Wynn Resorts, Limited (NASDAQ:WYNN) Q4 2021 Earnings Conference Call February 15, 2022 4:30 PM ET

Company Participants

Vincent Zahn - SVP and Treasurer
Craig Billings - CEO
Ian Coughlan - President of Wynn Macau
Brian Gullbrants - President of Wynn Las Vegas

Conference Call Participants

Carlos Santarelli - Deutsche Bank
Joe Greff - JPMorgan
Thomas Allen - Morgan Stanley
Stephen Grambling - Goldman Sachs
David Katz - Jefferies LLC
Dan Politzer - Wells Fargo Securities
John DeCree - CBRE

Operator

Welcome to the Wynn Resorts Fourth Quarter 2021 Earnings Call. All participants are in a listen-only mode until the question-and-answer session of today's conference. [Operator Instructions] This call is being recorded, if you have any objections, you may disconnect at this time.

I will now turn the line over to Vincent Zahn, Senior Vice President and Treasurer. Sir, you may begin.

Vincent Zahn

Thank you, Michelle, and good afternoon everyone. On the call with me today are Craig Billings and Brian Gullbrants in Las Vegas. Also on the line are Ian Coughlan, Linda Chen, Ciaran Carruthers, Frederic Luvisutto, and Jenny Holaday. I want to remind you that we may make forward-looking statements under Safe Harbor Federal Securities laws and those statements may or may not come true. I will now turn the call over to Craig Billings.

Craig Billings

Thanks, Vince. Afternoon, everyone, thanks for joining us today.

I'd like to start by saying that I'm genuinely honored to be speaking to you as CEO of Wynn Resorts. I joined Wynn in 2017, because I'd spent much of my career admiring the company for its dedication to its craft and its people. I'm excited to lead the company forward and I know that our best days are ahead of us.

Before we talk about the fourth quarter, I'd like to give you some additional context around a couple of transactions that we've announced over the past few weeks. First, let's touch on the sale leaseback of our real estate at Encore Boston Harbor that we announced today. We’ve discussed the sale of real estate on past earnings calls and we've always maintained that we believe our valuation over any reasonable period of time reflects the value of our real estate. We believe that to be the case today. So why execute a sale leaseback?

A sale leaseback is after all nothing more than a financing and capital structure decision. In our case, this transaction benefits our capital structure in a few different ways. First and foremost, it provides long-term capital to grow our business. In this case capital to deploy adjacent to Encore Boston Harbor in the construction of additional parking, and complimentary non-gaming amenities that will drive Encore Boston Harbor to even higher levels of performance and capital to deploy an attractive greenfield projects like our development in the UAE, which I will discuss in a moment.

Second, it enables us to potentially retire near term debt with a higher cost of capital than the lease. I would note here that this sale leaseback transaction was executed at 17 times rent, for a 5.9% cap rate, a record for regional gaming assets by some two turns, and an attractive long-term cost of capital.

Third, it brings a new partner into our capital structure. Sumit and the team at Realty Income have been great partners in executing this transaction. And I would note that there are a number of highly bespoke terms in the lease that reflect our longer term goals. These terms were only achievable due to the unique way that Realty Income is structured and their willingness to engage and align this transaction with our goals.

Overall, this transaction gives us a lot of additional financial flexibility, the transaction will close near the end of the year. Some of you may ask, What about Wynn Las Vegas? In response to that, I would note a few important points. First, Las Vegas is a very different market when compared to regional markets.

Potential operational deleveraging in an economic downturn is more extreme as we saw in 2009. And the need for continuous and sizeable reinvestment in order to stay relevant is high. As many of you know, it is fundamental to us that we maintain consistent service levels and CapEx throughout the business cycle. And I never want us to be in a position where in the midst of a downturn, we have to choose between our world-class service and escrowing rent, or between paying rents and investing in our property.

In fact, our 2021 results speak to the power of our proprietors mindset, with a host of new investments bearing fruit, and with our team and tech despite COVID, we continue to take market share and delivered the property's highest ever annual EBITDA. Further, the breakage costs related to a sale leaseback of Wynn Las Vegas would be significant. Beyond the tax leakage our capital structure in the U.S. has bond financing at both Wynn Las Vegas and a holding company above it. A sale of our Las Vegas real estate would trigger an acceleration of that debt, driving over $600 million in breakage.

