Cassandra Lee : This is Cassandra on David’s behalf. I want to expand on Macau’s margin longer term. As we think about the shift in VIP mix from junket to direct, I believe your competitors have also called out increased labor costs and some labor shortage and increased utility. So how should we think about the margins in Macau longer term? A – Bill Hornbuckle Well, again, I’ll kick this to you, but my only initial comment is — I believe everyone knows this, the junket business, I mean, when it was all said and done, it was a 20% margin business. And so while there was a great deal of volume in that business and we all — was accretive to us and obviously, a vehicle for capital into the market, it didn’t help the margin, I can assure you.
So over, I don’t know if you want to talk about more generally what you think will happen there. But I do like where we’re positioned for VIP, Mass VIP. Remembering our branch environment and system is broader than almost anybody else is in the market. We’ve been doing it for 30 years into Las Vegas, and we’ve now taken that network and put it to work directly to the benefit of Macau. Hubert?
Hubert Wang : Yes. I think that in terms of margins, I think that we expect in this year and beyond, probably we’ll at the high end of — in the 20s, but in the higher side of the 20s. And in terms of junket to direct, certainly, there are some conversion in that space, but it’s really too early to give you any concrete numbers. But from the strength we have observed in January and Chinese New Year in our direct business, I think that we’re still very confident in the growth of the direct business and particularly given the wide network of MGM Resorts in terms of global reach of high-end customers.
Cassandra Lee : Great. And for the follow-up, if I may shift here on Las Vegas. There were a lot of very bullish or favorable commentaries. The ADR has been substantially higher than pre-COVID levels. Do you think that is sustainable? And looking beyond ’23 and especially if we’re thinking about a recession, how resilient do you think that ADR should be?
Corey Sanders : Yes, this is Corey. Yes, I think it’s sustainable. As we look at the event calendars on weekends and our forward-looking pacing and what we’re booking rates at now, we have pretty good visibility further out. On the midweek, we see our — not only our convention business getting better, but the whole city’s convention business getting better. So the pricing that we’re seeing today, we should be able to sustain, given where the economy is today.
Operator: The next question is from Carlo Santarelli from Deutsche Bank.
Carlo Santarelli : Just looking at some of the disclosure in Las Vegas and trying to decipher what is kind of the delta between gaming revenue and your net casino revenue has widened in the last few quarters. I’m assuming that is kind of all mix related with Cosmo coming online? And is that kind of a range, that delta, that pretty much will hold firm moving forward?
Bill Hornbuckle: Yes, Carlos, hi, Bill, I think the answer to the question is yes. We got a — we needed to through COVID because obviously, the group segment of note went away. Very active with our casino market, entertained marketing database, personalization and other things we might do in that sector, and we’ve sustained it. And so it’s helped that tremendously. Obviously, now convention business is going to come back and carryout 18%, 19% of our mix this year. But I think it is sustainable is the way to think about the business.
Carlo Santarelli : Great. And then, Corey, just on that, on the topic of convention mix, you made a comment earlier, I believe that the bookings that were done, were done at double digits. If you look at kind of the entirety of the group business on the books or the targeted group business on the books from a pricing perspective, how does that look year-over-year or relative to 2019, however, you guys kind of want to think about it?
Corey Sanders : Yes, I think — look, many of those contracts were in place over 2019, 2020. I think they have price escalators in there. It’s probably an area of opportunity for us in the future as we look at future convention bookings. But just as a reminder, it’s 18% of our business. The new business is getting booked based on where rates are today.
Carlo Santarelli : Okay. And do you believe, like when you think about it overall, just that taking the pricing aside, thinking about the visibility that it provides you do you believe as you look through 2023, all things equal economically and from a macro perspective that there should be pricing power year-over-year on a same-store basis?
Corey Sanders : Yes. I think there should be some pricing power based on the amounts we have on the book and the foundation we have in our bookings.
Bill Hornbuckle: And remember, Carlo, one thing we have strategically decided to do is push more business out of weekends and back into midweek. And so that has an overall play in ADR. Obviously, it brings down the convention ADR, but it raises the overall company’s ADR because it gives us more opportunity we where we see, frankly, and continue to see real upside, particularly in the luxury segment, across Cosmo, MGM, Mandalay, Aria, Bellagio.
Operator: The next question is from Stephen Grambling from Morgan Stanley.
Stephen Grambling : Maybe turning to Japan, that was another one that you referenced is still out there. You’re waiting on some approval but still looking for a return that’s above it sounds like your free cash flow yield. Wondering if you could just elaborate on any of your updated expectations for that market and anything that’s either evolved from the terms of the transaction, even the timing of when construction could start and when the proper to be coming out of the ground..
Bill Hornbuckle: Yes. Steve, we got to be a little careful because some of this is NDA with the government, et cetera. But having said that, we had hoped to hear in October. Obviously, we sit here now in February not having heard. The process lies today with MLIT, the government agency that is going through and consistently asking us questions about the project, about the contract with the government of Osaka, et cetera. Time to tell whether we get through that efficiently over the next 30 days. We would like to think and believe we might, but we’ve been thinking that for a while now. As it relates to macro, look, I’m excited to think that we may be the only player. And so instead of a market of 19 million people, we’re talking about a much larger market.
Having taken the journey many times from Tokyo, it’s only 2.5 hours away by high-speed train, et cetera, so we see upside. Inflation has not hit Japan like it’s in other places, and particularly for us, at our end of the partnership, the value of the yen has gone tremendously in our favor, but we’re still looking at a $10 billion project. We’re looking at a return on that project, we think can bring 15% plus in cash flow and then maybe then some, but it has to mature. And overall timing, the goal was — now we’re going to be challenged with that if we don’t hear soon to get this thing open before the decade close in 2029. But since — there’s a bridge to getting there.
Stephen Grambling : That’s helpful. And maybe a follow-up on BetMGM, just to make sure I understand you correctly. I guess, are you anticipating far out, but any additional capital being put into that JV beyond this year, given the targets for kind of profitability or standalone at this point?
Bill Hornbuckle: No, none substantively. If BetMGM gets into the M&A business for some particular product, maybe. But generally, no. It’s the $50-odd million, I think we’ve — well, collectively, but call it, our $35 million or $45 million we’ve identified. It gives us every reason to believe it should hit its target this year, starting to make profitability in the second half of the year. We all have to be rational players. There is growth left. There are six additional states yet to go that have been identified. But no, there’s no large-scale capital. That business should begin to mend and take care of itself.
Operator: Next question is from Chad Beynon from Macquarie.
Chad Beynon : Bill, Jonathan, another one on Vegas, just given your diverse portfolio with luxury and core. Can you just kind of help us think about broadly how these segments compared to against each other in ’22? Bill, I think you said obviously, a lot of the group events and the city-wides in ’23, just those compression nights should help probably a little bit more in luxury, but just trying to see — I know you’re not breaking it out, but kind of where the — which way the wave is moving luxury and core.
Bill Hornbuckle: I think Corey you’re best…
