Earnings Call Transcript - CZR Q3 2020

Operator, Operator

Good afternoon ladies and gentlemen and welcome to the Caesars Entertainment Inc. 2020 Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. I would now like to turn the conference over to your host Mr. Brian Agnew Senior Vice President of Finance Investor Relations and Treasury.

Brian Agnew, Senior Vice President of Finance Investor Relations and Treasury

Well, thank you, Ashley and good afternoon to everyone on the call. Welcome to our conference call to discuss our third quarter 2020 earnings. This afternoon we issued a press release announcing our third quarter financial results for the period ended September 30, 2020. A copy of the press release is available on the Investor Relations section of our website at investor.caesars.com. Joining me on the call today are Tom Reeg, our Chief Executive Officer; Anthony Carano, our President and Chief Operating Officer; and Brett Yunker, our Chief Financial Officer. Before I turn the call over to Tom, I would like to remind you that during today's conference call we may make certain forward-looking statements about the company's performance. Such forward-looking statements are not guarantees of future performance and therefore, one should not place undue reliance on them. Forward-looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the company's filings with the Securities and Exchange Commission. Caesars Entertainment undertakes no obligations to revise or update any forward-looking statements to reflect events or circumstances that occur after today's call. Also during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of these differences between each non-GAAP financial measure and then the comparable GAAP financial measure can be found on the company's website at investor.caesars.com by selecting the press release regarding the company's 2020 third quarter financial results. I will now turn the call over to Tom.

Tom Reeg, CEO

Thanks Brian. Good afternoon everybody. We're back to report our third quarter earnings. As you look at our income statement, keep in mind that Eldorado Resorts was the surviving entity in the transaction. We changed our name to Caesars Entertainment. So, there's a lot of noise in the financial statements you're looking at. You're looking at 2019 numbers that are legacy Eldorado. You're looking at 2020 numbers that are legacy Eldorado only through July 20th, and then the combined company through the end of the quarter. We're going to cut through and get you to what we think are the key points in the quarter. Our same-store adjusted EBITDA in the quarter was a little over $460 million, which was a little ahead of the wide end of the range of our pre-release during our equity offering. We're quite pleased with the progress that we've made since closing the transaction. We've seen quite a bit of opportunity within Caesars. Some was expected some were nice surprises. We continue to believe that we will bring the consolidated EBITDA margin in a post-COVID world at least to the mid to high 30s if not 40% EBITDA margin in the consolidated entity. Vegas, Anthony will get into detail, but we did $60 million of EBITDA in Vegas and keep in mind that was with dragging Rio and Cromwell and Planet Hollywood were closed for the whole quarter. Planet Hollywood and Rio have opened since; Valleys was also closed for part of the quarter. So, we are carrying operating losses relative to those assets to get to that $60 million number. Our occupancy for the quarter in Las Vegas was just under 60%, just a few basis points under 60%. We're running in the mid-50s on weekdays now and weekends were well into the mid to high 90s. So, we've been heartened by our performance. Clearly, that's a key piece of evidence on the strength of the Caesars Rewards program. Pavan Kapoor, who we inherited on the yield management side, is a wizard with this stuff and has done a tremendous job for us in Vegas and we've moved him throughout the company in this area. So, we're excited with what Pavan and his group will bring to the table for us. As I said, the merger closed on July 20th. So, obviously, that was during the quarter. Also, we announced a cash offer to acquire William Hill during the quarter for 272p per share. That shareholder vote will take place on November 19th as is needed to be the case under U.K. Takeover code. We have confirmed the entire amount for that transaction including an equity offering that was just shy of $2 billion on October 1 of this year. We expanded our relationship with ESPN in the quarter on the sports betting side which we think is an exciting piece for customer acquisition for us. We've got a co-exclusive link out across all ESPN channels with DraftKings and we're excited with what that will bring to the table. We were also active on the asset sale front. We announced the sale of Tropicana Evansville for $480 million to Twin River and GLPI just about a week ago. You should expect to see more news in Indiana prior to the end of the year from us. A couple of things that I'd stress as takeaways regarding questions that I get on the operating side of the business, if you annualize the costs that are out of the business this quarter excluding gaming taxes, which obviously reduce as gaming revenue goes down, our run rate cost reduction is about $2 billion from pre-COVID levels. There's obviously a lot of talk about what will come back, what won't come back. A lot of those costs are never coming back as I said over the last several quarters. None of that has changed. As I said, I think, we're going to get to 35% to 40% EBITDA margins at a minimum. It's enjoyable from my seat to see our peers in the space reporting the same types of cost savings opportunities that we've been talking about for many years and to see Las Vegas locals' margins in excess of 40% for the quarter and a couple of our peers. That's a roadmap to what's coming. You think about what revenue is missing from our business. It's the highest flow-through revenue in the business. It's hotel room rate and occupancy in Las Vegas. And what I told you two quarters ago prior to the reopenings that you were going to be surprised with what regionals could do on the margin side. We had another quarter where if you look at our peer regionals without destination properties, EBITDA was up substantially. Anthony will get into that. Today what I'd tell you is, when we get into a post-COVID world, the pent-up demand you're going to see for gaming in general and Las Vegas in particular is going to be beyond your wildest dreams. The flow-through that you're going to see in the sector is unlike anything that's happened historically in this space. I can't tell you when that's going to happen. I wish I could answer when the public health situation will change. But as we look at the pieces of our database that are missing or lagging they're the most profitable pieces of our database. It's the 55 and over cohort that's not coming. These are people that are not going anywhere and are not spending and are going to come out of this with significant pent-up demand and spending power. It's going to be extremely powerful what you'll see across the entertainment space but particularly in casinos and particularly in Las Vegas. The other question I get all the time is about sports and online. I'd tell you our New Jersey casino business continues to ramp up even after physical properties reopen. We're now on a run rate for $150 million of annual revenue out of the iGaming business in New Jersey at margins in the mid-30s. We're extremely excited about that business. We think controlling our destiny in this space positions us to be a long-term winner. The ability to wrap our iGaming and our iCasino into a single wallet attached to your Caesars Reward database with the ability to earn and use points in any way that you'd like online or offline. Our customers truly get an immersive experience in this company. You see it with what we're doing in Vegas. We think that's going to translate into the online business. I don't really have a roadmap to what the ultimate size of this business will be. But I do know that if you're betting against the American people's propensity to gamble or you're betting against the allure for states to attract tax revenue when their budgets are in the place that they are today, that's been a losing bet since the dawn of civilization. So I feel real good about where we are and where we're headed and I'll turn it over to Anthony.

