Earnings Call Transcript - LVS Q2 2025

Operator, Operator

Good day, everyone, and welcome to the Sands Second Quarter 2025 Earnings Call. It is now my pleasure to hand over the microphone to Mr. Daniel Briggs, Senior Vice President of Investor Relations at Sands. The floor is yours, sir.

Daniel J. Briggs, Senior Vice President of Investor Relations

Thank you. Joining the call today are Rob Goldstein, our Chairman and CEO; Patrick Dumont, our President and Chief Operating Officer; Dr. Wilfred Wong, Executive Vice Chairman of Sands China; and Grant Chum, CEO and President of Sands China and EVP of our Asia operation. 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 language on forward-looking statements included in our press release and 8-K filing also applies to our comments made on the call today. 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 will 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.

Robert Glen Goldstein, Chairman and CEO

Thanks, Dan, and good afternoon, and thank you for joining us. Marina Bay Sands had a historic quarter EBITDA of $768 million. We had forecasted that MBS could do $2.5 billion annually, and that may just happen this year. All the pieces are in place for this property to continue to perform. Mass gaming and slot win did $843 million, reflecting 97% growth in Q2 of 2019 and 40% higher than last year's same quarter. We are in the right place at the right time. Singapore is a very desirable destination, and our product is as good as it gets. It's difficult to find superlatives that describe the magnitude of this result; it is unprecedented for a single building to perform like this. Macau did $566 million of EBITDA for the quarter. We have underperformed in this market. We were not aggressive enough in terms of customer reinvestment. We believe our buildings would be enough. We were wrong. So in the middle of the quarter, we changed our approach to enable us to increase market share and EBITDA. We will, however, be market sensitive. Our assets remain the strongest in the world. The Londoner is open and moving towards our goal of $1 billion of annualized EBITDA. This new approach will create a higher market share and EBITDA. At the same time, Macau's GGR accelerated this quarter, a very positive sign. Our goal is to lead in Macau, and Macau's increased GGR and our strong assets will enable us to deliver improved results in the future. Let's turn to Patrick for more commentary.

Patrick Dumont, President and Chief Operating Officer

Thanks, Rob. Macau EBITDA was $566 million. If we had held as expected in our rolling program, our EBITDA would have been lower by $7 million. When adjusted for higher-than-expected hold in the rolling segment, our EBITDA margin for the Macau portfolio of properties would have been 31.3%, down 80 basis points compared to the second quarter of 2024. All 2,450 rooms and suites at the Londoner Grand were available for the last 2 months of the quarter. We are focused on delivering revenue and cash flow growth at the Londoner across the portfolio. Margin at the Venetian was 35.6%, while the margin at the Plaza and Four Seasons was 34% and at the Londoner was 31.9%. We expect growth in EBITDA as revenues grow and as we use our scale and product advantages, together with targeted reinvestment to better address every market segment. Now turning to Singapore. MBS' EBITDA for the quarter was $768 million at a margin of 55.3%. If we had held as expected our rolling program, our EBITDA would have been lower by $107 million. There will naturally be fluctuations in hold rate in any specific quarter driven by game mix and player preference. The record financial results of Marina Bay Sands reflect the impact of high-quality investment in market-leading products and the growth in high-value tourism. We believe we are still in the initial stages of realizing the benefits of our investments in Marina Bay Sands. Turning to our program to return capital to shareholders, we repurchased $800 million of LVS stock during the quarter. We also paid our recurring dividend of $0.25 per share. In addition, during the second quarter and in July, we purchased $179 million worth of SCL stock, increasing the company's ownership percentage of SCL to 73.4% as of today. We believe the repurchase of LVS equity through our share repurchase program will be meaningfully accretive to the company and its shareholders over the long term. We look forward to continuing to utilize the company's share repurchase program to increase returns to shareholders. Thanks again for joining the call today. Now let's take questions...

Operator, Operator

Your first question is coming from Stephen Grambling from Morgan Stanley.

Stephen White Grambling, Analyst

Starting with Macau, I appreciate the acknowledgment of the shortfall somewhat there. But perhaps remind us of how you're thinking about turning the tide from a competitive standpoint and what KPIs or timing investors should maybe be thinking about in terms of seeing some of the market share go in the opposite direction?

