Las Vegas Sands (LVS) Q2 2023 Earnings Call Transcript

Las Vegas Sands (LVS -0.22%)
Q2 2023 Earnings Call
Jul 19, 2023, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Sands second-quarter 2023 earnings conference call. At this time, all participants have been placed on a listen-only mode. We will open the floor to your questions and comments following the presentation. It is now my pleasure to turn the floor over to Mr.

Daniel Briggs, senior vice president of investor relations at Sands. Sir, the floor is yours.

Daniel Briggs -- Senior Vice President, Investor Relations

Thank you, and thank you for joining us today. Joining the call today are Rob Goldstein, our chairman and CEO; Patrick Dumont, our president and COO; Dr. Wilfred Wong, the president of Sands China; and Grant Chum, EVP of Asia operations and COO of Sands China. Today's conference call will contain forward-looking statements.

We'll be making this out of the safe harbor provision of federal securities laws. The company's actual results may differ materially from the results reflected in those forward-looking statements. In addition, we will discuss non-GAAP measures. Reconciliations to the most comparable GAAP financial measures are included in our press release.

We have posted an earnings presentation on our website. We may refer to that presentation during the call. Finally, for the Q&A session, we ask those with interest to please pose one question and one follow-up, so we might allow everyone with interest the opportunity to participate. This presentation is being recorded.

I'll now turn the call over to Rob.

Rob Goldstein -- Chairman and Chief Executive Officer

Thank you, Danny. Good afternoon. Thank you for joining us today. The powerful recovery taking place in Macao and Singapore is evident in our results.

We believe it's early days, and there's still room to run in both those markets. We continue to invest in both markets for our future growth. We do have a structural advantage in Macao based on our scale. As the market accelerates, we will be a major beneficiary in the future.

Singapore continues to do well despite two impediments in the midst of $1 billion renovation which does impact adversely the results in Singapore. In addition, we haven't seen a full return of the Chinese premium mass segment yet. This iconic building has a very bright future. Cash flow recovery is in full bloom, so it's very, very enjoyable to say yay dividends.

Let's go to some Q&A. First question, please.

Questions & Answers:

Operator

Thank you, ladies and gentlemen. The floor is now open for questions. [Operator instructions] And the first question today is coming from Joe Greff from J.P. Morgan.

Joe, your line is live.

Joe Greff -- JPMorgan Chase and Company -- Analyst

Hey, everyone.

Rob Goldstein -- Chairman and Chief Executive Officer

Hi, Joe.

Joe Greff -- JPMorgan Chase and Company -- Analyst

Rob and the team in Macao, I'd love to get your view on -- on margins in Macao both within the quarter and then, just broadly, how are you thinking about it going forward. When you look at the months within the 2Q, was there a differential between, you know, margins exiting the quarter in June versus the first couple of months? And then, related to that, I'm assuming you're under the belief and impression that monthly GGR can continue to grow sequentially. I would imagine in the summer months, that would follow typical sequential seasonal trends in margins from here, probably have more upside than downside from 2Q levels. So, my question is specifically this: Going forward, how do you think about the flow-through on incremental revenue growth from here? And then, I have a follow-up.

Rob Goldstein -- Chairman and Chief Executive Officer

You know, Joe, starting internally with Grant to the margin discussion, obviously, do believe that the market is starting to get stronger. And you saw that in our numbers, and our June results were the strongest, almost $200 million of EBITDA in June alone. So, we had acceleration to the quarter. Our numbers I think speak for themselves and they speak loudly.

Six months ago, we were virtually closed on the month of June. Again, we announced $200 million of EBITDA. And visitation increases in Macao. I think the visitation issue is going to drive obviously the GGR escalation.

I just do believe we will be the beneficiary because of our scale, and $15 million investment will pay off quite well. We have adequate room to run because we have capacity in every segment, be it gaming and non- gaming. I think a very strong advance in that regard. So, again, we think as the GGR escalate for more visitation, we will be a major beneficiary.

As to margin, Grant, I hope you're awake in Macao. Please answer that.

Grant Chum -- Senior Vice President, Global Gaming Strategy

Thanks, Rob. Yes, Joe, yeah, just on margin, as you imagine, has continued to improve as we grow the revenues on optimal cost structure, normalized margins up about 240 basis points quarter on quarter. And I think that will continue to rise as revenues continue to recover. We do have a more profitable business mix than -- than 2019, as does the whole industry, because we have a greater proportion of mass relative to VIP.

But recall, relative to the industry, we always had a much greater proportion of our GGR in mass. So, 87% of our GGR this quarter is in mass versus 71% in Q2 of 2019. And also, the shift between gaming and non-gaming. And recall, we're the dominant revenue generator in non-gaming in the industry.

And non-gaming is rising as a percentage of our revenues, going from 17% in 2019 to 22% this quarter. So, both of these mix shifts are positive for margin. We are obviously reinvesting our revenues back into the business to increase our capability to handle more -- more visitors, chiefly increasing our headcount to service more hotel rooms. That's for sure.

One of the things that we've achieved this quarter where our room operating capacity was back to 10,700 rooms on average for the quarter. And as we go into the summer, as we discussed last time, we're heading back to 12,000 rooms in terms of our operable hotel room capacity. So, that entire labor issue -- shortage issue has -- has dissipated as an impediment. And then, in terms of intra-quarter, yeah, margins are related to the revenue recovery rate, and June was the standout month for sure for us.