For now, we believe we will deliver far more long-term shareholder value by continuing to own our real estate in Las Vegas. And I am confident our equity valuation will continue to reflect that.

Let's turn to our announcement regarding an integrated resort development in the UAE. We're thrilled about this project which will further diversify our business while extending our brand into the Middle East and Europe. I'm sure all of you are familiar with the UAE and with Dubai in particular. It's a dynamic country and we are proud to have the opportunity to deliver our exceptional hospitality there. Ras al-Khaimah is about 45 minutes North of the Dubai airport via a first-class multilane highway. The location on Marjan Island is stunning and will be a great setting for our resort. I do want to provide some clarity on a topic I have seen in a number of analyst notes and media reports regarding the project.

In any new jurisdiction, there are three things that need to happen to have an integrated resort with gaming. The first is enabling legislation is gaming legal? The second is regulation, how will gaming be conducted? The third is licensure, who can operate a gaming establishment? With respect to this project, no further enabling legislation is required. We're not looking at a multiyear process for legalization like we have seen in some other markets.

Regulations are well advanced, having been modeled on those of Singapore and the United States. The tax rate and license structure are very reasonable. And finally, with the regulatory framework taking shape and the regulator in place, we will be licensed to conduct gaming in Ras al-Khaimah.

In other words, where we go with these projects. We're commencing master planning now and will begin mobilizing architecture and design in due course. I expect our ultimate design will be one or more iconic buildings that both take advantage of the pristine beach location and also show respect for the unique cultural aspects of the region. We're big believers in the potential for Ras al-Khaimah to be an amazing tourism and hospitality destination.

Lastly, I would point out that this is the first transaction where Wynn Resorts is being paid for its know-how and service excellence via a management agreement. I expect it to provide a very high return on invested capital. We have a lot happening around here and I'm personally very excited about the future.

Turning to the fourth quarter and starting in Las Vegas. The team at Wynn Las Vegas had an absolute stunner of the quarter. $186 million in EBITDA despite holding a bit low. Drop was strong, handle was strong, RevPAR was strong. I could go on and on. To us, the quarter's results are a further indication of the fact that our unrelenting focus on service and great product are resonating with premium customers who after being cooped up for 2020 and the first part of 2021 are traveling and spending again with a vengeance.

As you've heard from some of our peers, January results in Las Vegas were impacted by Omicron, particularly in the group side. Encouragingly, forward bookings in January were very strong and February to date has accelerated further positioning us well into March and beyond. To give you some context, our hotel occupancy in January was 61%. And with the latest wave of COVID quickly receiving, we expect occupancy to increase to the mid-80s in March. As we increasingly distance ourselves from our competitors, we believe we have strong pricing power on rooms, food and beverage and nightlife during 2022.

In Macau, the market continued to experience subdued visitation during the fourth quarter, and our results reflected that enroll, in drop and volatility a hold. Of course, you need only Chinese New Year to remind yourself of the power of that market and the pent-up demand for visitation. During the holiday period, turnover per day in our direct program was up nearly 175% from 2021 and down only 12% from Chinese New Year 2019. Encouragingly, we are seeing both strong spend per customer and significant new customer sign-ups in our direct business, highlighting the strength of our market-leading product and service offering.

On the mass side, table drop was up 34% versus 2021, and that drop was 60% of our Chinese New Year 2019 levels. As we have seen before, when Macau is more accessible, demand snaps write back. Long-term, I remain incredibly enthusiastic about the prospects for Macau. Between the shift to higher-margin premium mass customers and to customers who have more motivations to visit than just gaming, the market is evolving, and we are prepared to adapt and grow our business as we embrace those changes.

Further, the concession process continues in a methodical and logical manner with the amended gaming law currently sitting with the Assembly Committee. We continue to be pleased with the process and with the content of the amended law.