Anthony Carano, President and Chief Operating Officer

Thank you Tom and good afternoon to everyone on the call. I'd like to take a few minutes to provide you with some operational highlights for our portfolio during the third quarter. Before I begin, I want to express my sincere gratitude to all of our team members for their hard work and dedication during the COVID-19 pandemic. Our operations performed extremely well during these trying times due to the outstanding service that our guests receive on a daily basis from all of our great team members. Our success this quarter is a clear reflection of the commitment of our team members who continue to work hard each day to provide a safe, healthy and exciting environment for our guests and their fellow team members. Now turning to operations. We now have 55 of our 56 properties reopened. As we mentioned in our press release, our regional properties are performing strongly. Within our regional segment and excluding destination markets like Atlantic City, Reno, New Orleans and Tahoe, our regional properties generated a revenue decline of 11% and EBITDA growth of 10%, leading to over 700 basis points of margin expansion. Ten properties had margin growth of over 1000 basis points. In total and including the destination markets in our regional portfolio, regional EBITDA for the third quarter was $447 million. Now turning to Las Vegas and our regional destination markets. Starting with Las Vegas, we now have every property open except the Rio. We generated $60 million of adjusted EBITDA in Las Vegas in the quarter with operating performance improving each month throughout the quarter leading to a strong month of September. We continue to see strong occupancy trends on the weekend in excess of 90%, with midweek occupancy still running in the 50% to 60% range. We were encouraged when Governor Sisolak lifted the meeting caps from 50 to 250 people, which has allowed us to host some small group meetings in Q4. Excluding the closed properties during the quarter, property-level EBITDA was approximately $100 million. Our destination markets in the regional portfolio displayed sequential improvement in operating performance throughout the quarter, leading to September showing material improvement in the rate of EBITDA decline versus July and August. These regional destination properties with large hotel room portfolios are slowly recovering as operations return to normal and customers are returning to the properties. Overall, our immediate actions to reduce operating expenses at our reopened properties contributed to a leaner cost structure that we believe will contribute to sustainable EBITDA margin expansion. We are encouraged by the performance of the regional markets and the sequential rate of change in property performance within our destination markets during the quarter. With that I'll now turn the call over to Bret for some additional insights on the third quarter and details on our balance sheet and capital structure. Bret?

