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 for 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.

Thank you and thanks 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 will be making those statements under 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 measure 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 post 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.

Thank you, Dan, and 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. We're 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.

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 JPMorgan. Joe, your line is live.

Hey, everyone.

Hi, Joe.

Rob, Patrick, Dan, and the team in Macao, I'd love to get your view on margins in Macao, both within the quarter. And then just broadly how you're thinking about it going forward. When you look at the months within the 2Q, was there a differential between 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 GGRs can continue to grow sequentially. I would imagine in the summer months that would follow typical sequential seasonal trends, and margins from here probably have more upsides than downsides 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.

Yeah. Joe, I'll start and then turn over to Grant for the margin discussion. Obviously, we do believe that the market is starting to get stronger, and you saw that in our numbers. Our June results were the strongest, almost $200 million of EBITDA in June alone, so we had acceleration in the quarter. Our numbers, I think, speak for themselves, they speak loudly. Six months ago we were virtually closed, and in the month of June, again, we do $200 million EBITDA. And visitation increases in the town. 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 billion of investment will pay off quite well. We have adequate room to run because we have capacity in every segment of the gaming and nongaming. We have, I think, a very strong advantage in that regard. So, again, we think as the GGRs escalate from more visitation, we will be a major beneficiary. As to margin, Grant, I hope you're awake in Macao. Please answer that.

Thanks, Rob. Yeah, Joe, margin obviously 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 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 nongaming, and recall, we're the dominant revenue generator in nongaming in the industry, and nongaming 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 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 shortage issue has dissipated as an impediment. And then in terms of intra-quarter, 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 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 our non-rolling drop increased 15% against April-May. In June, slot handle was up 9% and rolling volume was up 10%, so across the board we saw a very sharp acceleration in June.

Great. Thank you.

But also reference page 14 of the deck, I think the structure to look at what's happening in the provinces beyond Guangdong and non-Guangdong visitation and lack of penetration. It's just early days, this recovery. And 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 will evidence more and more return to pre-pandemic numbers in the non-Guangdong visitation. And that's going to fuel this business. As you know, we have the capacity, gaming, non-gaming to participate across the board. And that's what we believe will happen, that will impact margins, but also in our mind, that's an inevitable factor in Macao, six months into this recovery, and we're still way behind in terms of visitation.

Great. My follow-up question is, 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?

So obviously, we prefer a strong macro economy in China. We're hoping for that in the future, but we can perform and will 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 businesses, so that will be matures numbers, you see other retail members. The retail market, our business doesn't require -- everyone's been making a strong economic recovery because certain segments can make it happen. But again, we're hoping for a strong rebound and a stronger macro that would impact us positively. I still believe this market will continue to grow in spite of a slower recovery than we like in that region.

Thank you.

Thanks, Joe.

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

Hi. Thank you. This is actually Arpine 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 ramps up probably higher percentage of grind mass returns to Macao. How do you think about that more normalized spend per mass customer, looking forward into the back half?

Grant?

Yes. Thanks for the question. I think you can see from the results that 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 whilst, obviously, as the base mass picks up, you'll 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 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-valued 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 is actually continues to be very high, and indeed, spend per visitor is heading in a positive direction.

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

Hi. How are you? So 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 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 company in the past. We're very focused on return on 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. I think when we talk about the dividend size, it was something that -- there's 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 intend to shrink the share count. 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 than we have been in the past. And I think really this gives us the flexibility 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 it corresponds to 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.

Thank you. Very helpful.

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

Hey, everybody. Thanks. Robert or maybe one of the guys in Macao, I was wondering, 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 mix towards VIP relative to you guys, have you seen any change in behavior as it pertains to kind of mass reinvestment levels across the market wide?

Yes. Grant, why don't you take that?

Sure. Yes. 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 continue 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 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 least in terms of our non-gaming programming that we put in place has been really driving business levels and visitation. In terms of reinvestments, yes, I think it's relatively similar to what we've seen in the recent quarters. Clearly, it's become -- 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 amongst the operators in the industry in general, led by the larger players. But as I said, the focus of the industry has been to reinvest in the non-gaming programming, and that's been a tremendous driver to the recovery so far.

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 time line, spend, et cetera?

