive Officer and President

Joe, obviously, we love our position in Macau. We're excited about Japan. I'm not going to comment on anything else. We'll continue to be -- aggressively look at M&A and active to the extent it makes sense.

But I really don't want to comment on the Singapore situation. I don't know, Jonathan, if you want to, so we stand as we are, Joe.

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

OK. Understood. And Bill, I think you had comments that, obviously, the forward pace in Las Vegas and of course, the portfolio is not reflecting any consumer retrenchment from any kind of downturn that we're in or maybe going into, which is great to see, and that's consistent with others in the industry and others in our coverage universe. Can you talk about what Plan B would be in terms of managing the business if we're going into a downturn and you see spend per visit and length of stay, god forbid, start to retrench? How do you manage that from an OpEx perspective, from a labor perspective? How does that maybe translate into sort of a flow-through, particularly in light of sort of the margin gains that you've achieved since the pandemic started? And that's all for me.

Bill Hornbuckle -- Chief Executive Officer and President

Yeah. I'll kick it off and maybe turn part of this over to Jonathan and/or Corey. Look, inflation is an interesting thing to our business. Obviously, we price our hotel rooms every day.

So we're in a great position there. Most of our food and beverage is also dynamic in some respect. I think we, as a company, have done a great job with energy. We've already bought energy through the end of '23.

And most of our employees, about 60% of them are in some form of a union contract, and the biggest lift on that comes next year in '23 with the commentary -- we've got about 35,000 employees in some way, shape or form in some kind of a review cycle. So we feel good generally where we are. I would make this broad comment. We just came through hell and back with COVID.

We've learned how to manage this company at scale at a premium, meaning we're premium operators with high-end product. And I think our margins are still stretching into high 30s into the 40s. Some of our significant properties even higher. Obviously, we're not naive to what may or may not happen.

But I feel good about the operating model we've put in place. I feel good about the levers that we have and the handle we have on costs. And so Jonathan, I don't know if you want to talk about some specifics of what might happen. But that's my general view.

Jonathan Halkyard -- Chief Financial Officer

Yeah. Joe, we've done certainly forensics on prior recessions and the impact of changing customer behavior and pricing on our operating model and tried to adjust it for things like the very -- the dramatic -- the different supply environment that we have now better than what was experienced back in say, '07, '08. And it really depends upon where any reduction in demand would come, whether it be from visitation or pricing or both. I certainly believe having seen this now, just in my relatively brief time with the company, our company twice has dealt with pretty material reductions in demand last August, September and then, of course, back in January.

The operating model really works here, and the company has playbooks. And I'm confident that we will be able to adjust as much as possible to that kind of reduction and maintain margins, perhaps not where they are now, but above where they've been in the past under such circumstances. And I think the other thing that I add is we still have a number of initiatives in flight that would help us greatly in such a situation. And those would include, of course, the cost work that we've done over the past couple of years and also the MGM Rewards program, which is designed, in part, to stimulate increased visitation from our regional properties in Las Vegas visitation that I don't think we get our fair share of now and also cross-property visitation while our customers are within Las Vegas.

These are huge opportunities, and I think would be a bit of a buffer for us in that kind of environment.

Bill Hornbuckle -- Chief Executive Officer and President

And I think maybe one last comment, Joe, to think about our regionals. In many cases, market-leading large-scale ultimately really resorts. They're not smaller properties that do $15 million or $20 million. They're large-scale places that hopefully do a couple of hundred million.

And so our regional portfolio even sets up a little different. Two thirds of our database, the average household income was over $110,000. So it's -- we have an upmarket opportunity in the context of who our customer base are and therefore, who may or may not be impacted and how severely by a significant downturn.

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

Great. Thank you.

Operator

And the next question is from Carlo Santarelli from Deutsche Bank. Please go ahead.