We recovered for the second quarter as a whole. As you can see, 85% of 2019 levels in terms of mass revenues for the second quarter. But in June, our mass revenue were about 97%, almost at full recovery to June 2019. So, the acceleration in June was -- was really very broad-based.

We saw underlying visitation recovery obviously, Macao visitation recovering to almost 70% of 2019, and all of our key volume metrics were up significantly against April and May, so a non-rolling drop increase 15% against April and May. In June, slot handle was up 9%, and rolling volumes up 10%. So, across the board, we saw a very sharp acceleration in June.

Joe Greff -- JPMorgan Chase and Company -- Analyst

Great.

Rob Goldstein -- Chairman and Chief Executive Officer

Joe, also referenced on Page 14 of the deck, I think it's instructive to look at what's happening in the provinces beyond Guangdong and non-Guangdong visitation and lack of penetration. It's such early days in this recovery. I think if you look at '14, it gives you a really good snapshot of what we believe is the beginning of a strong recovery. Hopefully, this summer, we'll evidence more and more return to pre-pandemic numbers and the non-Guangdong visitation numbers that's going to fuel this business.

As you know, we had the capacity gaming, non-gaming to participate across the board. And that's what we believe will happen that impact margins, but also online. That's inevitable fact of Macao. Six months into this recovery, and we're still way behind toward visitation.

Joe Greff -- JPMorgan Chase and Company -- Analyst

Great. My follow-up question is this. We've seen, within mainland China, more mixed macroeconomic performance year to date, and yet, at the same time, in Macao, gross gaming revenues, visitation, retail sales, pretty much most metrics have steadily improved. How do you reconcile the disconnect between China macro and the fundamentals on the ground in Macao? And how do you see that relationship playing out going forward?

Rob Goldstein -- Chairman and Chief Executive Officer

Well, obviously, we prefer a strong macro economy in China. We're hoping for that in the future, but we can perform and we'll perform even if the recovery is slower than our business. We'd like to see it come back quickly. But as you see in other business, you saw LVMH numbers, you see the other retail numbers, the retail market, our business doesn't require everyone to be making a strong economic recovery.

It just certain segments can make it happen. But again, we're hoping for a strong rebound in China and a stronger macro, which also would impact this positively. I still believe this market will continue to grow in spite of a slower recovery than we'd like in that region.

Joe Greff -- JPMorgan Chase and Company -- Analyst

Thank you.

Unknown speaker

Thank you.

Rob Goldstein -- Chairman and Chief Executive Officer

Thanks, Joe.

Operator

Thank you. The next question is coming from Robin Farley from UBS. Robin, your line is live.

Arpine Kocharyan -- UBS -- Analyst

Hi. Thank you. This is actually Arpine in for Robin. I was wondering if you could talk about average spend for mass customer and where you expect that to sort of normalize, thinking about the fact that a portion of higher spender in VIP obviously ends up in mass.

But also that as you open up more hotel room capacity, that rents up probably higher percentage of ground mass returns to Macao. How do you think about that more normalized spend per mass customer looking forward into the back half?

Rob Goldstein -- Chairman and Chief Executive Officer

Grant?

Grant Chum -- Senior Vice President, Global Gaming Strategy

Yes, thanks for the question. I think you can see from the results, the premium mass recovered still faster than the base mass. But sequentially, base mass still grew strongly on the back of improving visitation. And as you alluded to, I think as room inventory increases, we're able to cater to more visitors.

I would say the spend per head directionally continues to be very strong across both premium mass and base mass. So, while, obviously, as the base mass picks up, you'll see -- you see more of a mix shift, I think, over time. But within each of the segments, spend per head is actually rising. So, we are getting high-quality, high-value tourists into Macao at this point.

And also, we're broadening this to -- to high-value foreign tourism as well. So, we can see strong results this quarter again in terms of the high-end foreigners. So, I would say, at this stage, the higher value segments are growing, recovering still at a faster rate. Base mass is picking up as visitation grows and hotel capacity increases.

But within each of the segments, i.e., both premium mass and base mass, the spending has actually continued to be very high, and indeed, the spend per visitor is heading in a positive direction.

Arpine Kocharyan -- UBS -- Analyst

Great. Thank you, Grant. And just one quick follow-up. With your dividend reinstated here, I was wondering if you could update us on your overall capital return strategy and how you think about buybacks.

Thank you.

Patrick Dumont -- President and Chief Operating Officer

Hi, how are you? So, you know, I think when we view the business in terms of capital allocation, we feel like we have a lot of good opportunities really for big growth both in Macao and Singapore, and that investment will continue to drive our expansion of non-gaming amenities and drive our cash flow. But we also think that we're going to be able to return a lot of capital in the future. We were a very shareholder-friendly capital -- very shareholder-friendly company in the past. We're very focused on return of capital.

But I think when you look at our prior program and what we're looking to do going forward, I think we'll probably look to have more of a balance between share repurchase and dividends. You know, I think when we thought about the dividend size, it was something that leaves us plenty of room for investments in the future. It allows us to grow over time, which is our focus to really grow our asset base and grow our cash flow capacity. But it also allows for future share repurchases, which is something we're motivated to do.

I think the dividend size today gives us flexibility with our capital allocation, and really, over time, we tend to shrink the share count. You know, I think having a balanced capital return program is very important for us. We talked about it with the board. I think management is very focused on it.