Brett Yunker, Chief Financial Officer

Great. Thanks Anthony. As everyone on the call is aware we had quite an active third quarter, even by our own standards. We closed on the Caesars merger on July 20 and subsequently announced the proposed transaction to acquire William Hill PLC on September 30. As we mentioned in the press release our quarter ending balance sheet was impacted by the cash required to be placed in escrow for William Hill in connection with the Rural 2.7 announcement. On October 1, we completed a public equity offering of 35.6 million shares generating net proceeds of $1.95 billion. Additionally, in early October we entered into a £1.5 billion interim facilities agreement with two large international banks. Execution of this committed debt finance allowed us to release $2 billion of cash that had been escrowed on September 30, allowing us to fully repay a $900 million draw on our parent revolver and return excess cash liquidity to our balance sheet. As of today both of our revolvers are undrawn and our unrestricted cash position is over $2 billion. Based on current operating trends, we expect to end the year with a similar level of cash on hand and 0 revolver balances. As I mentioned on our second quarter call, our approach to maintenance and growth capital investment will be focused and disciplined. Over the next 12 months we expect to spend approximately $300 million to $350 million on CapEx excluding any Atlantic City-specific CapEx that's already been escrowed. With that I'll turn it back to Tom.

Tom Reeg, CEO

Thanks, Brett. Before we move to questions, I want to provide some insights on our business trends since last quarter. Sequentially, we are seeing continued improvement. October outperformed September, which in turn was better than August. In terms of our performance in Las Vegas, I'm sharing some numbers that are not typical for us but may be helpful given the uncertainties around COVID. In Las Vegas, our EBITDAR for July was $10 million positive, which includes losses from shut-down properties. For August, it was $16 million, September saw $34 million, and we expect October to approach $50 million, though we haven't finalized those figures yet. Business is definitely improving in Vegas, and we're not considering shutting properties mid-week; instead, we're focusing on expanding. We opened the Cromwell last week, and I anticipate the Rio will open by year-end. For group bookings, the latter half of 2021 and beyond is showing record numbers. Bookings from Q2 to Q4 2021 are significantly ahead of our 2019 figures, and Q3 bookings returned to more normal levels. The Caesars Forum Convention Center, which only operated for a brief period before the COVID shutdown, has secured 172 events, amounting to 1.6 million room nights and over $600 million in room and banquet revenue, with 78% of that new to Las Vegas. However, this all hinges on improvements in public health. We're encouraged by recent announcements from Governor Sisolak regarding socially distant meetings and a potential increase to 50% capacity by early 2021, which could help retain some business in the first half of 2021. We expect the first quarter will largely resemble the previous three quarters of 2020. Now, I’ll hand it over to the operator for questions.

Operator, Operator

And your first question comes from Steve Wieczynski with Stifel.

Steve Wieczynski, Analyst

Hey. Good afternoon, guys. So Tom, I want to start in Vegas. And if you look at this point, you said your occupancies are running above 90% on the weekends, mid-50s weekdays. Is there any way to kind of think about that weekend kind of traffic? How much of that business in terms of the mid-90s is kind of a cash business versus whether that's a comp business or a reward redemption?

Tom Reeg, CEO

So you should presume that if you look at our historical mix, Steve, the convention business has been replaced by casino block business, and that the other segments remain relatively constant as you look back.

Steve Wieczynski, Analyst

Okay. Got you. And then the comments you made about demand is going to be, I think you said beyond either My Wildest Dreams or Your Wildest Dreams. Was that mostly related to Vegas? Is that kind of across the entire across the entire U.S.?

Tom Reeg, CEO

It's across the entire U.S. When I tell you that, our 55 and over group is significantly lagging the rest of the business, that's throughout the country. Those are the people that tend to skew to an older population that are not leaving their houses right now. My mother is one of those. When you get a vaccine and you have freedom of movement and feel better in terms of the likelihood of contracting COVID, I think that the pent-up demand for Vegas and for entertainment generally is well beyond what anyone is thinking today.

Steve Wieczynski, Analyst

And have you seen any change in that 55 and over kind of crowd recently?

Tom Reeg, CEO

Everything is kind of grinding a little bit better every month, month-over-month, but it's baby steps.