Turning to Boston. Like Vegas, Encore had an unbelievable quarter in both gaming volumes and RevPAR, resulting in $68 million of EBITDA in Q4. The team in Boston has really done a tremendous job, particularly in the casino, but we're just getting started. Our next phase of growth in Boston will be driven by database growth, particularly growth outside of adjacent areas and through our upcoming expansion project across the street from the property. That expansion will see us add additional amenities and importantly, additional parking.

Parking, particularly on weekends, remains a constraint for us. Though Encore is now run rating higher EBITDA than a number of strip properties, Encore still has a tremendous amount of growth ahead of it.

Lastly, on Wynn Interactive, we generated about $785 million in turnover across casino and sports betting in Q4, which drove a 29% sequential increase in revenue. This was despite a meaningful curtailment in marketing spend in November and December. As you may recall on our Q3 call, we were very explicit about our view on the unsustainable nature of the current competitive environment in sports betting and we stated our intention to manage the business with a long-term shareholder-friendly view.

To that end, we began shifting our user acquisition mix in early November, focusing only on proven performance marketing channels where we know we can achieve positive ROI on spend, particularly in casino. By doing this, we meaningfully reduced our overall burn rate and as our remaining brand advertising commitments handled off with the Super Bowl, I expect EBITDA burn levels to reduce even more drastically.

Overall, we estimate Q1 2022 burn should be down some 60% from Q3 '21 to the $40 million range, and I expect Q2 2022 to be even lower.

With that, I will now turn it over to Vince to run through some additional details on the quarter. Vince?

Vincent Zahn

Thank you, Craig. At Wynn Las Vegas, we generated a record $186.2 million of adjusted property EBITDA on $493.9 million of operating revenue during the quarter. We estimate low table hold negatively impacted EBITDA by approximately $10 million in the quarter. Overall, our hotel occupancy reached 86% in the quarter, with 91% occupancy on weekends.

Importantly, we have stayed true to our luxury brand and continue to compete on quality of product and service experience, with our overall ADR reaching $441 during 4Q '21, 37% above 4Q '19 levels.

Our other non-gaming businesses saw broad-based strength across F&B and retail, which were also well above pre-pandemic levels. In the casino, our 4Q '21 slot handle was 40% above 4Q '19 levels, and our table drop was 41% above 4Q '19 levels despite still suppressed international play due to COVID-related travel challenges.

The team in Vegas has done a great job of controlling costs without negatively impacting the guest experience, delivering adjusted property EBITDA margin of 37.7% in the quarter or approximately 39% when adjusted for low table hold. This was unchanged sequentially and up 1,350 basis points compared to 4Q '19 on a hold-adjusted basis.

OpEx per day was $3.18 million in 4Q '21, approximately $145,000 per day above 4Q '19 levels due to a combination of higher cost of goods on materially higher nongaming revenue along with special event costs, including the Kafka, DeChambeau [ph], Golf match, among others. We remain committed to maintaining a cost structure that appropriately balances margin and our exacting service standards in Las Vegas.

In Boston, we generated another record quarter with adjusted property EBITDA of $68.2 million in 4Q '21, with an EBITDA margin of 33.4%. We saw broad-based strength across the casino combined with solid hotel performance, which was aided by a favorable calendar set up during the quarter.

As Craig noted, regarding in Las Vegas and consistent with some of our regional peers, Omicron along with bad weather temporarily disrupted our performance at EVH in January. Encouragingly, we have already seen signs of improvement in the business as case counts have decreased across the region.

At EVH, we remained very disciplined on the cost side with OpEx per day of $1 million in 4Q '21, excluding a $2 million nonrecurring accrual reversal. This was a decrease of over 20% compared to $1.3 million per day in 4Q '19 and a modest increase relative to $950,000 per day in 3Q '21, with the sequential increase driven by improved business volumes and increased operating hours, most notably from the hotel opening of full seven days per week beginning on September 1.

Looking ahead, we expect OpEx to increase modestly due to higher payroll, stemming from onetime contractual labor agreements coming into effect in 2022, which will add around $45,000 per day to our OpEx base. We are well positioned to drive strong operating leverage as we continue to grow top line over time in Boston.

