Joe Greff: Got it. Thank you very much.
Keith Smith: Yeah.
David Strow: Thank you. Our next question comes from Steve Wieczynski of Stifel. Steve, please go ahead.
Steve Wieczynski: Yeah. Hey, guys, good afternoon. So I’m not sure if this is a fair statement or not, and correct me if I’m wrong, but as we kind of think about moving forward, is it going to be tougher for you guys to cut operating expenses from here if your revenue stream, your top line continues to be a little bit softer? And if that’s the case, is there anything you can do on the CapEx side of your business to offset some of those higher operating expenses? I mean, do you go down the path of cutting slot budgets or other things like that to potentially offset your higher operating expenses?
Keith Smith: Look, as we think about total operating expenses, given our margins today, we are running a very efficient business. And so I think its a fair statement to say that we don’t have as much room to fine tune the business as we did let’s say pre-COVID. And so we have to be very careful going forward in terms of how we adjust, what we adjust to make sure it doesn’t impact the top line. Having said that, do we have flexibility in the CapEx side? I think absolutely. I think we have a very robust maintenance capital budget that we’re comfortable with. I think over the years, we’ve always been able to use that as a lever to balance any declines in the business or declines in overall free cash flow that we see. And when times are good, spend a little more, and times are maybe a little tougher, we can always pull back.
We’re very careful about it because we don’t want to impact the overall condition of our properties in what is a very competitive market, not just here in Las Vegas, but across the country.
Steve Wieczynski: Got you. Thanks for that, guys. And then the second question, wondering if you could give any update in terms of changes to the promotional environment around the majority of your operating markets? Meaning, have you seen any changes from your competitors to offset any type of slowdown they might be encountering from a visitation standpoint or spend standpoint? Again, you’ve got two pretty big properties coming into the Las Vegas Locals market. And do you change the way you think about your promotional spending for that market specifically?
Keith Smith: Yeah. I think look, as you look across, I think the country globally, the promotional environment has been fairly stable or rational. Here in Las Vegas, the major operators have been very stable, and it has not been highly promotional. It’s been stable. The people who got aggressive or the individual properties maybe who got more aggressive coming out of COVID have stayed aggressive. The other operators have stayed kind of very disciplined through Q3, and I’d expect that to be continuing into Q4. As we look at our regional markets, it’s largely the same. Those players that got aggressive post-COVID have stayed aggressive, and those players that have remained disciplined after COVID are still being disciplined.
We’re not seeing much in the way of people stepping out and getting aggressive. Our customers have the opportunity today to participate in those more aggressive programs. They don’t. They stay with us. And so I don’t see much changing in that landscape even with two new openings here in Las Vegas.
Steve Wieczynski: Got you. Thanks, Keith. Thanks, Josh. Appreciate it.
David Strow: Thank you. Our next question comes from Barry Jonas of Truist Securities. Barry, please go ahead.
Barry Jonas: Hey, guys, I wanted to dig in a little bit more into the retail softness. You’ve noted any specific geography or segment of the database you’d highlight, and if possible, can you maybe help frame the size and, say, importance of retail versus core segments to any extent you’re comfortable with. Thanks.
Josh Hirsberg: So I think – when we think about the retail business, it’s an impact – we saw similar impacts in Las Vegas that we saw in the Midwest & South. So it’s not, to the extent, geographic in any sense or property specific, it’s across all segments. And so it’s not isolated or unique to any one set of properties. I think as we think about kind of the overall impact of retail to kind of the core business, first, think about retail in two categories. One, being the unrated segment, and the second component of retail being the lower end rated segments. And within our rated database, generally, the trend is pretty consistent. So that rated core customer growth is offsetting any softness in the lower end part of the database that falls into the retail category, where we’re seeing kind of – where we don’t have the ability to kind of offset through the growth in the core customer is the softness in the unrated segment.
It’s certainly not the entire segment, because some of those customers are obviously good, but we are seeing softness in the unrated segment and for that – and that’s definitely related to the – through the economic impact. We track about 60% of our business overall, and so the rated business – the unrated business as a category is about 40% of our business, and that’s on the slot side of things. So I don’t know if that helps you understand kind of the customer trends that we’re dealing with or not, but hopefully, that puts it in some sort of perspective for you, Barry.
Barry Jonas: Yes, Josh, that’s helpful. And then just as a follow-up, I appreciate the commentary on the Durango opening, but I guess I had a longer term question around the Vegas locals market and your capital allocation strategy. Red Rock has been talking about ultimately doubling its footprint in the market. So I was just curious if you could talk about how you think about further investment or even expansion into the marketplace overtime.
Keith Smith: So one of the things that I mentioned we’re doing is upgrading many of our hotel rooms and many of our restaurants. And so that is to make sure that, again, we have a very current relevant product for our customers. We do have significant acreage of many of our properties here locally at the Orleans, at the Suncoast, at the Gold Coast, at Aliante, to be able to grow these businesses. We’ve talked in the past about trying to invest in and leverage up strong existing businesses where we believe we can continue to grow them and get a good return on investment. The first two were Fremont and Treasure Chest, and we’ll be announcing a few more next year. But certainly, our locals properties have some of those dynamics where we have very, very strong performers that we think can continue to grow their business with some additional capital investment.
I’m not ready to describe exactly what those are. That’ll be middle of next year, but we do have those opportunities. We are looking at them and reviewing them, and we’ll be in a place to talk about them sometime middle of next year.
Barry Jonas: Great. Thanks, Keith. Thanks, Josh.
Keith Smith: Yes, Barry.
Operator: Thank you. Our next question comes from Carlo Santarelli of Deutsche Bank. Carlo, please go ahead.
Carlo Santarelli: Hey, guys. Thanks. You guys obviously talked a little bit about the competitor opening in the fourth quarter. And just to kind of put into context, I would imagine it would be Orleans, where you’d feel a little bit of impact. And I know you guys don’t provide any kind of real property level, but just more or less looking to frame, like, what you think from a Las Vegas locals impact perspective that that opening could have on Orleans or the broader portfolio in an otherwise, say, flattish environment in 2024. Just kind of thinking about the magnitude of what you see in that impact. And do you see any kind of lasting impact or you believe it’ll just be trial and dry up fairly quickly?
