But as I said, it will be an existing property that’s a strong, high performer that’s in a strong market where we think we can continue to grow the business. And we have several of those that fit that profile. We’re just trying to decide what the priority is and when to get those projects started. But not prepared to talk about it now, but by – certainly by the middle of next year, we’ll be prepared to kind of discuss what is next for us in terms of “growth as opposed to maintenance”.
David Katz: Got it. Understood. Thank you.
David Strow: Thank you. Our next question comes from Shaun Kelley of Bank of America. Shaun, please go ahead.
Shaun Kelley: Hi good afternoon and thanks for taking my questions. Josh, just going back to the cost environment, I think that’s clearly the incremental part of kind of what’s going on here. I just wanted to ask sort of – as you look forward, what do you think the right leverage point for the business is? So to see margin expansion from here? What level of revenue do you think you would need as we start to get out into a little bit more steady state, let’s look out 2024 or 2025? Is it – can you do so on a very low single-digit number, i.e. 0%, 1%, 2%? Or does it need to be a little higher than that where maybe some of these costs while coming down look a lot more like prevailing inflation that might be 3% to 5%, whereas historically, it was maybe a little bit lower than that?
Josh Hirsberg: Sean, it’s a good question. I think ultimately, the way we think about it is, I think it’s kind of like costs that are piggybacking off of one another. So at some point, we’re able to kind of manage through those costs, and we were able to do that over time. And then as utilities picked up or property taxes and property insurance picked up, became just a little much relative to softness with the retail customer. I really don’t think it takes a lot to turn – to kind of turn it back around, so to speak. So to the extent we started to see growth off of a base, I think that’s when we would be able to kind of outpace. We would be able to manage through the cost pressures. And so I think it’s really difficult right now, because I think part of what’s going on in the business is a normalization.
It is like if you think about and I know it’s hard to think about when we had stimulus in the business, but stimulus really just came out of the business in 2021 and 2022, and we’re kind of getting beyond that in 2023. At the same time, some of the decline in revenue is related to what’s going on in the economy. So – and it’s hard to figure out how much of that is attributable to each one of those factors. At the same time that all of that’s going on, we’re dealing with and working through the expense side of things. And so ultimately, I think once the business normalizes, which I think is part of what’s going on, it’s not all economic that we will be able to kind of grow beyond that. And that’s when you’ll see us start to have flow through on that incremental revenue that could happen in 2024, even with a soft retail consumer, as long as that retail consumer were to remain consistent and not continually decline.
So I hope that gives you a sense of our perspective for that.
Shaun Kelley: Yes, thank you. And then maybe just to clarify, to make sure we’re all kind of clear on the modeling side, your comments as it relates to sort of flattish operating expenses from here, I mean, this is all a dollars comment, right? So to the extent we saw OpEx dollars up a bit, quarter over quarter this quarter, this feels like a good run rate or base of expense, even despite some seasonality utilities, et cetera. This is sort of the right expense dollar base to kind of think about the business moving forward, is that right?
Keith Smith: Yes. That’s the point I was trying to make. I think there will be seasonality. But that’ll give you the offset that some other costs will go up and it’ll all kind of come out in the wash, so to speak. So that’s our expectation today. We don’t have any reason to think that there’s going to be kind of outsized, continued increases in costs. And to an earlier question, further evidence of that is the costs seem to be leveling out at the same time so.
Shaun Kelley: Yes, that was clear. Thank you very much. Appreciate the color.
David Strow: Thank you. Our next question comes from Brandt Montour of Barclays. Brandt, please go ahead.
Brandt Montour: Hey, good evening, everybody. Thanks for taking my questions. I wanted to focus in on the Las Vegas Locals top line environment, demand environment, and we only have a couple months out of the quarter from the state of Nevada. But it did look like the first two months of the quarter, the Locals market overall grew a little bit. Last quarter, you guys tracked with that market down modestly, but this quarter looks like for the quarter, you’re down a little bit and the market was up. But again, we don’t have September. So I guess the first question is how – maybe you could give us September in terms of just the cadence relative to the early two months of the quarter. And then the follow-up would be if you think you’re tracking below the market at all, why is that? Is it a customer mix? Is it sort of the segmentation for your unrated play versus the market? And any other thoughts on that dynamic would be helpful. Thank you.
Keith Smith: So if you’re looking at the statistics that are put out by the Gaming Control Board, part of this is how you put those together. For the last three-month period, the last quarter, as you said, it’s kind of August because they haven’t issued September yet. Our market share is pretty much right on top of last year. We haven’t really lost, I mean, maybe down a 10th or something, but that’s about it. And so we feel pretty good about how we’re performing in terms of the Las Vegas Locals market. So just the numbers in Nevada are hard to put together because they don’t break them out specifically. So aggregating them was more of an art [ph]. But the way we do it and the way we’ve consistently done it, we’re pretty much right on top of last year. Like I said, we may be off the 10th.
Brandt Montour: Okay. That’s helpful. And would you care to comment on how September cadence looked versus July and August?
Keith Smith: I really can’t because I don’t know how the market is going to perform. And so it’s – what’s going to reporting in Nevada is unique. And so we’ll not provide any comment on September until we see everybody else did.
Brandt Montour: Okay. All right. That’s it for me. Thanks a lot.
Keith Smith: Yes.
David Strow: Thank you. Our next question comes from John DeCree of CBRE. John, please go ahead.
John DeCree: Good afternoon, Keith and Josh. Thanks for taking my question. Maybe on the demand side, the core customer play, I think, in your markets, you’ve kind of mentioned that play was up low single digits. Curious if you could give us maybe a little bit more color there? Are you seeing your number of core customers grow or are they spending more? And then I guess the broader follow-up that I don’t think you’ve been asked yet is more broadly speaking, are you seeing spend per trip about the same or up in number of trips down or kind of how are you thinking about that broadly and then kind of on your core customer growth?
Keith Smith: Yes. So as we look at our core customers, it is a little bit of a mixed bag around the country, right. We do see good growth in guests and visitation in certain age demographics frankly at the higher end of the age demographics, a little less so at the lower end, it’s different by region. We’re seeing good growth frankly across all the age segments in Las Vegas. And it’s kind of once again a mixed bag across the age segments in the MSR. Remember, as we came out of COVID, we’re really more focused on the quality of the customers and the value that they’re generating than we are absolute numbers. And we’re seeing larger increases in the daily spend and how much we are earning from those customers than we are in the actual growth of those customers. So we’re very happy with both increases in volumes of customers but more increase in volumes of play.
John DeCree: Understood. That’s helpful color. Keith, thank you. Maybe one more on the consumer side. You may have touched on it a little bit earlier, but on the hotel and F&B business, it sounds like its price, cash rates and cash covers, but is that fair? Are you also seeing an uptick in occupancy in the number of covers across the restaurants and F&B outlets as well?
Keith Smith: Yes. So I think as you think about the hotel, it really is more occupied rooms that generally speaking, across the portfolio, kind of a flattish average cash rate up a little bit in some markets, flat in others, but generally think of it as more cash occupied rooms. On the food and beverage side, it’s more of an increase in pricing than it is increase in covers.