Our Macau operations delivered an EBITDA loss of $25.9 million in the quarter on $325.7 million of operating revenue. Our EBITDA included a onetime bad debt provision that negatively impacted EBITDA by $24 million during the quarter. So we would have been essentially breakeven adjusting for that. While business in 4Q was challenging due to the evolving COVID situation, we remain disciplined on costs.

Our OpEx, excluding gaming taxes and the onetime provision I noted, was approximately $2.2 million per day in the fourth quarter, essentially unchanged sequentially. We continue to be well positioned to drive strong operating leverage in Macau as our businesses recover.

Turning to Wynn Interactive. In 4Q, the business generated approximately $785 million in total turnover, a 20% sequential increase relative to 3Q. Top line growth, combined with decreases in marketing spend and other OpEx, drove an improvement in our EBITDA burn rate to $79 million in 4Q '21 versus $104 million in 3Q '21. Since quarter end, we've continued to thoughtfully grow the business with launches in New York and Louisiana, and the initial reception from our customers has been very encouraging.

Turning to the balance sheet. Our liquidity position remains very strong, with global cash and revolver availability of $3.6 billion as of 12/31. In Macau, we had approximately $1.7 billion of available liquidity as of 12/31 In the U.S., we had total available liquidity of approximately $1.9 billion at 12/31. Finally, our CapEx in the quarter was $78 million, and we remain prudent with respect to CapEx while we gain further confidence in the recovery.

With that, Michelle, we will now open the call to Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Carlos Santarelli from Deutsche Bank. You may go ahead, sir.

Carlo Santarelli

Thanks Craig and thanks Vince for all the color. Guys, if I could, just Vince, you talked about it a little about with the provision in the quarter in Macau, as you think about some of the new regulations around VIP and kind of around running that business, whether it's the share of handle as opposed to rev share agreements or the single junket model or the heavier reliance on VIP or direct VIP, I should say.

Could you just talk a little bit about your strategy in navigating that, obviously, it will be a little bit more cumbersome from a balance sheet perspective? But how you guys are kind of thinking about that -- the outlook for that business run from a direct platform with some of the new requirements?

Craig Billings

Sure, Carlo. I'll start, and then I'll ask Ian to give you his thoughts as well. As you know, the situation is evolving. The charge that we took in the quarter was frankly due to -- primarily due to historical junket position. So it really doesn't have anything to do with the business going forward. And as Vince mentioned, if you adjusted for that charge, we would have effectively been at breakeven in Macau. But the amended law in general, I think we are quite pleased with the various components of it. And the process, as we've said many times, has been impeccable in terms of administration.

So the market is evolving. The market is moving quickly. We have the best product, the best service in the market. And so it's not surprising that we saw the activity on the direct side of the business over the course of Chinese New Year, we were pleased with it. Some of those were former junket players kind of indicating that there's been movement among the different groups of customers from junket to premium mass and junket to direct.

We have a very, very prudent approach towards deployment of the balance sheet and I expect we will continue to take that approach. And to your last, I guess, to one of the subsets of your points, the use of agents, the use of referring parties, et cetera, that's all kind of happening in real time. So we are exploring all potential options in the market that are consistent with the amended gaming law and we'll figure it out in due course, but it's really too early to say. Ian, do you have any additional thoughts?

Ian Coughlan

Just the disappearance of junket operators is a very recent development. So the only way we can actually judge the impact is pretty much over Chinese New Year when we saw meaningful growth in both premium mass and in our own direct VIP program, and we have seen that migration of former junket players. They have the desire to gamble. They have a desire to come to Macau. We have the best product in the market and the best service. So we feel very confident that we'll capture more than our fair market share.

Craig Billings

And I would just add to that, Carlo, we've said before, I can't remember if it's been on calls or in other forums. By 2019, 80-something percent of our EBITDA was from sources other than VIP. So we started our journey of diversification really with the opening of Palace in 2016, and we have become very, very capable marketers over the course of the past five years. So I kind of look at Macau, and I see an amazing setup where investor expectations are pretty low. And we have the opportunity to kind of chart our own destiny. And frankly, that's what this company has done for years and years and years, particularly here in Las Vegas.