Carlo Santarelli -- Deutsche Bank -- Analyst

Hey, guys, thanks and good afternoon. I know getting in the property level stuff and you certainly gave some same-store metrics that were certainly helpful. But I wanted to ask around Cosmo. I believe I think you guys had in the release at the time of acquisition.

It was LTM-run rating, a little over 4 and 15, or so. I was wondering, as you've kind of gotten in the asset and it's only been a couple of months, but had some time to integrate, is there anything along the lines of synergies that you think exist there that might be tangible enough to call out?

Jonathan Halkyard -- Chief Financial Officer

Well, there are certainly synergies in this transaction. They relate to the things you might expect, the combination of some facilities that the Cosmopolitan needed to maintain and pay for associated with their relatively small footprint, things like warehouse space, corporate offices and the rest. I'm proud to say that on the day after we closed the transaction, we had their employees -- the CoStar is able to park in the Bellagio garage and therefore, not have to take a bus transportation from a remote spot. But the synergies, I think we'll realize over the next couple of years.

I would note that the -- you can probably do this math yourself, but I'll save you a step on the same-store sales or same-store EBITDAR calculation. In the six weeks that we owned the Cosmopolitan of Las Vegas during the second quarter, it generated kind of just a little bit under $60 million of EBITDAR. So this business is rocking and rolling right now. Corey?

Corey Sanders -- Chief Operating Officer

Yeah. And the other thing I would add, Carlo, that we've identified immediately as procurement savings that and they go both ways. They go on buys that they were getting through Blackstone and on buys that we get.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great. And then if I could, just one follow-up. I was wondering if you guys had any color you could add on the launch in Ontario and how that's gone maybe at an industry level or at a company level with the experience there has been to-date acknowledging it's a softer season on the sports side, but perhaps you could shed some color on the iGaming side.

Bill Hornbuckle -- Chief Executive Officer and President

Carlo, it's Bill. Look, it is softer sports season, as you know. We're exactly where we thought we would be, particularly with our iGaming business. Obviously, as you know, it was a great market that's now been regulated.

So there's a couple of dozen competitors. We're in the single digit, high single-digit market share and growing. And so it's a real -- it's clearly a real marketplace that is used to iGaming and sports betting. And so our entry into that has been productive, and we're pretty excited about where that ultimately all goes.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great. Thanks. Thank you, everyone.

Operator

And the next question is from David Katz from Jefferies.

David Katz -- Jefferies -- Analyst

Good afternoon, everyone. Thanks for taking my question. Could we just spend a moment on LeoVegas and just talk through the strategies for that and how it sort of fits into the, obviously, this very busy plate that you have? And what success looks like with it?

Bill Hornbuckle -- Chief Executive Officer and President

Sure again, Bill. So David, pretty straightforward we believe, ultimately, the digitization of our business and therefore, our ability to take brands through omnichannel and otherwise and make something real of it is a real business. And obviously, BetMGM is heading to a $2 billion revenue line next year. Hopefully, profitability by year-end.

And we are interested and want rest of world. And so a smaller acquisition, you know the numbers. We're probably going to be in at just under $600 million, hopefully throw off between $40 million and $50 million the first year. But it's got an expandable platform.

It's got a built-in team that we really like in terms of its management. And so we're looking at M&A, we're looking at gaming studios. They have dabbled in before live dealer, live gaming. And so we like the entry.

We recognize it's not as large scale and therefore, needle moving as we might want over time. But we thought it was a great place to start. And most importantly, we like the platform and the players -- I mean, the team. And so that's -- in essence, that's it.

And we think over time -- it's in Canada as well. So it's an open marketplace, obviously, for BetMGM, LeoVegas and our partners at Entain as well. And so we just like the exposure it gives us. It's a learning curve for us to understand rest of world, and we think we'll learn a lot from these guys.

David Katz -- Jefferies -- Analyst

Understood. And as my follow-up for Jonathan, I just wanted to talk about share repurchases. You've obviously done a fair amount of that of late. And just thinking through how share repurchases might be an ongoing or recurring aspect of the strategy and frankly, something that happens quarter in and quarter out and how we might think about that.