Kwan Lock Chum, CEO and President of Sands China

I'll take that, Stephen. Thank you for the question. I think around late April, we started to implement a more aggressive customer reinvestment program. I think we're seeing some encouraging initial results from those increased levels of reinvestment. As we get into May and June, the performance of SCL did improve. I think we will continue to adjust to the market conditions as and when necessary. We're also looking for opportunities for us to perform better from our smaller properties at Parisian and Sands. Overall, the reception to Londoner has been phenomenal. I think we're getting exceptional feedback from customers, and that's obviously growing nicely. But obviously, this quarter is still just the start. All of the rooms, as Patrick referenced, were available from late April, and we intend to continue to yield better at Londoner and Macau. So that property has much further to go. The rest of the portfolio, we need to adjust our reinvestment levels according to the product and the individual product mix within the property. I think this process has only just started, and we'll continue to see improvements in our results as we've done since May and June already. As you can see, we have a sequential improvement in our mass GGR market share, up 8% for the quarter, and we intend to drive better improvements and also hopefully recapture that market share in the coming quarters.

Patrick Dumont, President and Chief Operating Officer

So I just want to say one thing, which is we're not where we want to be in Macau. We feel like we've made great investments. We have great products, and we believe we can grow EBITDA from here. We're very focused on it. We realize we have work to do in our reinvestment programs. We have strategies that we think will make us more competitive, and we're going to take some actions. We believe we have an approach that we hope in the long run will create growth for us, both on the revenue and EBITDA side.

Stephen White Grambling, Analyst

I have a follow-up regarding Macau. You mentioned that you’re not currently satisfied with your position there. What does this imply for your capital allocation in that market? In the past, you maintained a strong dividend payout as a proportion of free cash flow and earnings. Should we expect to see a return to that practice only after a turnaround? If you resume dividend payments, will that previous ratio be a valid framework for planning moving forward?

Patrick Dumont, President and Chief Operating Officer

Yes. So I think the key thing is that we've always been focused on return of capital, particularly with the dividend at the SCL level. As we see the CapEx roll off from the Londoner, which was a very meaningful investment, we feel it will generate cash flow over the long term. We'll be happy to make it. However, hopefully, our CapEx profile looks better in the future, as you can see from our CapEx expectations that we published. When that happens, we'll look to return to increasing the dividend over time with the support of the SCL Board. For us, we think the best use of free cash flow there other than investing in growth projects is to return it to shareholders. You've seen how we've handled it in the past, and we look forward to doing that again in the future. The levels will be based on our expectations of cash flow production going forward.

Operator, Operator

Your next question is coming from Shaun Kelley from Bank of America.

Shaun Clisby Kelley, Analyst

For Grant or whoever wants to take it, maybe we could just start in Macau. We did see across the market a bit of an improvement sequentially as the quarter went on in sort of overall market GGR. We've heard some mixed views about how either promotionally driven or VIP or event-driven that was. So hoping to get a little bit of color on just what's driving that improvement? How sustainable you think it is and just broader health of the macro in the market right now?

Kwan Lock Chum, CEO and President of Sands China

Sure, thanks for the question, Shaun. The market clearly picked up from May to June, with June standing out due to the events that took place. Looking at the segment details from the DICJ data, the VIP segment performed exceptionally well this quarter, showing a 26% increase year-on-year by our estimates. The non-rolling slot win also saw improvement, while we maintained high single-digit growth for the quarter. There are promising signs, as a combination of heightened customer engagement, the event calendar, and the offerings from operators contributed to the rise in patronage.

Shaun Clisby Kelley, Analyst

To shift our focus to Singapore, Rob, your performance has been remarkable. Generating over $750 million from a single property in one quarter is impressive. Could you provide your insights on how we should anticipate the future productivity or run rate for this property? Are we looking at consistently exceeding $600 million in quarterly EBITDA? I understand your target stands at $2.5 billion core, but I would appreciate your guidance to help set realistic expectations, especially considering the previous quarter wasn't an easy comparison and that VIP performance can fluctuate significantly.