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 and the fact that China has not fully recovered, and if you look at sort of the nature of where Singapore sits today in the confluence of events in terms of the growing economies in Southeast Asia, we have a very strong view that the future of Singapore is positive. And 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 change 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 hope we have a chance to continue with the final version of our project in the short-term. We're looking forward to getting started.

Great. Thank you, Patrick. Appreciate it.

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

Hey, thanks. As a follow-up on 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 see that build as base mass continues to recover?

What was the second portion, the last part, last thing you said. Recover?

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

It should go up. I think that -- the reason we called that out is because obviously, a strong month, especially in light of the seasonality of June not being a great one. But look, our position is simple. We think Macao will just continue to get stronger. And the recoveries will be predicated on visitation in all segments. And again, our advantage is very structural and very different offers. We have capacity to grow, base mass, premium mass, ropes, retail, everything you think of these customers want, we have the product to service that, that does the business of our competitor. So I think June is the beginning, and hopefully the summer will be evidence of that. We'll see how July, August, September holds 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 just what we believe in partly. I guess I take comfort in fact, again, six months ago, we weren't sure we'd open. We had basically a closed business in December '22. Here we are in summer of '23, looking at a $2.4 billion run rate. Just based on June, we believe that could accelerate. So we were firm believers in Macao. Always have been. We never vastly in our belief that that market is just special. And the recovery in China is slower, in general, for all segments and probably, but it's coming on now and the summer will be a great indicator how fast to get back to $26 billion, $30 billion, $32 billion. I don't know what the peak is, but just the acceleration will be evidenced this summer. And again, we are in just very, very good position on having target assets to put to work in Macao. Plenty of rooms, the rooms are all open. The retail is open and functioning, slots and tables. So as the market grows, we should be a pretty big beneficiary from that new demand is coming.

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 is that -- you're saying that is a clean number to build off of?

So I think the key thing to note is that we've had these non-gaming what we call lifestyle programs, which includes entertainment and other activations for years. And they're very successful pre-pandemic because we were able to connect with their customers and bring in very high value tourists in those high frequent. And so we've started those programs again. And so the concept 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 with 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 on premium mass. But now as people can begin the trial of the Macao more easily and more frequently, they're starting to return. They're starting to consume all of our different amenities, not only the hotels, but the concerts, the food and beverage, the retail, all of it's working. And so we'd like to believe we can grow from that number materially as our base mass non rate of play 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 to the pandemic and very high-quality products. The customer response has been very strong. And we're little priced through it. So we'd like to believe that there is 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 that will continue to grow overall the desirability and visitation of Macao. Grant, do you have anything to add?

Yes. Thanks, Patrick. Yes, I mean, as you rightly say, we've had a very long track record going back 16 years in terms of posting 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 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 this new global tour at The Venetian Macao, I think, is testament to both Macao's 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 the month was strong, not just the days when the concert was on, which is nine months 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 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 start to the new concession.

It makes senses. Thanks so much. I'll leave the floor.

Thanks, Stephen.

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

Hi. Good afternoon, everyone. So maybe I just want to go back to the cost side a little bit. It's probably for Grant. But if I caught it correctly, I think in an earlier question, you said 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, we exit the quarter there? And just what does that imply for 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?

Yes. Thanks, Shaun. Yes, I think you heard it right, averaged around 10,700 rooms a day in terms of our operable capacity from a labor standpoint during the quarter. We actually increased further towards 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, typically, there's always a handful of rooms out of order for maintenance, regular maintenance. We're effectively back in full inventory now and ready for the peak summer season, which is getting underway later this month.

Great. Thanks for that. Maybe a similar question, but kind of transferring over to Marina Bay Sands. There, we've seen kind of two quarters in a row with margins kind of in the 46 to 47 camp. That's still a couple of 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 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 exited the quarter there. And just your thoughts on costs, which I think were up about 10% Q-on-Q. Is there anything -- any -- is there -- as 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?

So I think what's important to note about Marina Bay Sands, as Robert 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 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 multi-day 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 earnings 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 like 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 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 in 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 multi-day suites come online, we will have an opportunity to price through some of the cost increases and improve margin.

Thank you, Patrick. Thanks everyone.