Steve Wieczynski, Analyst

Okay. And then last question. So with William Hill, and I'm not sure how much you can say given the pending, the deal hasn't closed yet. But let's say that deal does go through and you talked about that single app. Do you have any idea yet in terms of when that single app would be deployed?

Tom Reeg, CEO

I'm extremely limited in what I can speak to on William Hill outside of the four corners of the document. You can presume that we were already working in that direction in the former iteration and we would continue to work in that direction post-closing.

Operator, Operator

Your next question comes from Thomas Allen with Morgan Stanley.

Thomas Allen, Analyst

Hey, how are you? So, it's now been about 3.5 months since you bought Caesars. Can you talk a little bit about additional synergy opportunities you've found that you've kind of been under the hood for a bit longer? Thanks.

Tom Reeg, CEO

Yes. The entire discussion about synergies changed significantly due to COVID. It's more about what returns rather than what to eliminate. Caesars operated differently than Eldorado on a daily operational level. We manage our properties with daily profit and loss statements for each location we own. In contrast, Caesars measured EBITDA much less frequently. The operators lacked the tools to benchmark themselves against other properties within the system. When we were Eldorado as a private entity in just two markets, we could evaluate our performance in each market. Having 55 properties enhances that capability greatly, which is a key advantage of scale. In our view, Caesars wasn't leveraging that effectively. It took us almost two months to establish a daily profit and loss system, and we are still refining the Caesars processes. However, we recently completed our first quarterly reviews, which revealed important insights for the operators. They can now see inefficiencies in their operations compared to similar properties. This fundamental analysis is what we are currently focusing on, which gives me great confidence in achieving our margin targets.

Thomas Allen, Analyst

That's helpful. And then just on the sports bar and gaming, any updated thoughts around branding?

Tom Reeg, CEO

You should expect that we will use the Caesars brand for properties that we own and operate. For third-party properties, the William Hill brand will continue to be used in the U.S. Thanks, Thomas.

Operator, Operator

Your next question comes from Jared Shojaian with Wolfe Research.

Jared Shojaian, Analyst

Hi. Good afternoon, everyone. Thanks for taking my question. Tom you talked about October, Vegas pushing $50 million in EBITDA. I know there's weird seasonality with Vegas right now in the fourth quarter without the group business and the convention business. Can you just help us think about November and December? Obviously, I know, it's dependent on a lot like New Year's Eve and other holidays, but how should we think about those two months? Are you assuming that sequential step-up you've been seeing pretty consistently can continue? Or are there some other factors to consider there?

Tom Reeg, CEO

No. As you know, you're hitting a normal soft period in Vegas that November and then pre-December or pre-Christmas December. But what we're seeing is the reduction in volumes is not nearly what it's been historically at least in our business. So we feel good about posting a strong fourth quarter number in Las Vegas.

Jared Shojaian, Analyst

Okay. Thank you. And then I'll try to tackle this question a little differently. But if I think back to your most recent synergy target, the $800 million cost savings, the $100 million of revenue synergies, should we assume the entire $800 million of opportunity is already in that $2 billion number of costs that have been taken out? So really it's entirely just a matter of getting the revenue back? Or are there still some additional costs you think you could take out and then presumably, the $100 million of revenue synergies is still outstanding. Is it fair to say you really haven't gotten any of that yet?

Tom Reeg, CEO

Yes, the revenue synergies are definitely there. On the cost side, the corporate segment on the Caesars side emerged from COVID relatively unscathed. We managed to reduce corporate expenses by about $200 million on an annualized basis, which is in line with our expectations. That reduction is complete, and the rest of the cost savings are reflected in our figures. To give you some context, we had an $800 million target based on both cost and revenue synergies, with $100 million attributed to revenue. So, that leaves us with $700 million in cost synergies. The combined company generated around $11 billion in revenue in 2019 at roughly a 28% margin. If we aim for the higher end of our target range at 35%, that translates to almost $800 million in cost savings. Moreover, if we reach 40%, the savings would exceed that amount.

Jared Shojaian, Analyst

Okay, great. And maybe just to quickly follow up on that. I think you're divesting a lot more properties than you had initially expected when you announced the deal, is that positive, negative or neutral to the margin?

Tom Reeg, CEO

It depends on the properties. I would say that for the properties we've sold and those we expect to sell, their removal would positively impact our overall margin target.

Operator, Operator

Your next question comes from John DeCree with Union Gaming.