Robert Glen Goldstein, Chairman and CEO

It's hard to predict, isn't it? I mean, I don't think we forecasted a $770 million quarter. I don't think we have a clear view of what's sustainable going forward. It's proving to be an amazing market, and we have the best assets by far in the market. How high is up and how deep is that well? I don't know. The truth is it would be very difficult to dismiss these results and say we are now heading for $2.5 billion. Can we get to $2.6 billion, $2.7 billion, and continue? Shaun, it's tough to predict. It's not an easy market. There's never been anything like this in the history of gaming anywhere. You realize this run rate is a $3 billion asset. We don't expect to do that now. $2.5 billion is realistic and doable, but I would not want to venture a guess and wouldn't want to dismiss the results. I don't want to overhype them and say every quarter is $750 million. I think that's unfair. But could we do $600 million plus or $650 million? Possibly yes. It depends on how strong the economy remains over there and the super high end of the market there. We dominate it, and we're kind of low in that place in terms of the super high end. It could be that we're looking at a whole new world in Singapore, and we'll have to wait and see. Time will tell. We just don't know because we didn't see this coming this early. We thought it would come later. Let's see. Let's deal with it.

Operator, Operator

Your next question is coming from Dan Politzer from JPMorgan.

Daniel Brian Politzer, Analyst

I wanted to revisit the situation in Macau. It appears that your approach is becoming more promotional and you are focusing on achieving a specific EBITDA level. Is there a particular EBITDA share that we should consider to reach your desired goals, given your historical EBITDA share of 33% to 35% in that market? How should we evaluate your strategy and key performance indicators for returning to a level that you deem appropriate?

Robert Glen Goldstein, Chairman and CEO

I believe we need to approach this gradually. We've recognized our mistake in assuming our assets were robust enough to withstand this new environment. We are now part of the market, not the leaders, which is a positive development. Our immediate objective is to achieve a run rate of $2.7 billion and recover from our current position. We are confident that the Londoner and Venetian together can generate $2 billion, while the Four Seasons and Parisian can each achieve over $300 million. Additionally, we expect the Sands to exceed $100 million due to changes in the Peninsula. Currently, at $2.2 billion or $2.3 billion, our performance is lacking despite having top-tier assets. We believe that boosting gross gaming revenue is crucial and that our significant assets will help us regain strength in the market. We anticipate reaching $600 million to $650 million in the near future, bringing us back to the $2.6 billion to $2.7 billion range. Looking ahead, we expect the market to mature, and if growth accelerates, it will positively impact all of Macau. This could realistically happen by 2025 or 2026. Acknowledging our past performance, we are committed to improving and trust in our team's capability to help us get back in the game.

Daniel Brian Politzer, Analyst

Got it. That's a helpful detail. Just a follow-up on Singapore. Is there any way to kind of wrap our heads around that sudden acceleration in those gaming volumes? Because it does seem like it was pretty concentrated on just the gaming side. And I mean, we're trying to parse this out if there were new customers, maybe reception for the property improvements and new suite product, anything in the event calendar? Just trying to make sense of what's obviously typically the seasonally softest quarter of the year here to be so strong.

Patrick Dumont, President and Chief Operating Officer

A lot of this can be attributed to the product itself. Over the past few years, we have made significant reinvestments, not just in the physical product but also in service levels and the overall experience we offer. The profile of our customers and Singapore's position today, particularly with the rising wealth in Southeast Asia, is very promising. We have a strong belief in Singapore's future, as indicated by our customer demographics. The market is robust and diverse. New customers are drawn to what we provide, whether for business or leisure travel, and they are visiting Marina Bay Sands and enjoying our offerings. This success highlights the hard work of our team and the investments we've made in our operations. Ultimately, it's a reflection of the increasingly appealing experiences we offer, which are unique and attractive to visitors. Our facility has evolved significantly over the past five years, and a visit will reveal these improvements and demonstrate the high caliber of our clientele.

Robert Glen Goldstein, Chairman and CEO

You also have to give credit to the government of Singapore, which allows us to dream and excel. Patrick referenced that groundbreaking last week of our second building. It's an amazing place, but the market also has 4 billion Asian people at the very top end looking for an extraordinary experience, and we have the assets and space over there. The truth is that building is just the most desirable with super high end, and there's a lot of people coming to Singapore. The propensity to gamble, as you know, is high in that part of the world. We are in a very fortunate position. I don't see it changing. I think we are in a very privileged position, and hopefully, it goes on for quite a long time. We are not ones to forecast that it's $600 million, $700 million, or $800 million a quarter. But we know we're in the right place at the right time, with extraordinarily strong assets and excellent government support and a very strong market in terms of Singapore visitation.

