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Thank you for holding, and welcome to the Galaxy Entertainment Group's management update for the second quarter and half year results of 2023. Joining us today are Mr. Ted Chan, Chief Financial Officer; Mr. Roland To, Senior Director of Strategic Planning; and Mr. Peter Caveny, Assistant Senior Vice President of Investor Relations. [Operator Instructions] This conference is being recorded.
I would now like to pass to Mr. Chan for presentation. Mr. Chan, please go ahead. Thank you.
Thank you, operator. Welcome, everyone, and thank you for joining us for the update call on GEG's Q2 2023 results. Joining me here on today's call is Roland To and Peter Caveny. Copies of our media release, stock exchange announcement and PowerPoint presentation are available on our website, which also include our customary disclaimers.
Macau has experienced a rapid rebound following the relaxation of travel restrictions in early January this year. We are pleased to see continuing growth in Q2 in gaming revenue, effectively full hotel occupancy even after increase in hotel room count. Retail remains solid, and food and beverage remains strong.
Q2 2023, GEG reported EBITDA of $2.5 billion versus $384 million EBITDA loss in Q2 '22 and $1.91 billion in Q1 '23. It's more or less better in Q2, increased our EBITDA by $4 million. Our flagship property, Galaxy Macau's mass gaming revenue, was close to 2019's level. Moreover, retail mall rents exceeded 2019's level by 36%, and hotel revenue reached 87%.
We are pleased that our Board approved a special dividend of $0.20 per share payable in October this year. Our special dividend certainly demonstrate our continued confidence in the Macau market and GEG's future performance as well as our commitment to return capital to shareholders.
We're already halfway through Q3. Let me give you some colors on the outlook. Indeed, we continue to see encouraging business performance. Quarter-to-date, the continued recovery has been verified by the performance during summer holidays. Group-wise, our mass gaming revenue has fully recovered to 2019's level, driven by Galaxy Macau's performance. Daily drop and win were greatly higher than Q2 and tracking around 120% of 2019's level.
Post the trial opening of Raffles at Galaxy Macau and the new Horizon Premium Club open, we have seen a meaningful improvement in Q3. August month-to-date, we have seen further market share gains. Our hotels are effectively fully built for the busy summer period. And in September, we will add even more hotel rooms capacity with the opening of Andaz Macau.
We have also run a number of very successful events and concerts at the GICC and Galaxy Arena, and we have signed a number of multiyear agreements with well-established entertainment companies who will help to support our event programming.
We continue to work at managing our cost structure. Staff costs represent around 80% of our OpEx. As at end of Q2, we have 18,000 staff, which was approximately 82% of 2019's level. We are on track to deliver our headcount statements even with the resort expansion after the full opening of Phase 3.
As you can see, we remain highly confident about the future of Macau as we continue to invest literally billions of dollars into our business. In fact, we invest approximately $3.3 billion during the first half this year. Our Cotai development activities, along with the existing property initiatives, also demonstrated our support of Macau by continuing to invest in the economy, creating jobs and supporting local SMBs as well as a long-term commitment to help Macau achieve its vision of becoming a World Centre for Tourism and Leisure.
We are recruiting and training additional staff in preparation for the opening of Andaz Macau next month. We are now fully focused on the development of Cotai Phase 4, which is already well underway. Phase 4 will include 6 high-end hotel brands new to Macau, together with a 4,000-seat theater, extensive F&B, retail and non-gaming amenities. On completion, our total Macau hotel room capacity will be around 7,500 rooms and suites.
We believe that with many additional facilities that we have added and will continue to add in the future will position us strongly for the longer-term growth. Additionally, we're in the process of opening our first overseas business development office in Tokyo, to be followed up by offices in Bangkok and Seoul in order for us to tap into international tourist market and opportunities.
Last but not the least, on the balance sheet, cash and liquid investments were $24.4 billion at the end of June, and we are in the net cash position of $22 billion.
That concludes my prepared remarks. Operator, please begin the Q&A session.
[Operator Instructions] We will now take our first question from D. S. Kim from JPMorgan.
First, can I double check? Earlier, you mentioned about 120% of 2019 level quarter-to-date. Were you referring to mass drop or mass win? I missed that part. And then I have a few follow-ups.
D. S., thank you. That refers to both win and drop.
Wow, that's very nice.
Yes, on a consolidated basis.
Oh, wow. So consolidated, meaning even including StarWorld, Broadway and everything, 120%, that's pretty impressive.