Jonathan Halkyard -- Chief Financial Officer

Sure, David. Well, as mentioned in our results today, we purchased $1.1 billion of shares in the second quarter. That's our highest investment since this program restarted a little over a year ago at the -- it should surprise nobody -- at the most attractive price, just $34 and change. I should note that we -- since the end of the quarter, we've repurchased another 5.3 million shares at a price just above $29.

So we did continue the program into the third quarter. My soliloquy at the end around the attractiveness of the value of the shares is certainly one of the reasons we've been so aggressive here and why I believe we'll continue to repurchase shares. But it's also true that this was a part of the strategy -- our asset-light strategy, to return this capital to our shareholders and fine-tune the leverage of the business. And at $4 billion in the past 15 months, I think more of that strategy is behind us than is still in front of us.

We do have just under $1 billion remaining on our share repurchase authorization, and we'll be opportunistic keeping in mind some of the other capital requirements we have coming up that we're excited about, things like LeoVegas, New York and so on.

David Katz -- Jefferies -- Analyst

Understood. Thank you.

Operator

And the next question is from Shaun Kelley from Bank of America. Please go ahead.

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

Hi. Good afternoon, everyone. I have two questions, both related to Las Vegas. So the first would be just wondering in the second quarter, we obviously all saw a bit of the return of both group convention and some event -- some really large-scale events business.

Can you just give us a sense of maybe relative to your normal or stabilized mix, how much group made up in the second quarter, just to get a sense of maybe what inning we're at in the recovery there? And then the second part would just be, can you just talk a little bit about the health of the Las Vegas gaming customer, specifically, maybe some areas about rated versus unrated play, those types of metrics? Just to give us a sense of how that's trending as we get kind of further and further into the recovery.

Corey Sanders -- Chief Operating Officer

Shaun, it's Corey. In Q2, we were about 93% of 2019 room nights in the convention segment. And we actually had our highest catering and banquet numbers since the fourth quarter of 2019. So pretty positive environment there.

We did have one large group that canceled. That's been the only group that's not come back. We're happy to say we're seeing most of our big groups come back considerably. With regards to the gaming customer, the business is strong in all age groups across all segments of it.

Especially in Las Vegas, even our lower end is strong there. And our unrated continues to be outpaced where we were in 2019. It's flattened out since 2021, but all indications are very strong trends.

Bill Hornbuckle -- Chief Executive Officer and President

And Shaun, we had said in '22, we'd be at about 90% pace to '19. With the exception of this cancellation, we're right on that point. And so that's been the return of what we expected, and we've seen it. And I think next week, we have Cisco in town with 27,000 people.

So tech is back. Large scale is back. And so that continues to look real positive into the next year, particularly given, as I mentioned earlier, the citywides are going to cycle through.

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

Thank you very much.

Operator

Next question is from Dan Politzer with Wells Fargo. Please go ahead.

Dan Politzer -- Wells Fargo Securities -- Analyst

Hey. Good afternoon, everyone. So I want to hit on capital allocation and your general stroke there. I think you guys have talked about becoming more global and the importance of diversifying your revenues and cash flows.

I mean how do you prioritize that in terms of -- or what's at the pecking order for diversification? Is it Europe or international or Asia? Or is it just really in the medium such as digital versus brick-and-mortar?

Bill Hornbuckle -- Chief Executive Officer and President

I think, Dan, it's actually both. I mean, obviously, we have a keen interest. We're going to invest several billion dollars in Japan if we're given the opportunity. And so that will be another cornerstone for us in Asia.

Between that and Macau, we feel pretty comfortable with what's going on there. And obviously, we'll watch like everybody, what happens in Thailand or any place else for that matter. But we like where we are. And furthermore, we'd love to be in Japan at scale.