John DeCree, Analyst

Hi, everyone. Thanks for taking my questions. Tom, Bret I wanted to ask you guys a little bit about deleveraging from here and the capital that you raised this quarter earmarked for William Hill. You talked in the past about at some point selling a strip asset just to help delever more quickly. But based on what you see now and the amount of costs that have come out of the business and your kind of outlook for margin how do you approach deleveraging from here? Is it going to be through EBITDA growth? I mean you have some asset sales that you just talked about will help. But just curious to get your thoughts on the cadence over the next 12 months or 18 months ways that you'll work down leverage.

Brett Yunker, Chief Financial Officer

Yes, it's really going to be a combination of all of the above. Again we're hopeful that we're nearing an inflection point here where we start generating strong free cash flow post this health crisis. So that's obviously number one alongside that we've been announcing asset sales and we expect to continue announcing them going forward. So that will be part of the package. In Las Vegas, we want to get past the health crisis and then think about monetizing an asset here. So all three of those alongside the denominator growing sequentially is going to help us deleverage in the next 12 months to 24 months.

John DeCree, Analyst

Thanks, Bret. And Tom on the sports and Isle Casino strategy assuming the transaction with William Hill proceeds and you look at your portfolio of brands and assets do you see any need or opportunity to add additional either services or brands or partners for that portfolio? You've got a big one with ESPN. Are there still more to do as you continue to build out business?

Tom Reeg, CEO

This is all about building market share profitably and making your customers as sticky as possible. We think we have the building blocks to do that with what we'll have post the William Hill transaction, but we'll always be looking to improve upon that. I've found it interesting to see non-gaming entities look into this space just the IAC movement into MGM, obviously, what ESPN did with us and DraftKings. There are a lot of companies out there who are looking for share of wallet and screen time on your phone. So it wouldn't surprise me if you see more of that as we move into the future. If there were a partnership or a transaction that would improve our position and we could execute it in a manner that created additional value for our stakeholders, we would certainly take a serious look.

Operator, Operator

Your next question comes from Chad Beynon with Macquarie.

Chad Beynon, Analyst

Hi. Good afternoon. Thanks for taking my question guys. I wanted to drill into the regional gaming EBITDA $44 million or I guess, maybe more importantly the 33% margin. You noted that it was hamstrung by some of these regional, I guess, destination properties in Lake Charles being closed. I was wondering if you were willing to I guess help us think about what the drag was or if these properties had been punching at the same level as the other assets what the result would have been? Any more color just on kind of the impact there and how to think about that going forward?

Tom Reeg, CEO

So you've got New Jersey, Reno and New Orleans that are your biggest drags, obviously like Charles this quarter given the storm. In terms of materiality, three are in Atlantic City, Reno, New Orleans. Atlantic City opened at the very beginning of the quarter. You had no alcohol service, you had no food service and significant limitations on capacity that lasted for a significant period of time during your peak season in Atlantic City. So Atlantic City comps obviously look poor. In Reno, we had the silver legacy tower open. We had a fair amount of Eldorado rooms open. We did not have the Circus Circus 1600 rooms open at all, again in the seasonal peak for the market. New Orleans is a significant national database receiver of business. People not traveling New Orleans as a market due to their restrictions being stricter than the state itself. You have legislative mandated labor count in New Orleans and you have a tax system where we paid a fixed rate in the quarter versus the variable rate that we typically pay. These three properties are significant drags as we move into the fourth quarter and you get into the shoulder season. Reno Atlantic City looks a lot better because you're doing pretty well on a comp basis midweek in those markets when properties weren't full this time last year. The weekend drop-off is not nearly what it was in the summer. New Orleans still has all of the same issues that it had in the third quarter.

Chad Beynon, Analyst

Great. Really helpful. And then Bret just on the cash flow side could you just remind us in terms of what the annual or quarterly cash interest and cash rent will be a little bit of noise in the reporting here but that would be helpful.

Brett Yunker, Chief Financial Officer

Yes, putting GAAP aside on a pure cash basis we're roughly $2 billion all in of annual master lease, rent payments and interest expense so you can just divide that by four for the quarters. About $1.2 billion of rent and $800 million of interest.

Operator, Operator

Your next question comes from Dan Politzer with JPMorgan.

Dan Politzer, Analyst

Good afternoon, everyone. Thanks for taking my questions. I was hoping that you could give maybe an update on your iGaming rollout and when we could expect to see your launch in Pennsylvania more formally at least. And maybe if there's any plans for Michigan and if you have a market access agreement there?