We'll probably look to be more programmatic about share repurchase that we have been in the past. And I think, really, this gives us the flexibility to -- to repurchase more shares over time and to really address our capital expenditure needs. So, I think what we're going to try to do is allocate capital to growth, which we think we have a lot of opportunities that are unique for our company; focus on the dividend as a cornerstone of our program as we always have, but allow ourselves to have more balance, more flexibility in the future to do more programmatic share repurchases and really shrink that share count.

Arpine Kocharyan -- UBS -- Analyst

Thank you. Very helpful.

Operator

Thank you. Your next question is coming from Carlo Santarelli from Deutsche Bank. Your line is live.

Carlo Santarelli -- Deutsche Bank -- Analyst

Hey, everybody. Thanks. Robert or maybe one of the guys in Macao, I was wondering, as -- as kind of the market has shifted and you've seen a couple of quarters that at least look more normalized, as operators who may have been more VIP focused in the past or certainly more mixed toward VIP relative to you guys, have you seen any change in behavior as it pertains to kind of mass reinvestment levels across the -- marketwide?

Rob Goldstein -- Chairman and Chief Executive Officer

Yeah, Grant, why don't you take that?

Grant Chum -- Senior Vice President, Global Gaming Strategy

Sure. Yeah, thanks for the question. I think, on the whole, we see a very stable competitive environment. I think all of the operators, the entire industry is continuing to invest in non-gaming and diversification and bringing about, I think, a really stellar event programming into the market which is helpful, I think, not just for growing the tourism economy, but also increasing the business volumes for -- for all of the operators.

So, I think you're seeing the positive results from that investment in non-gaming and events programming even in this past three months, not -- not least in terms of our non-gaming programming that we put in place that's been really driving business levels and visitation. In terms of reinvestments, yeah, I think it's relatively similar to what we've seen in the recent quarters. Clearly, it's become -- you know, continues to be actually always been a very competitive market in premium mass and will continue to be. But I think there's very rational behavior among the operators and the industry in general led by the larger players.

But as I said, the focus of the industry has been to -- to reinvest in -- in a non-gaming programming, and that's been a tremendous driver to the recovery so far.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great. Thank you for that. And then, if I could, as a follow-up, just in terms of the expansion at Marina Bay Sands, I know you guys were going through some stuff and reviewing some budget needs and design plans and everything else. Is there anything you guys could share at this point in time with how we should be thinking about that timeline spend, etc.?

Patrick Dumont -- President and Chief Operating Officer

Sure. First off, we're -- we have very strong feelings about the future success of Singapore. If you look at the results from the quarter, look at the visitation that we have, the type of customer we have coming through the building, the fact that China has not fully recovered, and if you look at sort of the nature of where Singapore sits today in a unique confluence of events in terms of the, you know, kind of growing economies in Southeast Asia, we have a very strong view about the future of Singapore. It's very positive.

So, we're very motivated to make an investment there and expand our capacity at Marina Bay Sands. Right now, we're in discussions with the government about what the final form of our project will look like. There's obviously been a lot of changes to the market in terms of market potential, the government's goals around high-value tourism, and to be fair the way we want to grow into that market. And so, there's some adjustments that we're making, and hopefully, we'll have a better sense of what that will look like in the upcoming quarters.

But right now, we're in discussions, and we have a chance to continue with the final version of our project in short order. We're looking forward to getting started.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great. Thank you, Patrick. Appreciate it.

Operator

Thank you. The next question is coming from Stephen Grambling from Morgan Stanley. Stephen, your line is live.

Stephen Grambling -- Morgan Stanley -- Analyst

Hey, thanks. As a follow-up in Macao, the $200 million number you mentioned in June, is that a clean number that you would think of to build off of given normal seasonality? Or should we -- should we see that build as base mass continues to recover?

Rob Goldstein -- Chairman and Chief Executive Officer

The second portion of this last part -- last thing you said, recover?

Stephen Grambling -- Morgan Stanley -- Analyst

Yes, it's a question of as base mass continues to recover, how should it impact that 200 million number?

Rob Goldstein -- Chairman and Chief Executive Officer

It should what? I think that 200 million, the reason we called that out was because, obviously, a strong month, especially in light of the seasonality of June not being a great month. Look, our position is simple. We think Macao will just continue to get stronger, and the recovery can be predicated on visitation in all segments. And our -- again, our advantage, it's very structural and very different than other operators.

We have capacity growth, base mass, premium mass, rooms, retail, everything you can think the customers want. We have the products, the service that and -- that does make the market competitive. So, I think June is the beginning. Hopefully, there's some -- will be evidence that we'll see how July, August, September hold up.

But our story is pretty simple: More visitation, especially more base mass, more penetration into China will yield bigger GGR, and we'll be a huge recipient of that. And I think that's the story we believe in wholeheartedly. I guess I take comfort in the fact that, again, six months ago, we weren't sure we'd be open. We had a basically closed business in December 22.

Here we are in December, in the summer of '23, looking at a $2.4 billion run rate just based on June. We believe that can accelerate. So, we're firm believers in that, always have been. We've never vacillated from that belief.

That market is just special. And the recovery in China is slower in general for all segments we thought would be, but it's coming on now. And this summer will be a great indicator how fast it gets back to 26 billion, 30 billion, 32 billion. I don't know where the peak is, but I just believe the acceleration will be evidenced this summer.

And again, we are in this very, very good position of having plenty of assets to -- to put to work in Macao. Plenty of rooms, the windows are all open, the retail is open, and functioning slots and tables. So, because the market grows, we should be a pretty big beneficiary from that. That new demand is coming.