And then for us, obviously, domestically, particularly if you think about Las Vegas and some other places, there's only so many places we can go and continue to grow. And so that's why digital, among many reasons, is so attractive to us. And so we're going to continue to lean into that. Obviously, continue to invest in BetMGM.

While painful, it's going to be productive. We sincerely believe that now two and a half years into this journey. It's hitting its marks, it's doing what it said it was going to do. Time to tell in that business how quickly it goes profitable.

But at the end of the day, if I said we're going to invest $1 billion in a business and ultimately reap hundreds of millions -- and by the way, the build cycle is three years, you'd all say let's go. And so we're excited by that and we remain so. And we'll watch for other opportunities in digital, either through our LeoVegas vehicle or anything else that potentially comes up, that could be meaningful for either strategic or basically broader economic reasons.

Jonathan Halkyard -- Chief Financial Officer

Only other point --

Dan Politzer -- Wells Fargo Securities -- Analyst

Go ahead.

Jonathan Halkyard -- Chief Financial Officer

Well, the only other point that I would add is that we have these, we think, two embedded growth vehicles within our business right now. One is ultimate recovery of Macau and the second is BetMGM, as Bill mentioned. And those do not require much more capital, at least as compared to the company's financial resources. At the same time, we've been applying capital to reduce our capital base for the benefit of our shareholders.

And I think that will provide real leverage as we expect to see those two businesses provide earnings growth for the company.

Dan Politzer -- Wells Fargo Securities -- Analyst

Got it. And then just on BetMGM, I think you guys said that you're still on pace for the $450 million total investment, which you're 50% of. As you're pacing through, I think you have $160 million or so through the first half of the year. How should we think about the back half of the year and the cadence --

Bill Hornbuckle -- Chief Executive Officer and President

The third quarter cadence goes way down given the seasonality. And then we get back into football, which is productive. So the back half of the year, we're going to still have the target number of about two to two and a quarter invested on MGM's behalf. We are pacing as we thought we would.

iGaming has been a little better, which is accretive to us. Sports betting not as much. And you've probably seen this or heard about this. We are continuing to pull down some of our marketing spend.

While share continues to be important, particularly in new markets, we're getting smarter and smarter and smarter about how we do this. And so we feel comfortable as we think about '23 and beyond, our ability to make money in this business is within our grasp.

Dan Politzer -- Wells Fargo Securities -- Analyst

Got it. Thank you so much.

Operator

The next question is from Chad Beynon with Macquarie. Please go ahead.

Chad Beynon -- Macquarie Research -- Analyst

Hi. Good afternoon. Thanks for taking my question. In terms of the Macau gaming draft bill that was released, how are you guys thinking about -- broadly thinking about what's expected from a rebidding process, whether it's time, commitments or capital when we see this at the back half of the year?

Bill Hornbuckle -- Chief Executive Officer and President

I'll kick this off, and then we have Hubert on the phone. Maybe you can add some color. Obviously, we just got last week the final request for RFP, RFI. The process has started.

We have until September 14 to make our submission. It's been obviously a tough couple of years. Time to tell who ultimately shows up for submissions, but I'm pretty confident the original six licensees will be there. 10-year window present some challenges when you think about we're still in the midst of COVID.

And so the idea of a significant investment would have to be something we'd really understand and study. There's a lot of things that the government wants around social programming, employment, job opportunities and other things that we're going to dig heavily into. There are a lot of things around programming and existing square footage that we already own as we delever on junkets and into really more mass gaming around experiences, around culture, around event activity. And ultimately, there's a big push on which kind of plays to our daily work in sports.

And so sports and entertainment is a big push. They'd love to see more of that activity case in that market. And so I think we're ideally positioned to be able to do that as well. Hubert, I don't know if you want to add any more color?

Hubert Wang -- President and Chief Operating Officer, MGM China

Thank you, Bill. Thank you, Chad, for the question. I think that in terms of timing, we're progressively working on the tender package. We'll submit, of course, before -- by the September 14 deadline.