So we're excited about a market that is higher margin premium mass and customers that may be traveling to Macau for motivations other than just purely gaming.

Carlo Santarelli

Great. Thank you Craig and thanks Ian. Just one follow-up as it pertains to the master lease for Encore Boston Harbor. First of all, Craig, is there any breakage on the 17%? And secondly, I see that the escalator is 1.75%. Are there any coverage ratios that trigger that one way or another?

Craig Billings

Well, let me start, and then I'm going to ask Vince to give you some details. We've been pretty explicit about our views on sale leasebacks. And I think this one is unique because the lease, which you'll see attached to the 8-K and you can tear it apart yourself, is incredibly unique. It's very, very flexible and very friendly to us as the OpCo. And that was incredibly important to us.

Because, as I said in my prepared remarks, I never want to choose between the landlord and our people. Our people are our service levels and our service levels are our brand. So you're going to find a whole bunch of unique things in that lease that I think many of them probably precedent setting. But to your specific questions, I'll ask Vince to chime in.

Vincent Zahn

And Carlo, do you mean debt breakage costs?

Carlo Santarelli

Yes. I'm sorry. I was more referring to kind of the way that Craig articulated the $600 million plus of breakage costs related to the debt in Las Vegas. Is there any leakage associated with the $1.7 billion cash proceeds of this transaction?

Vincent Zahn

No, there isn't. It doesn't trigger any of those provisions that would cause the breakage and call us and force us to call the debt. So the answer is no to that. Total transaction costs should be somewhere in the $50 million range. So net proceeds will be $1.65 billion.

As far as it relates to the escalator, there are no coverage provisions on the escalator. It's 1.75% for the first 10 years. Then after at least year 11 and beyond, it's the greater of CPI or 1.75%, and that's capped at 2.5%. And you can go look at some of the lease comps, particularly in Las Vegas and see how favorably that package compares. There are no minimum CapEx requirements, which was very important to us. So those are kind of some of the high-level details of the lease, Carlo.

Carlo Santarelli

Great. Thank you very much, guys.

Operator

Our next caller is Joe Greff with JPMorgan. You may go ahead.

Joe Greff

Good afternoon guys. Craig, Vince, how are you thinking about utilizing the, I guess, the $1.65 billion of net proceeds coming in from the sale of EBH?

Craig Billings

Sure. It's important. I want to remind you, it doesn't close until the end of the year. So we'll be in a different position at the end of the year vis-a-vis Macau. Our hope is that Vegas and Boston continue to hum along. So with that caveat, a sale-leaseback really isn't any different than raising debt in the bond market.

So if we were raising debt in the bond markets at this rate today, we would think about it is how do we grow our business? And are there more expensive or more restrictive pieces of debt that we should be taking out?

So we'll see how things evolve over the course of the year, but that's how we think about it today. We've got a room remodel in Vegas. We've got a show in Vegas. We've got an expansion in and around on Encore Boston Harbor, and we have a really exciting project in the UAE that is kind of almost shovel ready.

So across all of those, there's a whole bunch of great things we can do to drive incremental EBITDA. And then there are some expensive pieces of debt, including the bonds that we did when we, I think, reopened the high-yield market in the midst of COVID that would prove beneficial to shareholders as well.

Joe Greff

Great. And then maybe can you comment on how you're thinking of potentially monetizing went interactive. Obviously, there was a press report where you guys are potentially looking to monetize that through a sale. Can you talk about the ways you're thinking of that business and how it can drive net equity value for you all Wynn in a very broad way for you?

Craig Billings

Yes, sure. So first, we don't comment on market rumors or random press reports. We've been pretty -- we were pretty explicit on the third quarter call about not engaging in the unsustainable user acquisition blitz that has emerged, no pun intended this NFL season and that we would take a more measured approach.

The I-gaming business, where we have actually seen pretty reasonable success, there's a logical place for us in that business longer term. Unfortunately, it's not a humongous TAM right now. Sports betting is the total addressable market and sports betting is where most of the irrational behavior is taking place. So we will generate shareholder value from that business. I think the way we think about it is we're going to be really focused on the user acquisition flip side. We're going to be focused on the product side, and we're going to see how the end markets really behave over the course of the next several quarters, and then we'll figure it out accordingly.