Patrick Dumont, President and Chief Operating Officer

I think one other thing that's important to note is we started to see some momentum as we started finishing the renovation. Everything is pretty much done now, and we are starting to see the results; it's a direct result of the completion of the renovation and the type of customers that we can attract with the products that's there now.

Operator, Operator

Your next question is coming from Brandt Montour from Barclays.

Brandt Antoine Montour, Analyst

My first question is about Macau. From our perspective, it's somewhat challenging to see the clear strengthening of the Chinese consumer in your market and their inclination to gamble. Could you elaborate on this and discuss the improvement in spending per visit, either in base mass or premium mass? We initially expected a recovery in premium mass during May and June, but your slides suggest that base mass per table performed better. Can you provide more insights on who is spending more and in which areas?

Kwan Lock Chum, CEO and President of Sands China

Brandt, maybe I'll take that question. I think overall visitation has been very strong. You see the results for April and May were up by over 20% year-on-year. A lot of that is driven by day-trip visitors from the Greater Bay Area. Nonetheless, that's helping to drive some of the base mass recovery. No question, I think the acceleration in GGR is still primarily driven by the premium segments. This quarter, in particular, the market benefited from some big rolling play, but also the high end of the premium mass. Those dynamics remain similar to previous quarters. We're beginning to see an increased level of visitation, albeit more from the Greater Bay Area in terms of day trips. You alluded to it; we grew quite significantly in the base mass non-rolling win against Q1, and that's partly driven by the opening of the Londoner brand.

Brandt Antoine Montour, Analyst

Okay. That's super helpful. And then just a quick follow-up on Macau. The Londoner results clearly had a nice bounce here in the second quarter. You alluded to in your prepared remarks that some of the other properties didn't do quite as well. Am I to read between the lines that the Londoner is the property that has received the most incremental reinvestment activity and the other properties have not, and that's kind of next up in terms of your sort of blueprint or game plan here? Or is that not the right read-through?

Kwan Lock Chum, CEO and President of Sands China

No, that's not entirely accurate. In terms of our higher reinvestment levels, that just went into the portfolio across the board. What we referenced earlier is that we may need to further adjust our reinvestment levels during the quarter towards the end for some of our smaller properties because those products may need recalibration in the reinvestment levels versus the natural patronage that is flocking to Londoner and the strength of properties like Venetian continues to attract customers across all segments.

Operator, Operator

Your next question is coming from Robin Farley from UBS.

Robin Margaret Farley, Analyst

Just going back to the acceleration you talked about in June in Macau, it seems like it's driven at least a fair amount of it by the events calendar. How do you get comfortable that it's sustainable as you get past some of the July events and the calendar not being as sustainable in terms of events?

Kwan Lock Chum, CEO and President of Sands China

I think, Robin, the calendar is being filled literally every week and every month by different operators, including us. The change from before the pandemic is that every operator is contributing to the events calendar. The big events brought in, whether by us at the Venetian Arena or by our competitors, benefit the entire market when significant acts come in. That won't be a consistent pattern because acts come in at different times of the year, but you can be sure that the calendar will continue to be filled with great entertainment content. Macau has really been successful in establishing itself as a regional center for entertainment from Greater China, as well as Asian and international artists.

Robert Glen Goldstein, Chairman and CEO

Robin, I would just add to Grant's comments; I think it was last year, I wouldn't have given us credit in Singapore because Taylor Swift made the whole thing happen. She wasn't available this quarter, and we still did pretty well. We have lots of events in Macau, but I've learned over the years that events merely rearrange customer visitations; they don't necessarily create new visitations. I believe the market is showing strength; the June results indicate that. Yes, there's no question that high-profile entertainers help, but you need to look at the strength of the market overall. I believe it's there. I have not been there in the last month; it looks a lot like pre-pandemic Macau, very strong, with lots of people at the tables. I don't believe entertainers create more visitations; they rearrange when people come and go. But I wouldn't be concerned with the event count, although there are quite a few events happening now.