In terms of commitments, the government does focus on overseas market. So this is, I think, where MGM has a lot of strength with its global distribution network. So we'll be able to focus on that. There are a lot of requirements, as Bill mentioned, on the non-gaming side as well.

So we'll leverage our traditional strength in arts and culture. And together with the show that we are currently underway to produce, to leverage these strengths to -- for the non-gaming diversification that government is asking for.

Chad Beynon -- Macquarie Research -- Analyst

And then a separate follow-up. Just in terms of capex, slide nine, you noted the USD 750 million to USD 800 million for this year. Can you just kind of remind us, are there other, I guess, medium-sized maintenance projects, particularly in Vegas, that could be on the come in the next couple of years? Or how should we think about kind of a go-forward maintenance? Just trying to square what free cash flow could be going forward?

Jonathan Halkyard -- Chief Financial Officer

Now the largest components of our capex, Chad, are room renovations and our technology investments. Through the first six months of the year, we've invested about $250 million in capex. So we're behind pace, but I'm confident we'll be pretty close to the number that we've outlined for this year. And those will continue going into '23 and '24.

And so probably a reasonable number for maintenance capex is going to be kind of in the 5% or 6% of net revenue. And we, of course, have a lot of flexibility on timing of those investments if we need to, but we've set forward a multiyear schedule of room renovations that we think are important in order to maintain and grow revenues. And I'll just point out what we have going on right now is room renovations has just begun at New York. New York, one in a large segment of the MGM Grand and then down in Biloxi, a room renovation at the Beau Rivage business, which under leadership of Brandon Dardeau and his team is just having a phenomenal year so far.

Chad Beynon -- Macquarie Research -- Analyst

Thank you very much. Appreciate it.

Operator

And the next question is from John DeCree from CBRE Securities. Please go ahead.

John DeCree -- CBRE Securities -- Analyst

Hey, everyone. Thank you for taking my question. Maybe one, Bill or Jonathan, on the labor market and your hiring needs. How do you feel about staffing right now? Is it still difficult to get labor? Or are you kind of where you need to be? And then perhaps in the context of build some of the events that you've outlined as international comes back, convention ramps, the big citywides, will you need to kind of continue staffing to get ready for those busy peak periods?

Bill Hornbuckle -- Chief Executive Officer and President

Yeah. Good question. Thank you, John. So look, I guess if there's such thing as good news when I tell you this number.

We're under 4,000 open jobs. And remember, in any given usual time, and I'm making usual '18, '19, etc., we've always had between 1,200 and 1,500. It's just hard to keep the cycle going at the scale that we need. And so we're in a better shape.

We still have some key areas like most people in hospitality, around housekeeping, security, cooks, that we struggle with in terms of getting people back to work. And so that continues and it's similar here and even into our regions for sure, in some of the offshoot markets like Atlantic City and the Beau in Mississippi, obviously, Tunica has been a challenge, but it soon won't be our challenge. And so I still feel our ability to flex up. We flex up into -- think about our portfolio into the Bellagio and the Arias of the world with employees.

And so I'm not overly concerned. Things like F1 will be a significant undertaking from the community, but the company -- we're trying to get our head. We've assembled teams around all of that in terms of the opportunity, which is amazing. I think what's going to be ultimately for retail business of note and potentially gaming business.

But generally speaking, we're in decent shape. We are not running around with our hair on fire, if you will, anymore. But there's still some -- it's kind of interesting state of the economy. There's 1.5 million jobs available in this industry of the 11 million jobs still open in America, and we represent that, I think, fairly squarely.

But we are getting by and pretty excited by the folks that are coming back on board. And I think we're in decent shape.

John DeCree -- CBRE Securities -- Analyst

That's great, Bill. And maybe the follow-up to that -- with that in context. Like you said, F1, obviously, a big opportunity, a lot of the big events, big revenue opportunity. In Vegas, how would you kind of think about -- or how should we think about the margin profile as some of those big revenue events come back, but probably some costs, as well as you hire? Would you kind of expect margin stability, absent any kind of pullback in leisure consumer spending, which is hard to predict at this point.