Tom Reeg, CEO

Yes, on Michigan and our intention to roll out there Pennsylvania I don't know...

Brett Yunker, Chief Financial Officer

Yes. We're live in Pennsylvania, Dan right now. We're rolling out more product and more games as every day and week passes. We're expecting to see incremental opportunities in 2021 as these new products are rolled out. We would be optimistic on sort in Pennsylvania in 2021. Also in the state of New Jersey we're going to be launching live dealer on the Caesars side for iGaming. So that's an exciting opportunity as well.

Dan Politzer, Analyst

Got it. Thanks. And then in Virginia there was recently passed legislation that legalized gaming in Danville, where you talked about building a casino. Could you maybe talk to us about – a little bit about the project potential cost and return the competitive environment there and how you're thinking about this at a high level?

Tom Reeg, CEO

Yes. So the project that was approved, we'd expect 20% returns on roughly a $400 million investment. Keep in mind as you look at that project that's in the radius of the Cherokee property that we operate in North Carolina and the tribe has the opportunity and the option to opt in up to 80% of the equity of the Danville property and that became available to them upon the passage the vote on Tuesday. So it's too early to say where that will eventually end.

Operator, Operator

Your next question comes from David Katz with Jefferies.

David Katz, Analyst

Hi, afternoon, and thanks for taking my question. I wanted to ask about the WH acquisition and essentially why now and the degree to which you get closed on it what kind of tech investment and/or marketing spend you envision might be required to be a leader with it right would be successful with it?

Tom Reeg, CEO

Yes. So we – as we looked at the opportunity in the space, as I've said, I think this is the most significant growth opportunity in the casino space since River Boats were legalized in the '90s. We were looking at the partnership that we brought in from the Eldorado side where if you recall we entered that partnership knowing that Eldorado's brand was unlikely to play on a national basis. We wanted to form a partnership with a respective sports betting operator that had a national strategy, where we could participate in the upside. We subsequently bought Caesars, who obviously has a very different brand situation than Eldorado, and it became clear that we have a brand that can resonate on a national level. We've got a database that can feed into that business. We had been talking about how should we proceed with the partnership. If you recall, the partnership included sports betting and not include sports betting and not Internet casino. If you were going to get to a single wallet solution in both. It really wasn't ideal for either partner in the current landscape. So as we looked at potential solutions, it became clear to us that the best answer for us was to control our own destiny here. That being said, our marketing spend will align with knowledgeable decisions for these teams and creating that market. We feel good where we stand today based on the historical perspective of our market position.

David Katz, Analyst

Okay. And I recall, I hope I have your terminology correct, but the notion that iGaming and sports betting may warrant its own brand at some point. How have you thought about making sure that business can grow and achieve what it needs to achieve under your roof versus its own roof?

Tom Reeg, CEO

So, it will be an unrestricted subsidiary of Caesars Entertainment upon closing. Post the Caesars acquisition Eric Hashan and Chris Holden out of the Caesars side agreed to stay as co-President of that business for us. Christian Stewart on the operations side has been invaluable in this process for us and will remain involved. You will see it operate as a subsidiary of its own. You will be able to see the numbers of it on its own, but the question becomes what's the best structure from a capital markets perspective. We have time to make those decisions. The expectation at the outset is it will be a wholly owned unrestricted subsidiary of Caesars Entertainment; it will not have its own currency. But as you know, we are 100% focused on driving value to our shareholders. If the right answer is it becomes a separate entity with its own currency, you might see us head in that direction in the future.

Operator, Operator

Your next question comes from Barry Jonas with Truist Securities.

Barry Jonas, Analyst

Hey, guys. I wanted to start with Vegas. Can you maybe just talk about the reintroduction of entertainment? How profitable do you think that can be either directly or indirectly? And then also, what's been the response so far to the return of paid parking?