Stephen Grambling -- Morgan Stanley -- Analyst

And so, just to be clear, you don't -- do you think that there was any kind of one-time benefits in June, whether it's Jackie Chung or other things that could have been driving that? And so, that may have been an outsized number or you're saying that is a clean number to build off of?

Patrick Dumont -- President and Chief Operating Officer

So, I think the key thing to note is that we've had these non-gaming, what we call lifestyle programs, which include entertainment and other activations for years. And they were very successful pre-pandemic because we were able to connect with our customers and bring in very high-value tourism that was high frequency. And so, we've started those programs again. And so, the concert you just referred to is very popular, and I could let Grant comment on that, or Wilfred comment on it.

But I think the key thing for this is our non-gaming programs are working, that the investment in non-gaming, that the activations, that the driving customer visitation through social media is working. And so, the visitation of high-value customers flows through in our results in that month. I think the interesting thing is air traffic to Macao and to Hong Kong is, like, around 50% of where it was pre-pandemic. So, our story is one of visitation.

It was led by higher-value customers and premium mass. But now as people can begin to travel to Macao more easily and more frequently, they're starting to return, they're starting to consume all of our different amenities, not only -- not only the hotels but the concerts, the food and beverage, the retail, all of it's working. And so, you know, we'd like to believe we can grow from that number materially, as our base mass, non-rated player returns, as more premium mass customers show up, and as Grant said earlier in the call, more of our hotel rooms come online. So, we think we've invested through the pandemic and very high-quality product.

The customer response has been very strong, and we're able to price through it. So, we'd like to believe that there's margin room there. We'd like to believe that, as we activate our non-gaming activities, that will draw more customers to concerts and other events. And then, it'll continue to grow overall the desirability of a visitation account.

Grant, do you have anything to add?

Grant Chum -- Senior Vice President, Global Gaming Strategy

Yeah, thanks, Patrick. Yeah, I mean, as you rightly say, we've had a very long track record going back 16 years in terms of hosting world-class entertainment events at the Venetian Cotai Arena. And this was always part of our lifestyle programming. Jackie has been terrifically successful in the past with us as well.

He played in both 2017 and 2018 in the summers of -- of -- of those years. I think what makes this June special is, firstly, he played a record-breaking 12 shows across four weekends. I don't think that's ever been done before in Macao. But not only that, Macao was the first touring stop of the entire global tour that Jackie Chung has just launched.

So, that he chose to launch his new global tour at the Venetian Macao, I think, is testament to both Macao's, you know, rising destination appeal, the importance of it as an entertainment hub regionally, as well as our own track record in partnering with Jackie and his team over many years. So, you know, the month was strong, not just the days when the concert was on which is nine months of of the month. So, it's a combination of factors. I think the underlying visitation to Macao, like Patrick referenced, was improving throughout the quarter and into June, even though it was into a traditionally weaker part of the travel calendar.

Hotel availability improved. Transportation improved. Concert series undoubtedly played a part, but that's just one component of the ongoing lifestyle program. And I think that programming is not just done by us but by the whole industry, and I think that will make Macao continue to recover rapidly.

And it speaks volumes to, I think, the new direction that the government is pursuing, and I think is a great -- is a great start to -- to the new concession.

Stephen Grambling -- Morgan Stanley -- Analyst

Makes sense. Thanks so much. I yield the floor.

Rob Goldstein -- Chairman and Chief Executive Officer

Thanks, Stephen.

Operator

Thank you. The next question is coming from Shaun Kelley from Bank of America. Sean, your line is live.

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

Hi. Good afternoon, everyone. Good morning, Grant. So, maybe I just wanted to go back to the -- to the cost side a little bit, and it's probably for Grant.

But if I caught it correctly, I think in an earlier question you said, you know, room complement was up to 10,700 on average in the quarter, heading to 12,000. Can you just give us a little bit more color on that? Are we at the 12,000 as we exit the quarter there? And just what does that imply for, you know, kind of necessary either headcount or kind of cost ramp-up from here? Is there a little bit more remaining, or actually, is this number that we saw in the quarter pretty reflective of kind of what you think the baseline operating cost should look like from here moving forward?

Grant Chum -- Senior Vice President, Global Gaming Strategy

Yeah, thanks, Shaun. Yeah, I think, yeah, you heard it right. It's averaged around 10,700 rooms a day in terms of our operable capacity from a labor standpoint during the quarter. We actually increased further toward the end of the quarter.

So, as we go into third quarter, we're roughly at that 12,000 rooms mark, which I said, plus or minus. But typically, there's always a handful of rooms out of -- out of order for maintenance, regular maintenance. We're effectively back at full inventory now and ready for the -- for the peak summer season, which -- which -- which is getting underway later this month.

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

Great. Thanks for that. And maybe a similar question but kind of transferring over to Marina Bay Sands. There, you know, we've seen kind of two quarters in a row with margins kind of, you know, in the 46 to 47 camp.

That's still a couple hundred basis points below pre-COVID. And I know there's a lot going on there, I do believe, in the slide deck, you guys called out that the -- some of -- some of the renovation activity was either over or close to. So, maybe just an update on some of that renovation disruption and how we sort of, you know, exited the quarter there. And just your thoughts on cost, which I think we're up about 10% Q on Q.