Joe Greff

Great. And then one final thing, Craig, you talked about the additional investments in Las Vegas and potentially a EBH. Can you talk about what's committed in terms of CapEx for 2022?

Vincent Zahn

Yes, sure. I'll take that, Joe. So in Vegas, we're pretty much back to regular maintenance levels of $75 million to $85 million per year in Vegas. Beyond core maintenance, Craig noted that we are reconstructing the rev data putting a new show in place. That has a budget of $120 million, of which about $30 million spent through 12/31. The rest against -- the remainder will get spent ratably in 2022.

We're renovating the Wynn Las Vegas tower rooms with a total budget of $220 million, of which $120 million has been spent. Same thing there. The balance will be spent over the remainder of 2022. In Boston, the property is essentially new. So maintenance will only be in the $20 million range there, mostly repositioning of nongaming amenities at that property.

We could have some modest CapEx towards the end of the year for the Easter Broadway expansion that Craig noted. The budget there is going to be somewhere in the $200 million to $250 million range, and that will basically be spent under a normal CapEx S-curve over '23 and '24. And in Macau, we're still being very judicious with CapEx until the return of stronger demand levels there. So core maintenance is expected to total $60 million to $80 million for 2022 on a property combined basis.

Craig Billings

And Joe, just one other point on the Boston CapEx. One of the unique aspects of the lease that we entered into is the ability to put some additional rents into the lease really upon completion of that expansion at a specified cap rate, which will in turn allow us to more than get our money back.

Joe Greff

Great. Thank you guys.

Operator

Our next caller is Thomas Allen with Morgan Stanley. You may go ahead sir.

Thomas Allen

Thanks for taking me. Just on the Macau, prior to COVID hitting you were running at 99% occupancy, for your rooms, I think, running at over 90% comps. Can you just talk to us how you're thinking about that on a go-forward basis?

Craig Billings

Sure. I'll start, and then I'll ask Ian to provide some thoughts as well. I mean the market is -- I think the fundamental question that you have to ask yourself is over the course of the next five years, 10 years, will a leisure business emerge in Macau? And if so, does that mean that you have a yielding mechanism like we do in Vegas to yield cash rims. I don't think we are close to that yet. I think we would assume that we're going to continue to be a comp room business. We don't have a ton of rooms relative to some others in the market. So we have a lot of opportunity to yield those rooms. Ian, do you have any additional thoughts?

Ian Coughlan

What we've seen in the periods when we've actually been reasonably open to Chinese consumers when they've been able to travel, is there is huge pent-up demand at all levels of the business. And there's cash business out there as well. There's family travel that's increased. We're also seeing an increase in millennial travel. And we're seeing new customers come to Macau. We've seen that again over Chinese New Year. So during the week when we have rooms available at times, there is cash business and rich cash business from affluential customers come. So we feel that we can fill rooms when they're available.

Thomas Allen

Alright, thank you. And then just on the UAE project. I mean you guys know this is kind of the first of its kind where you're being hired for kind of management expertise and development expertise. Do you think there's a lot of other opportunities? How are you thinking about that?

Craig Billings

Yes, it's a great question, Thomas. As we think about logical adjacencies for our business, we think about everything under the sun. We're constantly thinking about ways to increase shareholder value. I think it is a pivotal moment. Can it be replicated? We'll see. But it's an important moment where we're entering into really a 4-season style management deal for the creation of an integrated resort. Is that extendable to smaller properties in gateway cities? It may be. That's something that we'll explore.

Thomas Allen

Thank you.

Operator

Our next caller is Stephen Grambling with Goldman Sachs. You may go ahead sir.

Stephen Grambling

Hi, thanks. Maybe as a follow-up to that. I guess, how are you generally thinking about underwriting the ROIC in a market like the UAE as you think about the structure of this transaction or potential structure? And can you give any kind of color on what you foresee from a customer standpoint and looking at your global database, maybe what spending patterns have emerged in that market?