Tom Reeg, CEO

Yeah. So, on the question of entertainment, we're absolutely thrilled that we've seen movement in that area and the ability to operate with our – some fairly small venue entertainment across the city. What you're seeing come back. You're not seeing headline entertainment come back. You're not seeing big production shows come back. What you're seeing are the 500, 600 seats that are now offering 100, 200 seats. It's not a hugely profitable business on its own, but it creates additional reasons to visit the market and that's important to us. Every piece that we get that becomes another reason for someone to make the move to either drive here or fly here and stay in the market is good for the whole market. So we're extremely pleased that we're able to offer entertainment today. The initial response has been extremely strong and we're happy to have it back. Now, the issue of parking, you've got a heavy drive-in business now. As I said, we're mid-90 to high 90s occupancy on the weekends, and we have kind of 50-yard line real estate on the strip. What we were finding was our best customers were having difficulty finding parking in our garages, even if they had a lodging reservation. So what we wanted to do was to bring back parking fees, as kind of a hurdle so that our best customers can get to the property. If you are a significant Caesars rewards customer, you're a lodger or you're a local you're not paying for parking. To drive home the point that this was for those purposes, we decided that, we're going to donate all of our profits from parking for this quarter and next to local charities that support the community and those that have been displaced by COVID. So the response has been overwhelmingly positive from the city and from our customers.

Chad Beynon, Analyst

That's great. And then just a follow-up, how are you thinking about, I guess, OpCo mix to the business now? Tom in the past, you've talked about sort of like a 50-50 mix. Is that still the goal once the dust settles?

Tom Reeg, CEO

Yeah. You shouldn't see us doing sale-leaseback transactions or sales of real estate that will skew that. As you've seen us in the past, we've utilized the propco market for financing typically for transactions, so where there's something to come up that makes sense, it could be a tool that's used. But I don't expect us to be particularly acquisitive from here so you shouldn't see much movement on the real estate side. Thanks, Barry.

Operator, Operator

Your next question comes from Shaun Kelley with Bank of America.

Shaun Kelley, Analyst

Hi. Good afternoon everyone. Two questions, just wanted to go back to the, sort of regional margin performance. If we look at the kind of the numbers on a core basis, let's talk about those 700 basis points. Is it fair just as we think about continued recognition of some of the synergies in some of your initiatives that 700 basis points could actually improve or accelerate from here? Or do you think this is a good reflection of what the ability of the business can be, when everything else starts to settle in?

Tom Reeg, CEO

You should expect that it can continue to grow, because as I mentioned earlier, what's missing from the business is some of your highest flow-through revenue. As that starts to return to these markets, particularly in Atlantic City, Reno, and New Orleans, flow-through is quite high. Their contribution to the total regional pie in a post-COVID world should drive the entire regional sector margin higher.

Shaun Kelley, Analyst

That's really helpful, Tom. And then sort of a separate, but big picture strategic question, there's been some discussion as it relates to William Hill and I guess the bigger kind of picture strategy here as it relates to this kind of single wallet or access to the customer probably via an app. I'm just kind of curious like Caesars always took a pretty centralized or increasingly moved to a centralized marketing approach. Tom and Eldorado, I think without mischaracterizing, you guys were always pretty focused on a decentralized approach to really accessing the customers and empowering some of the local property managers. How do you think about that in the digital realm? So just sort of how do you kind of connect all this together as it relates to software and one vision of the customer? Does it sort of need to be centralized? Or can you balance those two approaches? And how would you sort of go about doing it? Or does anything need to change?

Tom Reeg, CEO

I think it's important to consider how we run the entire business. What sets us apart in this market is the loyalty of our customers and their engagement with our network. Reflecting on the pre-COVID era, frequent travelers like myself would go to great lengths to ensure they flew with their preferred airline or stayed at hotels where they had accumulated the most points. This is the essence of the Caesars Rewards system. It's a deeper relationship beyond just the money spent on sports betting through our app. Our customers are more loyal. The sports betting marketing shouldn't be viewed as fundamentally different from how we've built our brick-and-mortar operations. While I understand there's a competitive race for market share and the metrics that are reported monthly, this is a long-term strategy. I remember dealing with companies like Casino Magic, Casino America, and Players International, all of which eventually merged into the industry leaders. That's where we aim to be. We're at the beginning of what will ultimately be a prolonged contest. We're laying the groundwork to secure long-term success and capture as much market share as possible sustainably while ensuring customer loyalty. I could easily manipulate my market share in any given area to present favorable numbers at the end of the month if I invested heavily. However, that's not our approach, nor should you expect us to pursue this market that way.

Operator, Operator

Thank you very much. There are no further questions at this time. I will now hand the call back for closing remarks.

Tom Reeg, CEO

All right. Thanks everybody. We'll talk to you in 2021 after the fourth quarter.

Operator, Operator

That concludes today's conference. Thank you for your participation. You may now disconnect.