I just want to say, I think we're going to the labor side more escalate 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 a slog, but we get through this thing, the room product offer, the F&B, the retail, rethinking of retail. You see this all over the map in terms of why is Hermes and now Louis Vuitton get these ridiculously high-priced side 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 something that people don't understand how good it is until you see it, understand it. It's going to be really special, and we'll be able to get pricing in every level, be it rooms, casino gaming, retail. When this building is done -- I'm amazed we're doing these kind of numbers with ripped-up buildings -- when this building is done, our pricing power is going to go to another level. I think that's where MBS takes some different here. The margin have always taken care of itself 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 adding cost to add more labor. We're going to have a really good product we want 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 and people will pay up for it. It's just that simple. And margin reflects that in the daytime.

Thank you very much.

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

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 just looking back at where normal was in 2019 and what a new normal could look like now. How high the ceiling is, any qualitative perspectives around there and how we get there in the next several quarters would be helpful? Thank you.

I want to get 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 a very different position than some people in that we were built for this market in terms of scale and size in 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 in the last 20 years is to make this product grow and grow relative to 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, can you add some color?

Yes. Thanks for the question. And again, we don't have a specific forecast 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 have an excellent structure in terms of our business mix. We have an efficient cost structure. And I think the way you will be looking at this is 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 non-gaming is recovering even more strongly than gaming. We're at 93% of our 2019 non-gaming revenues. Our hotel revenues for the quarter are 8% higher than 2019 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 seats. That's ongoing.

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

So I think we just restarted our return of capital program this quarter. I think it shows the Board and management's confidence in the long-term performance of the business. And we'll look to grow that dividend over time in a way that also allows us to have repurchase program. I can't give you a specific side about the volume of repurchases for the time of it 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 I can't give you an exact amount today, I will tell you [Indiscernible] is to look at our -- what's called, CapEx for growth, CapEx for the future. Our 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 of capital program through share repurchases that are shareholder friendly. And I think that's how we'll look at it. But as where we are right now, I can't give you a side yet, but we'll continue to look at it in the upcoming quarters, and we'll talk about it.

Okay. Appreciate it. Thanks very much. Good-luck.

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

Hey, good evening, everybody. Thanks for taking my questions. So on the VIP business, which grew nicely for you guys in the quarter, but wasn't as strong as the overall market. 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?

I'm sure this is the first point, you said we didn't do as well as the market in the VIP?

VIP quarter-over-quarter grew below market-wide VIP.

I think we're very comfortable, we're going to the VIP and the base mass. I think our portfolio is so well rounded. The Venetian is still the king of Macao. It's going to be the first place that the $1 billion plus dollars earned EBITDA-wise. And it shows no signs -- buck the recovery to its previous position. We built a portfolio that is very well grounded. The Four Seasons enables us to meet very well to anybody to run product there, and the game products are pretty much unparalleled. Again, the Londoner, early stages, we're halfway done with the renovation. The full renovation is still a while down the road. But except for The Sands, which I think we give up on the potential, a lot of growth being down here in the peninsula, it's 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 The 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 pure mass size of our buildings. And again, we referenced 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 the lifestyle approach, I think, puts us at the top of the heap in that area, both as a product offerings, but also quality of product. Very comfortable going and have no reason why we can't grow and keep growing both in base and premium. I think the idea we're not a premium mass player is unfair and unjustified by numbers, Grant?

Yes. 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 a very strong sales network around the rest of Asia. So we're working very hard, bringing foreign 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, our very strong sales network around Asia and our continued effort -- intensifying the effort to bring more foreign top-tier patrons to Macao. As Rob said, it's a great destination for all of those markets, and we intend to make full use of our great product and destination to attract those foreigners.

Great. Thanks for that. And just a follow-up on CapEx. I'm trying to reconcile slide 23, this really helpful year-by-year build you guys do for us with last quarter. It looks like MBS expansion, I guess, was temporarily taken off. You guys commented on that already. You added Londoner Phase 2. Wanted make sure that that's new and hear any maybe thoughts about targets -- return targets for that project. And then lastly, 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 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 agreed with the government on.