Craig Billings

Sure. I'll start with the latter and then move to the former. So think about it this way. When we open that property, 95% of the world's population will be within an 8-hour flight of a Wynn resource property. I don't think anybody else can say that. So this is not only opportunity to leverage our pre-existing database, but it's an opportunity to grow database. The Dubai Airport has some 80-plus million passengers passing through it every year. I mean, it's astounding.

The UAE is already a substantial destination for not only the region but for Europe, for Brits, for Germans, for really folks from all over the place. So this is a significant customer acquisition opportunity and a really material extension of our brand.

In terms of how do we underwrite it, -- it's a $2 billion project. My presumption is that it will be 50% debt, 50% equity, of which we will be 25% to 40%. And then obviously, we have the management contract sitting on top of it. The land is astounding, beautiful and like I said before, nearly shovel-ready. So execution risk from a construction perspective, as we see it, is pretty low.

Stephen Grambling

That's helpful. And I know you don't like to give a lot of guidance, but maybe looking to Las Vegas and looking at the fourth quarter to EBITDA run rate. I guess what are some of the biggest puts and takes to think about in the year ahead across either various customer cohorts or spending categories that could influence both margins and ultimately EBITDA from here?

Craig Billings

Sure. I'll start, and then I'll ask Brian to provide you with his thoughts. Yes, Q4 was definitely a range. It was impressive. The team did really an incredible job. If you look back over the course of '21, we saw pretty substantial leisure and gaming demand. I think that's consistent across the market, although I would say we have continued to distinguish ourselves from a service and quality perspective. And -- but there are also a lot of customer types that weren't around, right? International play wasn't around. Group and convention was quite spotty and very concentrated into a couple of periods, one of which was, in fact, the fourth quarter. So that obviously helped the fourth quarter.

January, if you look forward, January was, as we noted, soft because of Omicron. We're already seeing the demand snap back from that. Brian, do you want to comment on kind of the structure of that demand or any additional thoughts you might have.

Brian Gullbrants

Sure Craig, thanks. I think overall our booking pace is back to pre-pandemic 2019 levels now. And we have a built-in rate premium that's also sustainable as we see it. And on the group side, the group lead volume is now actually exceeding 2019 levels. So I think people want to meet again and we're very bullish on the future. Things are pacing ahead and we're looking really solid.

Stephen Grambling

That's all super helpful. Look forward to seeing the continuing perhaps resuming Macau.

Operator

Our next question comes from David Katz with Jefferies. You may go ahead sir.

David Katz

Apologies. Thanks for including me. I wanted to just ask about the thought process around deciding to sell the real estate in Boston. Obviously, the terms that you've achieved are compelling. But in the context of other opportunities there may have been to divest assets such as excess land on the strip, et cetera. How did you sort of think about that choice versus maybe some others and the land being one example, maybe there are others that we could discuss?

Craig Billings

Sure. I guess, first, I would say there's really two factors that come into play. The first is cost of capital, which is an important consideration, but not the only one. The second is the operational structure of the asset and how conducive it is to operating with lease. And so in Boston, in the transaction in Boston, we were able to achieve both an attractive cost of capital, and that asset is based on the stability of revenues in the regional markets. And the much lighter CapEx burden relative to say Las Vegas made it a logical financing source for us, which is really what it was.

We weren't in the market just to raise cash, right? This was a cost of capital question first and foremost. So we're not going to be in the market with land or any other ancillary assets around the property -- in the properties anytime soon.

David Katz

Understood. And just for our own information. Since you talked about the buildings in Las Vegas in your prepared remarks, do the golf course or the other excess land across the street would they have considerable leakage as well? Or had you not looked into that at this point?

Craig Billings

Well, I'm not -- I know we know every no can potential source of leakage, but we're not interested in selling land. We have a 20-year view -- 20-plus year view when we think about Las Vegas. We love our portfolio here. And all of that land has real long-term value to shareholders. So it's not even worth talking about, David.

David Katz

Okay, fair enough. Thank you very much.

Operator

Our next caller is Dan Politzer from Wells Fargo.