But how would you think about kind of the cadence of business still ramps in Vegas on the revenue side as well?

Bill Hornbuckle -- Chief Executive Officer and President

Look, and Corey will have a view on this, but I will tell you, as it relates to something like F1, the retail potential and the upside of that are substantive, like we're talking room rates three times what we are normally and potentially then some. There are packages that sell for that event at $100,000 retail. And so the scale and scope, we have access to -- our ticket buy alone will be about $20 million, $25 million. And we have access to those tickets and then the ability to charge as we want and package as we want.

And so I don't think that one will be a margin hurt. Matter of fact, I think I'm pretty excited by that one. I got to tell you. Some of the other activity --

Corey Sanders -- Chief Operating Officer

Yeah. What I would add, John, is our margins probably already seen the impact because of the way we have to record T-Mobile in the Grand Garden. So now we're going to benefit these outside events, including what will happen at the spear if they bring you too in and others. It will just bring more people into the city.

And I think we saw that especially with the Legion with the NFL games, which will be in the fourth quarter and the events that they've had. So I don't think these -- I think these upcoming events will allow us to bring premium customers in and actually maintain or increase our margins.

John DeCree -- CBRE Securities -- Analyst

Understood. That's really helpful, everyone, thank you so much and  congratulations on another good quarter.

Bill Hornbuckle -- Chief Executive Officer and President

Thank you.

Operator

The next question is from Robin Farley from UBS. Please go ahead.

Robin Farley -- UBS -- Analyst

Great. Thanks for taking the question. I was curious regarding as to your JV partner, Entain because you had made an offer now, I guess, over 12 months ago. And since then, obviously, Entain's stock price is down quite a bit, and they've lowered guidance.

And now your offer -- the offer you made last year is a significant premium to where that stock is now. I'm just curious whether -- how much sense it would make to revisit because I would think all the benefits of owning 100% of BetMGM are still the same as they were a year ago. So I'm just curious how you're thinking about that.

Bill Hornbuckle -- Chief Executive Officer and President

Robin, we think about it all the time, of course. It'd be foolish to think otherwise. And you can't buy what's not for sale. We remain keenly focused on BetMGM.

We'd like more of it. We have a great partnership with them. That business is working well because of what we ultimately all provide, our IP, our database, their technology. And so there are other ways to skin a cat, and potentially, we may have to seek those, and it is what it is.

But obviously, we continue to follow the math, and we understand it intimately. But for now, we have no story there.

Robin Farley -- UBS -- Analyst

OK. All right. And then just as a follow-up, kind of unrelated. I know you've talked about the strength in Vegas that you're seeing and the forward outlook.

I'm curious on the regional front. Others have talked about regional kind of slowing and having tough comps. I'm curious of your view for the regional outlook.

Corey Sanders -- Chief Operating Officer

Yeah, Robin, this is Corey. I think we have two different sets of regional properties unlike our competitors. I think when we think about National Harbor, Beau Rivage, Borgata, you get a lot of tourists, a lot of FIT-type customers. And those properties, we're seeing the same strength we're seeing in Las Vegas.

As we get into our more traditional drive-in markets, the higher-end customers are continuing to come and play at the levels they were, probably seeing a little softness at the bottom end of that range and a little bit in the unrated especially at properties like Empire.

Robin Farley -- UBS -- Analyst

 All right, great. Thank you.

Operator

And the next question will be from Barry Jonas from Truist Securities. Please go ahead.

Barry Jonas -- Truist Securities -- Analyst

Great. As we look through your different Strip properties in Q2 and now, are there any major differences in performance as you sort of move from the higher end to the lower end?