You know, is there anything -- any -- is there -- as -- if the full complement of rooms comes back, can we also see some margin leverage or improvement sequentially or going forward? And how should we think about that in the second half?

Patrick Dumont -- President and Chief Operating Officer

So, I think what's -- what's important to note about Marina Sands, as Rob said in his remarks earlier, the building is under a lot of change. It's changed for the better. We're investing a lot, and we're creating what is arguably the best product we've ever had. And the customer response is very strong, but we're mid-flight in that.

And so, I think a couple of things to consider, our biggest suites, so our 200 multiday suites, are the last to come online. So, that's what's going to come in this quarter and the next quarter. So, the full potential of the renovated Tower 1 and Tower 2 will not really be reached until those suites are online. So, we've been operating without them.

So, we'll be able to price better, we'll have higher margin and we'll have a larger quantum of cash flow from this high-value segment coming into the building. Because they didn't have any place to stay, and now, we're adding 200 suites of the highest quality we've ever had. So, that's going to be meaningful, and that will address, let's call it, some of the operating leverage we want to get out of our cost base. We've had a significant number of rooms out of inventory.

And so, I think between some of the cost increases that we've seen in the market for inputs and, to be fair, the gaming tax increase, there are some things we need to overcome through higher-value customers, through pricing, and through volumes. And I think the one thing that's important to note, aside from the fact that we haven't had our most important room inventory available to us, our casino floor has also been on a renovation, that's coming to a close. But most importantly, airlift from China is really back yet. And so, when you look at play across the quarter from rated play from China, it's increased each month across the quarter.

And so, as China visitation comes back into the fold and our new multiday suites come online, we will have an opportunity to price through some of the cost increases and improve margin.

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

Thank you, Patrick. Thank you, everyone.

Rob Goldstein -- Chairman and Chief Executive Officer

I just want to say, I think we're going to do the labor side [Inaudible] because, in every business, be it hospitality or retail, when you've got an exemplary product, people want -- you've got pricing power. And I think we're finished over there. It's taking a long time. It's -- it's a slog, but we get through this thing.

The room can offer the F&B, the retail, rethinking our retail. You see this all over the map in terms of, you know, why is there a -- Chanel or Louis Vuitton, you know, get these ridiculously high-priced product margins. We want the product, they offer a superior product. Same thing happens in the watch world, same thing happens in the hospitality world.

I think we're building some of that. People don't understand how good it is until they see it and understand it. It's going to be really special, and we'll be able to get pricing in every level rooms, casino, gaming, retail. When this -- this building is done -- I'm amazed we're doing these kind of numbers with ripped-up building.

When this building is done, our pricing power is going to go to another level. I think that's MBS' case in different gear. The margins always take care of themselves as long as you have the product people want and will pay for it. And I do believe when you guys have a chance to get over there and see MBS and experience what we're doing, you'll appreciate these comments.

It's going to be a pricing power issue. We're not going to cut costs; we're going to add cost to add more labor. We're going to have a really good product people want to be at, but that enables you to charge prices that are high. And I think that's our strategy is not to -- we're going to earn our way to success by offering a great product.

We will pay out for it. It's just that simple. And margins reflect that in the daytime side.

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

Thank you very much.

Operator

Thank you. The next question is coming from David Katz from Jefferies. David, your line is live.

David Katz -- Jefferies -- Analyst

All right. Afternoon, everyone, thanks. I know you've touched on this from a number of different perspectives, but I'd love just a little more help or insight in terms of how margins should evolve, specifically for the Macao enterprise in total. And, you know, just looking back at where normal was in 2019 and what a new normal could look like now, you know, how high the ceiling is, any qualitative perspectives around there, and how we get there the next several quarters would be helpful.

Thank you.

Rob Goldstein -- Chairman and Chief Executive Officer

I want to give -- Grant take that question, but I do want to say, David, again, I think I'll use the words structural advantage. I think we're just very different position than some people and that we were built for this market in terms of scale and size and every area of our business, base mass, premium mass. We're still handicapped by the base mass, hasn't fully recovered, but I think our reinvestment the last 20 years is going to make this product grow and grow. And there's a margin and demand.

I think we're just built for this environment. So, I'm highly confident margins will rise with our increased revenue. Grant, you have any color?

Grant Chum -- Senior Vice President, Global Gaming Strategy

Yeah. Thanks for the question. Again, we don't have a specific forecast on -- on how high the margins will rise to. I think you can look at the structure of the business.

I mean, as Rob says, I mean, we -- we have a -- we have an excellent structure in terms of our business mix. We have a -- we have an efficient cost structure. And I think, you know, the -- the way you will be looking at this is, you know, how -- how high will revenues go. But it is true that the segments that are going to drive more revenue recovery and then eventually growing structurally will be the higher-margin segments within gaming, mass versus VIP, and then also non-gaming versus gaming.

I think our non-gaming is recovering even more strongly than gaming. We're at, you know, 93% of our 2019 non-gaming revenues. Our hotel revenues for the quarter are 8% higher than 2019 on -- on fewer rooms being available. Our retail business is looking very strong.

Tenant sales were up 28% this quarter. And that will continue especially with full seasons, and that's ongoing.

David Katz -- Jefferies -- Analyst

Thank you. And as my follow-up, with respect to share repurchases, Patrick, which you touched on earlier, obviously not asking for you know specifics around when and where and how much, but any color on sort of boundaries or accomplishments, or, you know, how we might think qualitatively as to, you know, when -- when -- when we get there, and when we can start to think about that, you know, in a more tangible way?