Robin Margaret Farley, Analyst

Okay. Great. For the follow-up, just a quick one. Are you thinking about revisiting what you consider a normal hold percent in Singapore? I know you just raised it in Q1, but I'm wondering if you're thinking about whether that 3.7% was high enough for normalized hold.

Robert Glen Goldstein, Chairman and CEO

I wouldn't let one quarter drive your thinking. Hold percentage is a moving target for us and other competitors because it changes based on who bets, what they bet, and the types of bets customers make. We'll come back to you in the future if we need to reassess, but for now, I think we're fine where we're at.

Operator, Operator

Your next question is coming from Joe Stauff from Susquehanna.

Joseph Robert Stauff, Analyst

In Singapore, I would like to ask about mass gaming revenue and its strength. Is this mainly due to better hold or increased visitation? Additionally, how does this compare to the new product you have in Singapore, and what potential do you see for this number? I understand that VIP is a different category with its own volatility, but could you provide more details to help us understand this figure better?

Robert Glen Goldstein, Chairman and CEO

I hate to say this; I like the answer, but it's very difficult for us to do it as well as you. When you do $843 million, up 97% pre-pandemic and 40% higher year-on-year, it's hard for us to wrap our heads around. There's an awful lot of people showing up in all segments and gambling outsized amounts of money. Your question is fair. I wish we had better answers about how deep the well is and how high this thing can go; we're confused ourselves by it. We expected $2.5 billion, and now I think we can say we can achieve it this year. I think it's a combination of an incredible market and incredible access to people who want to get there. We keep watching this and saying, yes, we've seen the quarter with amazement, and I think it will continue in Singapore. When we have good customer visitation, it's a different issue. We're not sure how to gauge it. Premium mass gaming is alive and well in those numbers; these are non-rolling, very high rolling people. The premium mass segment, which is included in that $843 million number, consists of many high-end non-rollers, which is different from past Macau. Your question is indeed fair. We don't want to exaggerate, but we also want to accept that it happened now for two quarters in a row with strong results.

Joseph Robert Stauff, Analyst

Got you. And then maybe a follow-up. Formula 1 is pushed to the fourth quarter in Singapore this year versus September last. What's the right way to think about whether or not the rest of the building can absorb that normal activity? Or do you view that as a bit of a headwind?

Patrick Dumont, President and Chief Operating Officer

Formula 1 is always a great event for Singapore. It's something that we fully support. We're an integral part of it and we always welcome it. I think our patrons really enjoy it. Many visitors show up in Singapore because of this event. For us, whenever it happens, it's great. If it's third quarter, fourth quarter, we’re happy with it. We do our best to support the initiatives around it because we think it's great for Singapore, great for Marina Bay Sands; the type of customers that show up are always beneficial. In terms of being able to accommodate customers in Q3 or during Golden Week with Formula 1, it's fine. Either way, it works.

Operator, Operator

Your next question is coming from Chad Beynon from Macquarie.

Chad C. Beynon, Analyst

Wanted to go back to Macau, Rob. You mentioned $2.7 billion as the near-term North Star, and hopefully, that eventually moves back to $3 billion. But I wanted to approach it from a margin standpoint. Londoner had nice improvement in margin. The collective was down 80 basis points, as you guys called out. And the flow-through was obviously negative here for the quarter. But does margin matter as much in terms of how you're thinking about running the business? Or given the commentary we've spoken about with promos, maybe we shouldn't have a margin target in mind because of simple inflation and a different approach towards promotions? Or is that still the case to get closer to a 40% margin long term?

Patrick Dumont, President and Chief Operating Officer

I think the key thing about Macau is that there's a very large fixed cost base in our property portfolio. Our margin will depend on how much revenue we can push through these buildings. If our promotional activity and customer reinvestment makes us a little less competitive and we have less revenue, our margins will be impacted. For us, ex-hold, if you ignore the impacts of hold, if we continue to have the best properties with great offerings and experiences for our customers and reinvest in a more market-competitive way, we think we'll still have the ability to drive revenue at an appropriate margin. The margin regime where we are today is okay for now. We think there might be some opportunity for upside as we grow revenues over time. But we are not looking at a specific EBITDA margin in terms of our reinvestment guidance.