Bill Hornbuckle -- Chief Executive Officer and President

Well, I think it ties to the broader market. Look, anything tied to luxury and high-end retail, and you can obviously put it into that case, Bellagio, Aria, now the Cosmopolitan parts of MGM and parts of Mandalay, are doing amazingly well. Room rate activity remains in the high teen. ADR percentages above all things ever.

Our food and beverage and our costing -- and our pricing, excuse me, is extremely strong. And so it ties to just about everything else you've heard about the broader economy. We're able to leverage up on higher-end retail products, and it's done well for us. Corey?

Corey Sanders -- Chief Operating Officer

And the high-end gaming piece in those properties, we are seeing that incremental play. So you'll see those properties outperform the legacy properties.

Barry Jonas -- Truist Securities -- Analyst

Got it. Got it. I just wanted to ask about iGaming. Just curious if you have any expectations around future state legalization.

Do you think anything maybe is possible in the next year or two?

Bill Hornbuckle -- Chief Executive Officer and President

Yeah. I think there are a couple of states. I think the reality is there's not a dozen right now. I think there are a couple of states that we're clearly targeting.

We think they have everything but iGaming in them, and they obviously make an interesting subject and an interesting discussion with regulatory, government officials and ultimately regulators. There's a couple though that we have benchmarked for next year, and we think we can break into and continue to grow that because it is the key to the bottom line of that business, as you know. And so we're excited to continue to do that. It's going to take some time, though.

Depending on how deep this recession may or may not be, when states need money, sometimes they turn to this vehicle. So we'll see.

Barry Jonas -- Truist Securities -- Analyst

Got it. All right. Thank you, and congrats on a great quarter.

Bill Hornbuckle -- Chief Executive Officer and President

Thank you, Barry.

Operator

Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Bill Hornbuckle for any closing remarks.

Bill Hornbuckle -- Chief Executive Officer and President

Thank you, operator. Just a couple of key thoughts as you think about our call today. And again, congrats to our entire team. I couldn't be happier with where we are and what we've accomplished.

Much has been done and, frankly, obviously, much more to go. There has been, I think, a shift. There is this insatiable appetite for travel experience, experience-based economy, and the millennials stepping into it. And I think we've seen it in all of our properties, particularly here in Las Vegas.

When you think about the Cosmopolitan and others, I think we're in a great place. I think we're ideally suited to take advantage of it. If you think about travel experiences and how things are reported out, we feel ideally situated to do that. We think we've proven our working model, and our operating model has worked, I should say.

Whether we lever up to the success we've had in the last two quarters or frankly, whether we need to weather the storm coming up, we think we're in great shape to do that. And we think we've learned a great deal as we think about the future, frankly, to go either way. We're not naive to what the economy may or may not do. And so we have constant pressure on ourselves around employment, around labor, around all things expense related.

And we remain keenly focused on that. We've all lived through this before and don't want to see some of the mistakes we've made in the past replicated. And so we're on that. But generally speaking, if you think about where the company is today, our balance sheet of note, the opportunities in front of us to go more into Asia, potentially to go more into digital, potentially buy back and take back some more shares for our stakeholders, I think we're in an amazingly great place, and I couldn't be more excited for our future.

So I appreciate everyone's time today and support generally. And we hope to continue to do the same kinds of things. So thank you.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Andrew Chapman -- Director of Investor Relations

Bill Hornbuckle -- Chief Executive Officer and President

Jonathan Halkyard -- Chief Financial Officer

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

Carlo Santarelli -- Deutsche Bank -- Analyst

Corey Sanders -- Chief Operating Officer

David Katz -- Jefferies -- Analyst

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

Dan Politzer -- Wells Fargo Securities -- Analyst

Chad Beynon -- Macquarie Research -- Analyst

Hubert Wang -- President and Chief Operating Officer, MGM China

John DeCree -- CBRE Securities -- Analyst

Robin Farley -- UBS -- Analyst

Barry Jonas -- Truist Securities -- Analyst

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