So just a few points. We did take Singapore expansion off because until we finalize 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 project decided upon. In terms of The Londoner under Phase II -- I think the great thing about The Londonder is when we first started, we actually did it pre-concession during the pandemic, and we built through the pandemic and into the concession renewal and came out of 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, let's 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 we'll open one day, come close to the Mid-East in terms of its productivity. The potential is there. Very excited about that opportunity. In terms of return targets, I think it's not something that we talk about directly, but in our mind, there's a lot of potential growth in our deepest and most profitable segments, which is mass and premium mass. And so 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 Londonder. So I think that's kind of how we're thinking about it. And in terms of a new hotel tower, I don't think we can comment 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?

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 is half of our main gaming floors. 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 Pacifica Casino on the Sheraton side. And we'll be adding more non-gaming amenities and attractions to The Londoner, 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 a longer time frame to develop. But first off, we're able to get right down to work on Londoner Phase 2, on the hotels and the casino refresh because we've been working on this during the pandemic on the designs. So we're now -- as Patrick said, I mean we've seen it, the product that we have come out with being hugely validated and with the market recovery with return of visitation and the hotel guests. We're keen to get moving on to this Phase II, and that's why we're able to start the actual construction in the second half of this year.

Great. Thanks all.

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

Hey. So Rob or whoever wants to take this -- and Patrick, you touched on this a little bit, so this might be you. But Slide 14, I think, is pretty interesting. Around visitation trends during the quarter, with Hong Kong back to actually above pre-COVID levels, Guangdong pretty much back. The rest of China, though, remains well below pre-COVID levels. So 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 really just air capacity? Or are there other factors out there that -- but might be holding that segment back?

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, see 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 strongly set up for that really drove a lot of high volume and high margin business. All those segments still haven't come back and forth. 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 from where we sit, we have a great ability to accommodate these customers than 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 Asia and the region and people are going to show up. We also have international visitors showing up, which is kind of a new thing. So 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 if you have additional remarks.

Yes. I was going to point to that page as well. Patrick. Yes, Dan's famous Page 15 on the penetration. Actually, you can see from the Eastern China, Yanxi River Delta region, especially Shanghai and Zhejiang Province. In fact, the recovery rate is higher than Guangdong's 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 airlift improves, transportation in general improves, and also our hotel room availability has been increasing. And actually, we'll 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 positive for the outlook for continued recovery in the visitation outside of Guangdong Province.

Maybe I'd just add, the trajectory may be uncertain, but the end result is very certain. I mean this market always comes back, and I think it walks the summer, you'll see some very positive indications. I don't think anybody knows when or 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 on the question. And again, I hope this summer, we showed some strong evidence. And July, hopefully, will show a big number, the best number of the year thus far and that starts to add in this recovery.

Okay. Great. I'll leave it there, guys. I appreciate the color. Thanks.

Thank you.

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

Hey, good morning, 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 and the build off the momentum that you saw in June, whether it's macro concerns, behavioral or entertainment calendar? Is it really just simply airlift? Or there are other reasons in particular?

No, there's multiple variables at work here. And I wouldn't want pigeonhole, the economy, Visa, I don't think we really know the answer to that. It's an aggregate answer, it can't be unpacked really. I do think though, seasonality, summer has always been the time. This is the first time, post-COVID. I, for one, believe summer has improved very strong. Some business people boasting about what the joint numbers look like. I hope they're right. I believe some will be very indicative of new growth in this market. And look, again, I think you have to look back on how quickly we see this recovery. Six months ago, we were in dire straits. And now we're unpacking $200 million a month in June. So we're very bullish when we think long-term. And again, the trajectory may be uncertain but the end result's very clear. We're going to get there. We're going to make a lot of money in Macao, definitely. 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 market.

Got it. And just 1 more quick one. We haven't touched on the digital strategy. And there's been some headlines lately that there's been some progress there. Do you have anything that you could possibly share? And as you just -- in high level, as you think about the strategy, how do you reconcile that with regulatory concerns, given your presence in Macao and your relationship with the government there?

So I think we said a while ago that we were going to invest in ground up digital activities. So we're -- 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. We 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 strong [Technical difficulty] I'm going to put this on hold. Sorry about that. So I think our view is that the digital issues 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.

Got it. Thanks.

Thank you. Ladies and gentlemen, this does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.

Thank you, everybody.

Thank you.