Robert Glen Goldstein, Chairman and CEO

And Chad, margin does matter, but EBITDA matters more. You must be sensitive to the environment you're operating in, and the environment there has changed. We weren't sensitive enough before, so now we need to adjust that. Coupling strong assets with a growing surge in GGR, I think you have a good formula. We always want to be margin sensitive, but EBITDA is our foremost priority. It’s complex.

Chad C. Beynon, Analyst

Great. The news that we've seen in terms of the movement from the Thai cabinet withdrawing the bill at this point for legalized casinos; I guess there's probably no update from your end because we're probably reading the same information. But anything to talk about there or any other potential developments that you plan to pursue outside of the two markets that you're in?

Patrick Dumont, President and Chief Operating Officer

We are constantly looking at new development growth opportunities in new jurisdictions, evaluating them as they come along. In Thailand, there's a great opportunity there if the legal and regulatory framework is appropriate. We will consider it. As of now, there's not a lot for us to think about.

Robert Glen Goldstein, Chairman and CEO

Thailand presents the greatest opportunity in Asia remaining within those countries. However, it's hard to predict what will happen day-to-day; it can change. It's a very important place if it ever comes to fruition.

Operator, Operator

Your next question is coming from Lizzie Dove from Goldman Sachs.

Elizabeth Dove, Analyst

You mentioned earlier that the goal of the Londoner is to move towards the goal of $1 billion in annualized EBITDA. Curious about the timing of that, how much more reinvestment, kind of promotions are needed to get there, and more so just the cadence to get there?

Kwan Lock Chum, CEO and President of Sands China

We've only just started ramping up the property. If you think about the Londoner Grand, it really only fully launched from May onwards. We're still in the very early stages of ramping up at Londoner. We're already running close to $800 million annualized, and we see opportunity to yield higher across all the hotels in Londoner Macau, especially Londoner Grand. We're seeing exceptional slot and ETG performance out of Londoner, surpassing what this building achieved in 2019. We’re seeing strong levels of non-rolling table performance as well. As all segments continue to grow and we put high-quality customers into the suites and rooms, we will achieve that $1 billion annualized that Rob referenced. That's the goal. We don't know the exact timing, but we're still in the early days of ramping up this property.

Elizabeth Dove, Analyst

Got it. That makes sense. Returning to the promotional activity; it's something you've been ramping up over the last couple of months. I'm curious what you've seen from other players and how the competitive environment has evolved? Whether they've responded with the same level of promotional activity? Whether there's been any irrationality in the market? Just what you're seeing broadly in response to that.

Kwan Lock Chum, CEO and President of Sands China

The market continues to be very competitive. The intensity is not dropping at all; each operator is fighting for a greater share of the pie. The main difference this quarter is that we are now in the mix regarding reinvestment levels to the customer. We see the response, and initial signs are encouraging. It's more biased towards the high-end segments where the shifts in customer investment are bringing players back to our properties or gaining new customers, especially through Londoner. That process will continue, and we'll keep evaluating. I do not expect the competitive dynamics to ease off; it will remain intense. But of course, high levels of GGR and acceleration in the market growth will benefit us all.

Operator, Operator

Your next question is coming from George Choi from Citigroup.

Shui Lung Choi, Analyst

Over the past several months, we've seen you took the side bets from Marina Bay Sands and introduced them to your Macau operations. Recently, we saw you added a progressive jackpot to your baccarat game in Macau, believed to have come from Marina Bay Sands. My question is, do you still have any best practices at Marina Bay Sands that your Macau operations can learn from?

Robert Glen Goldstein, Chairman and CEO

It's a work in progress, George. We trade information back and forth based on best practices, and we saw a lot of success in Singapore with side bets. I expect to see similar success in Macau as well. We're learning as we go. These markets aren't that different in terms of customer activity. In the end, I'm confident that we'll see similar results in Macau over time. It's newer to the Macau market, and it takes a little longer to get approved. However, we believe in the new era of smart tables and side bets, which is increasing hold percentages for everyone, including competitors, and it's beneficial for the industry and exciting for customers. Time will tell how long it takes to see the increased hold percentage.

Operator, Operator

Your next question is coming from David Katz from Jefferies.

David Brian Katz, Analyst

I wanted to start with Singapore, where significant investment is coming for further expansion. Things have started to really go well in the core building, which frankly, you've been waiting for a few years. I want to make sure there isn't construction disruption or anything that could impact the momentum that you have there in Singapore?