Patrick Dumont -- President and Chief Operating Officer

So, I think we just restarted our return to capital program this quarter. I think it shows the board and management's confidence in the long-term performance in the business. And we'll look to grow that dividend over time in a way that also allows us to have a repurchase program. I can't give you a specific size about the volume of repurchases today because we still have a lot of things to plan for.

But in our capital allocation thought process, we're going to think about it in the way that was described previously. I think what's also important to note is that we're going to have variability in our capex. We have a lot of large projects that we're considering. Some of them are more certain than others.

We're very excited about Marina Bay Sands' expansion. We think it's going to be an unbelievable asset. We're very excited about it. The timing may be a little delayed from where we are today.

And now, we're going to invest as much as we possibly can because we think the growth there will be extraordinary. But we have other options, other things we're looking at, and the timing of that potential outflow is unknown or if it's going to happen. The good news is we'll have the ability to modulate our capex based on how we grow the business and use excess capital and return it to shareholders through share repurchases and hopefully in a programmatic way. So, while I can't give you an exact amount today, I will tell you our intent is to look at our, let's call it, capex for growth, capex for the future, a way to grow the business, look at the dividend program and ensure that it grows in an appropriate manner, and then look at our return on capital programs to share repurchases that are shareholder friendly.

I think that's how we'll look at it. But as it were -- as where we are right now, I can't give you a size yet, but we'll continue to look at it in the upcoming quarters and we'll talk about it.

David Katz -- Jefferies -- Analyst

OK, appreciate it. Thanks very much. Good luck.

Patrick Dumont -- President and Chief Operating Officer

Thank you.

Rob Goldstein -- Chairman and Chief Executive Officer

Thanks, David.

Operator

Thank you. The next question is coming from Brandt Montour from Barclays. Brandt, your line is live.

Brandt Montour -- Barclays -- Analyst

Hey, good evening, everybody. Thanks for taking my questions. So, on the VIP business which drew nicely for you guys in the quarter, but it wasn't as strong as the overall market, you know, could you just update us how important is this segment to you when you plan the next couple of years? And then, can you just touch on the current dynamics of the VIP market overall away from you and how your strategy compares to the broader market?

Rob Goldstein -- Chairman and Chief Executive Officer

I didn't catch the first. But you said we didn't do as well as the market in the VIP?

Brandt Montour -- Barclays -- Analyst

VIP, quarter over quarter, grew below marketwide VIP.

Rob Goldstein -- Chairman and Chief Executive Officer

I think we -- you know, I think we're very comfortable where we're going with VIP and the base mass. I think our -- our portfolio is so well rounded. Venetian is still the king of Macao. It's going to be the first place $1 billion-plus is earned EBITDA-wise.

And it shows no signs but to recover its previous position. We built a portfolio that is very well rounded. The Four Seasons enables us to compete very well with anybody with room product there, and the gaming products, pretty much unparalleled. Again, The Londoner, early stages.

Were halfway done with the renovation. The full renovation was still a while down the road. But except for the Sands, which I think we give up on the potential of a lot of growth being down there in the Peninsula, still a very difficult, challenging place to make a lot more money. The shift has been to Cotai, which of course, all our assets other than Sands are there.

We remain convinced there's more room to grow in the region. But I think our position on the VIP and the base mass is as good as it gets. We've got more suites than anybody else, more share than anybody else, and I think more potential growth because of the sheer mass size of our building. And again, we reference lifestyle.

We built a business there with Jackie this month or somebody else next month. Whether it's the best retail, the best restaurants, we built a lifestyle approach. I think it puts us at the top of the heap in that area, both as product offerings, but also quality of product. Very comfortable going and have no reason we can't grow and keep growing both in base and premium.

I think the idea we're not premium mass players is unfair and unjustified by numbers. Grant?

Grant Chum -- Senior Vice President, Global Gaming Strategy

Yeah, I think, on the VIP, our strategy hasn't changed. And in fact, obviously, the way the market has evolved in Macao for VIP, it fits our strategy more than ever because we're focused on the -- we've always focused on the premium direct segment out of the VIP. And we've historically had -- had a very strong sales network around the rest of Asia. So, we're working very hard bringing foreign top -- top-tier players into Macao, and we're having, I would say, initially great success in doing so.

Our foreign rolling volumes are already back to 2019 levels in the second quarter, obviously far ahead of the general tourism recovery from overseas markets for Macao. So, I think -- I think it's anchored around premium direct, a very strong sales network around Asia, and the continued effort -- intensifying the effort to bring more foreign top-tier patrons to Macao. As a -- as Rob said, it's a great destination for -- for -- for all of those markets. And we intend to -- to make full use of our great product and destination to attract those -- those -- those foreigners.

Brandt Montour -- Barclays -- Analyst

Great. Thanks for that. And just to follow up on capex, and trying to reconcile Slide 23, this really helpful year-by-year build you guys do for us with last quarter, looks like MBS expansion, I guess, was temporarily taken off. You guys commented on that already.

You added Londoner phase 2. Want to make sure that that's new and hear any maybe thoughts about, you know, targets -- return targets for that -- that project. And then, lastly, you know, I think there were some reports from you guys -- or came from you guys through the media mid-quarter about a new hotel tower at the Venetian and, you know, if that's -- if that's a -- true or a plan. I'm just curious if that's going to be included in the 3.5 billion capex commitment that you've, you know, agreed with the government on.