Dan Politzer

Hey good afternoon guys and thanks for taking my question. So in Vegas, the OpEx per day for the quarter, I believe you said was $3.18 million, which is a little bit higher than the third quarter. How should we think about this kind of evolving over time given the changes in mix that probably occurs over the next year or two?

Craig Billings

Let me start, and then I'll ask Vince to provide some of the details. So Vegas, we are down from an FTE perspective. We talked earlier in 2021 about our commitment to enact certain permanent cost saves really in how we run and manage the business day to day. So we've been very disciplined on head count, and we've been -- we stayed true to our prior commitments.

Q4, we had some incremental cost of goods. You can see it in the revenue numbers. It kind of goes part and parcel with the revenue numbers that you saw. And then we had some onetime costs really around special events that we had in the quarter, New Year's and some other events that impacted costs during the period. So we're not prepared to guide you to a specific margin or specific OpEx per day at this point. What I would say is at any given revenue level, we will be running margins higher than we did in 2019. Vince, do you have anything you want to add to that?

Vincent Zahn

Yes. The only thing I would add is just to kind of pay attention to the seasonality, right? As we add seasonal amenities in 2Q into 3Q, there's some seasonality to OpEx that obviously comes with additional revenue streams. Apart from that, I think Craig covered it really well.

Dan Politzer

Got it. Just moving to Macau. How do you think about shift of your customer base from VIP into the premium mass or direct VIP product? Is there a certain percentage that you look or think is a reasonable level to recapture? And how is it working in terms of the margin dynamics? Is it like you capture half -- help the customers at 2x margin, so you end up being kind of on the same level? Or how do you think about those moving pieces in terms of the margin mix and revenues?

Craig Billings

Well, I guess, first of all, when you think about the customer motivation and demand a gaming customer in Macau is a gaming customer, gaming customer. It's really just a question of how they're choosing to play, whether they're playing with role or they're playing with cash. We have the best kit in the market. We have the best service in the market. So we like our odds longer term in Macau.

As I mentioned earlier, we started a journey of becoming very adept to mass marketers with the opening of Palace in '16. By the time we got to '19, more than 80% of our EBITDA was derived from sources other than VIP. So we already have what it takes to be competitive with respect to the mass market. And obviously, VIP direct. Ian, would you add anything to that?

Ian Coughlan

You're completely right, Craig.

Dan Politzer

All right. Thanks so much guys. Appreciate the color.

Brian Gullbrants

Michelle, we’re going to take one final question.

Operator

And our final question comes from John DeCree from CBRE.

John DeCree

Hey guys, thanks for taking my question. Maybe to stick with Macau. I think in the prepared remarks, you've mentioned that you're still being prudent on capital spend until demand returns. When demand returns, is there anything earmarked for repositioning or any CapEx that you have planned, given it's going to be 18 months to two years since you saw real demand there? Is there anything you're thinking about in Macau?

Craig Billings

Yes. We're always thinking about something. That's kind of who we are. So we have a number of things that we're looking at really in response to the evolution of the market across food and beverage, across the adjacent land. I guess the best I could say at this point is stay tuned.

John DeCree

Fair enough. Thanks Craig. And maybe one more kind of further-looking question, plenty on plate right now, but other potential projects that you're looking at in a meaningful way? And I guess I ask in the context with New York picking up some momentum, a pretty large opportunity there. Is that something that would be on your radar or any other maybe larger capital-intensive projects that you'd give a good look at?

Craig Billings

Yes. We're interested in a number of jurisdictions. If it's a gateway city, if it's a limited number of licenses, if it has reasonable tax rates and reasonable regulations, we are interested in it. So everything is -- you follow New York carefully, everything is too early to really provide any concrete guidance at this point. But we're active in New York, we're active anywhere there's a material opportunity to deploy capital.

John DeCree

Thanks Craig, that’s helpful. Appreciate all the color today.

Craig Billings

All right, everybody. Thank you for joining us today. We look forward to talking to you next quarter. Have a great day.

Operator

And thank you. This concludes today's conference call. You may go ahead and disconnect at this time.