Patrick Dumont, President and Chief Operating Officer

The site is adjacent to Marina Bay Sands. Renovation work we did at Marina Bay Sands was within an actively operated building. We managed to achieve that while continuing operations. The good news is the building's interior is complete, and we're starting to see benefits as a result. The groundbreaking for our expansion took place last week, with key members of our management team in attendance, including the Prime Minister. It's an important complex for tourism in Singapore, and we take potential disruption seriously. Fortunately, we have a bit more than a 7-acre site directly next door, allowing us to conduct operations without interruption. During construction, we won't face significant disruptions.

David Brian Katz, Analyst

Perfect. A quick follow-up on the strategic evolution in Macau. You talked about reinvestment rates. I wanted to ask about credit and whether that's a tool you'd be using and how that shows up. Does it sort of show up later on? And on the cost side, is there anything in there we should keep an eye on?

Kwan Lock Chum, CEO and President of Sands China

No. I think in terms of the credit-based play, it's a very small portion of our overall GGR traditionally. We extend credit to some premium patrons in our direct rolling programs, but it's been consistent for two decades. However, it’s not a significant part of the GGR.

Operator, Operator

Your next question is coming from John DeCree from CBRE.

John G. DeCree, Analyst

I wanted to ask about your retail mall portfolio, particularly retail sales. We're seeing a bit of acceleration in Mainland China. In Macau, you've seen a lift in Q2 as well. We have questions about sustainability of GGR growth which you’ve addressed already. Curious if you could share thoughts on what you're seeing in the retail mall, particularly on the luxury side.

Kwan Lock Chum, CEO and President of Sands China

The retail mall tenant sales are starting to see a good recovery in the second quarter. We've grown by about 10% year-on-year across the retail mall portfolio in Macau. Luxury is still relatively weaker versus the rest of the portfolio, but we saw signs this quarter that luxury sales were improving, partly due to introducing stunning flagship stores for key luxury brands in the portfolio. We're optimistic about making improvements that lift the luxury sales portion of the mall, and we're pleased to see that the mall is back in positive sales territory, achieving double-digit growth in Q2 compared to last year.

John G. DeCree, Analyst

Just a big picture question about visitation. Visitation from Mainland China, excluding Guangdong, has been sluggish relative to the day trippers in the Bay Area. Given your room base in Macau, this seems like a big opportunity. Curious your views on opportunities to penetrate deeper into mainland and see visitation outside of Guangdong return?

Kwan Lock Chum, CEO and President of Sands China

It's a great question. Excluding Guangdong, visitation recovery is still lagging, and some provinces are uneven. Some wealthier coastal provinces and major cities are recovering even beyond 2019 levels. Macau and operators are continuously doing destination marketing roadshows across different parts of Mainland China and overseas, and that will continue. Transportation is improving in terms of pricing and connectivity. Availability of hotel rooms remains stable, and we've added high-quality inventory. We expect these factors to drive better penetration of non-Guangdong visitation numbers, especially boosting overnight visitation, which is the higher spending segment. The overall hotel inventory in Macau isn't significantly growing, which will continue to act as a constraint on overnight visitation. However, we expect continued improvement in tourism quality in Macau.

Operator, Operator

Your next question is coming from Steve Wieczynski from Stifel.

Steven Moyer Wieczynski, Analyst

Most of my questions have been answered. Just one for me. Rob or Patrick, as we think about Singapore, and Patrick, you mentioned just started construction of IR2. Based on what you've witnessed over the last 6 to 8 months coming out of IR1 and the numbers you've been generating out of IR1, has that changed your internal return assumptions for IR2?

Patrick Dumont, President and Chief Operating Officer

I don't think so. We view Marina Bay Sands as an investment-driven story. The more we invest in high-quality assets and better service levels, the more we will have pricing power and be able to differentiate our products, attracting high-value tourism. That's where we're headed, and the current quarter and projections going forward back that up. This is a $6 billion investment and our goal is to have the best hotel in the world, the best gaming encounters, the best food and beverage, and this live entertainment venue, all to drive customer visitation. Our long-term view remains unchanged; it's a high-quality investment.

Operator, Operator

Thank you. That concludes our Q&A session. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. We thank you for your participation.