Patrick Dumont -- President and Chief Operating Officer

So, just a few points. We did take Singapore expansion off because until we finalized the program and have final approval from the government, we don't know exactly what it will cost. So, we're going to hold off on that until we have a final project decided upon. In terms of The Londoner phase 2, I think the great thing about The Londoner is when we first started, we actually did it preconcession during the pandemic, and we built through the pandemic and into the concession rule, and came out on the other side and the thesis was validated.

It's incredibly well received by the market. It looks spectacular. Customer response has been very strong. And we're excited about the result, and that market validation was very important.

And now, we're going to roll into the second part of the building and really, hopefully, tap into the absolute earning power of that, call it, really well laid out, really thought through hotel offering and amenity offering. And so, in our long-term view, that's something that will, hopefully, one day come close to the Venetian in terms of its productivity potential there. Very excited about that opportunity. In terms of return targets, I think it's something that we talk about directly, but in our mind, you know, there's a lot of potential growth in our deepest and most profitable segments, which is mass and premium mass.

And so, you know, with the revised or renovated hotel suite -- hotel rooms and suites that we'll have there, we think we'll be able to address the market incredibly well, just like we did with the first phase of The Londoner. So, I think that's kind of how we're thinking about it. And in terms of a new hotel tower, I mean, I don't think we can comment on -- on rumors. I don't think that's something we're familiar with.

I think, for us, we're really focused on really delivering against our concession renewal requirements, investing in the non-gaming amenities that really help define our portfolio in Macao and really drive visitation. So, Grant, do you have any other comments you'd like to add?

Grant Chum -- Senior Vice President, Global Gaming Strategy

Patrick, you covered it very well. I think The Londoner's success, we've had the wholesale reinvention of the property's positioning and the branding and the functionality. And actually, it's easy to forget that most of the hotel room accommodation today still remains the original Sands Cotai central rooms, as this half of our main gaming floor. So, phase 2 is really about making Londoner more Londoner.

We need to reposition and upgrade Sheraton and the Conrad hotels, as well as a comprehensive upgrade of the Pacific Casino on the Sheraton side. And we'll be adding more non-gaming amenities and attractions to The Londoner and, you know, many of which are also included in our concession commitments, more signature restaurants that have international appeal, state-of-the-art wellness center, other sort of lifestyle attractions. And then, beyond that, over a longer time frame, we've always committed since the concession retender to developing this new landmark garden-themed attraction, The Conservatory, located -- to be located in the gardens south of The Londoner resort. That will take longer time frame to develop.

But first off, we're able to get -- get right down to work on Londoner phase 2 and the hotels and the casino refresh because we've been working on this during the pandemic on the design. So -- so, we're now, as Patrick said, I mean, we've seen it, you know, the product that we have come out with being hugely validated, and with the market recovery, with the return of visitation, and the hotel guests were keen to get moving onto this phase 2. And that's why we're able to start the actual construction in the second half of this year.

Brandt Montour -- Barclays -- Analyst

Great. Thanks, all.

Operator

Thank you. The next question is coming from Steve Wieczynski from Stifel. Steve, your line is live.

Steve Wieczynski -- Stifel Financial Corp -- Analyst

Yeah, hey guys, good afternoon. So, Rob or whoever wants to take this in, Patrick, you touched on this a little bit, so this might be you. But Slide 14, I think, is pretty interesting. You know, around visitation trends during the quarter with Hong Kong back to actually above pre-COVID levels, Guangdong, pretty much back, you know the rest of China, though, remains well below pre-COVID levels.

So, you know, wondering how you guys are thinking about the recovery in that segment moving forward and what you're watching. And I know, Patrick, you talked about air capacity. Is it -- was it really just air capacity, or, you know, are there other factors out there that, you know, that might be holding that segment back?

Patrick Dumont -- President and Chief Operating Officer

You know, I think one thing I do want to say is we're really excited about it. Seeing the visitation come back has been thrilling customer responses, seeing -- seeing patrons from before, seeing new patrons. It's really a fantastic place. We were in Macao recently, and it just -- there's great energy, great electricity in the city.

So, I think some of it is air capacity. To be fair, some of it's the -- let's call it the more mass player, the unrated play that the Venetian and other of our assets were so -- so strongly set up for that really drove a lot of high-volume and high-margin business. All of those segments still haven't come back in full. So, between the airlift, and if you turn to the next page, actually Page 15, where it shows the visitation for 2019, and then compared to this last quarter, you can kind of see that we have a lot of room to go.

We have a lot of patrons who will want to come back and see us, and they're just starting now to make their trips happen. So, I think, you know, from where we sit, we have a great ability to accommodate these customers as we've done in the past. We have the capacity. We have very interesting non-gaming amenities.

We have entertainment. And we think this is the most important tourism market in -- in Asia, in the region, and people are going to show up. We also have international visitors showing up, which is kind of a new thing. So, you know, I think the power of Macao is going to continue to grow and grow.

But when I look at Slide 15, I just see a lot of potential. And our team is working hard to try to capture that potential. Grant, I want to turn it over to you and see you if you have any additional remarks.

Grant Chum -- Senior Vice President, Global Gaming Strategy

Yeah, I was going to point to that page as well, Patrick, yeah, Dan's famous Page 15 on the penetration. Actually, you can see from the eastern China, Yangtze River Delta region, especially Shanghai and Zhejiang province, in fact, the recovery rate is higher than Guangdong because I think you have better airlift, better propensity to travel cross-border from those source markets. And we've already seen a very big upward shift in the recovery rate of non-Guangdong relative to first quarter. So, I think in the first quarter, when we're looking at that recovery rate, it was less than 30%, and now, we're approaching 50%.

So, non-Guangdong visitation, second quarter, grew almost, I think, in the high-40s sequentially. So, it is coming back, as we said, as our lift improves and transportation in general improves and also hotel room availability has been increasing and actually will be further increasing for Macao as a whole in the third quarter. We have some new hotel rooms coming online. So, all of that, I think, is -- is positive for the outlook for continued recovery in the visitation outside of Guangdong Province.

Rob Goldstein -- Chairman and Chief Executive Officer

If I could just add, that trajectory may be uncertain, but the end result is very certain. I mean, this market always comes back, and I think you watch the summer, you'll see some very positive indications. I don't think anybody knows when exactly why it's not fully recovering in certain areas, but we just know it's going to recover. It's a question of when that happens.

The result, I think, is unquestioned. Again, I hope, this summer, we show some strong evidence, I mean, that July hopefully will show a big number, the best number of the year, thus far, and that starts to add to this -- this recovery.

Steve Wieczynski -- Stifel Financial Corp -- Analyst

OK, great. I'll leave it there, guys. Appreciate the color. Thanks.

Rob Goldstein -- Chairman and Chief Executive Officer

Thank you.

Patrick Dumont -- President and Chief Operating Officer

Thanks, Steve.

Operator

Thank you. And final question today is coming from Daniel Politzer from Wells Fargo. Daniel, your line is live.

Dan Politzer -- Wells Fargo Securities -- Analyst

Hey, good afternoon, everyone, and thanks for taking my questions. Just a quick follow-up, Rob, on that comment about July. I mean, is there any reason other than just the airlift capacity that we wouldn't expect that normal seasonality in the build-off of the momentum that you saw in June, whether it's macroeconomic concerns, behavioral, entertainment calendar? Like, is it really just, you know, simply airlift, or there are other reasons in particular?

Rob Goldstein -- Chairman and Chief Executive Officer

No -- no, there's multiple variables at work here. I wouldn't want to pigeonhole to airlift. Economy, visa. I don't think we really know the answer to that.

It's an answer that can't be unpacked cleanly. I do think, though, seasonality, summer has always been the time. This is the first summer post-COVID. I, for one, believe summer is going to prove very strong.

Some business people boasting about what the job numbers look like. I hope they're right. I believe summer will be very indicative of new growth in this market. And look, again, I think you have to look back on how quickly you see recovery.

You know, six months ago, we were in dire straits, and now, we're unpacking $200 million a month in June. So, we're very bullish on Macao in the long term. And again, trajectory may be uncertain and results very clear: We're going to get there. We're going to make a lot of money in Macao [Inaudible] heavily, and we hope we have more good news in the near future to offer to you.

So, I'm hoping for a big summer for the -- for the market.

Dan Politzer -- Wells Fargo Securities -- Analyst

Got it. Just one more quick one. We haven't touched on the digital strategy. There's been some headlines lately that there's been some -- some progress there.

Do you have anything that you could possibly share? And as you just -- in high level, as you think about this strategy, how do you reconcile that with regulatory concerns given your presence in Macao and your relationship with the government there?

Patrick Dumont -- President and Chief Operating Officer

So, you know, I think we said a while ago that we were going to invest in -- in ground-up digital activities. So, we're buyers -- we're not buyers, we're builders. And I think, for a while, we've been working on a couple of digital initiatives. And I think the key thing for us is it's still early days yet.

You don't really have much to talk about. We're very confident about it. We think, long term, there's real potential there, but our focus is going to be on highly regulated markets. So, that would mean Europe and North America.

Our goal is to make sure that we maintain our regulatory standards in the best possible way, only working with partners where that makes sense, and being very selective. But in our mind, we're very focused on regulatory certainty and being in strongly [Technical difficulty]

Rob Goldstein -- Chairman and Chief Executive Officer

[Inaudible]

Patrick Dumont -- President and Chief Operating Officer

Maybe someone put us on hold, sorry about that. So, I think, you know, our -- our view is that these digital initiatives have potential. We're going to continue to invest in them for the long term. We are committed for the long term, and I think our goal is going to be to focus on highly regulated markets.

Dan Politzer -- Wells Fargo Securities -- Analyst

Got it. Thanks.

Operator

[Operator signoff]

Rob Goldstein -- Chairman and Chief Executive Officer

Thank you, everybody.

Patrick Dumont -- President and Chief Operating Officer

Thank you.

Duration: 0 minutes

Call participants:

Daniel Briggs -- Senior Vice President, Investor Relations

Rob Goldstein -- Chairman and Chief Executive Officer

Joe Greff -- JPMorgan Chase and Company -- Analyst

Grant Chum -- Senior Vice President, Global Gaming Strategy

Unknown speaker

Arpine Kocharyan -- UBS -- Analyst

Patrick Dumont -- President and Chief Operating Officer

Carlo Santarelli -- Deutsche Bank -- Analyst

Stephen Grambling -- Morgan Stanley -- Analyst

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

David Katz -- Jefferies -- Analyst

Brandt Montour -- Barclays -- Analyst

Steve Wieczynski -- Stifel Financial Corp -- Analyst

Dan Politzer -- Wells Fargo Securities -- Analyst

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