On a group-wide basis, that would be considered high.
Group-wide, okay.
But StarWorld is still ramping up to somewhere around 80% in Q3 versus 67% in Q2. So still a very decent improvement in Q3.
Congrats on the impressive performance. I actually have a few housekeeping questions, especially on OpEx, operating expense momentum this quarter. I think, if I'm not mistaken, Galaxy Macau OpEx went up about 20-something percent quarter-over-quarter and now running at about 90% of pre-COVID. And my 2 quick question here is, a, does this increase in 2Q has anything to do with Raffles' soft opening so far? Or everything Phase 3-related, both Raffles and potentially Andaz are [ parked ] 100% at preopening? So just wanted to try to understand the delta here in 2Q specifically.
And b, how should we think about the run rate from here into 3 and fourth quarter when Phase 3 would be more released, especially Andaz? Is it going to be like 5% increase in OpEx? Or is it going to be more like 10%, 15% meaningful bump from the current run rate?
Sure, D. S. I think your number of 20% Q-on-Q is actually inclusive of -- on the group level as well. So if we just look at property level, the OpEx actually increased by 9%. And the increase in other costs really related to some of the PR and marketing costs in Q2. Related to the OpEx increase, that's partly because of the hiring in Q2 that we are fully capacity opened in Q2. So that will be some increase in staff cost.
And in terms of the run rate and the OpEx, we're currently somewhere around 80% to 85% of 2019's level. As you noted in my remarks -- opening remarks, we are going to open Andaz and the other [ cost ]. So the opening costs will become operating costs going forward. So we're still quite positive in terms of the headcount savings as opposed to 2019. But as you know, the [ REMA ] cost as well as the other costs will increase. So -- but net-net, I think we are still on the confident level of managing somewhere below 2019's OpEx level. I hope that answered your question.
It did. If I may check, finally, if that's okay, final follow-up is, can you kindly explain a bit about what happened to retail income? I think it's very solid, 40% higher than pre-COVID level. But just as all the investors wanted to get a little more detail, sequentially, it seems to be declining about 10% at GM. So was there any one-off or nonrecurring component either last quarter or this quarter? I just wanted to double check, and I'll go back into the queue.
Sure, no problem. Perhaps some of you might know that our contract with the tenants are more tied on a monthly basis in turnover basis that translate into sales versus the other operator, perhaps looking on more a longer-term translation into the rent income. So I believe our number really reflects what's happening in the market more accurately in terms of the sales volume.
Our Q2 quarter-to-quarter drop around 10% really has resulted from a really outperforming Q1 result as a result of a couple of very, very large purchase in the jewelries and high-end products in the mall, which is quite good and [ when it's in Q1 ]. Back in Q3, I see the number has actually normalized to a very decent level compared to Q2 as well at the moment.
We will now move to our next question from Angus Chan from UBS.
So Ted, so you mentioned about 120% mass win and drop. Can we expect your EBITDA to be back to '19 and above in August? That's the first question.
And then secondly, on the mass hold rates, it seems like there's a -- in general, we have lower mass hold this year versus last year and also versus 2019. Is there anything that you can point to, to explain that lower mass hold situation?
And thirdly, I guess just the timing of Phase 4, what's the latest thinking of completion opening?
Sure, Angus. I think with an improvement in terms of drop of win, EBITDA definitely improved. We are looking at a decent level. We are not checking whether that will be over 2019's level, but we are thinking about a very positive way moving forward.
In terms of the hold percentage, I think we are still in the range of acceptable level, if you may, in terms of Galaxy Macau. And in StarWorld, we see some improvement actually in Q3 as well moving forward to higher numbers. That may attribute to some of the behavior of customers in the market, but I do see some improvement also in Q3. When you look at the length of stay of customer, the stay in the device of a customer as well as the average bet is actually moving on to a more favorable position in Q3.
And in terms of the opening of [ Phase 4 ], we're trying very hard. We are looking at this quarter to top up all the tower that we have in Phase 4. And the original plan was actually in 2027 opening. Given the markets are quite promising, we hope that we can actually push forward a bit, but we're trying very hard to do so.
[Operator Instructions] Our next question comes from Simon Cheung from Goldman Sachs.
I also have a couple of questions. Just the first one, we have seen Japan, Korea opening up the group tour visa and that the traffic to other countries seemingly has started to pick up. And obviously, the market is well concerned about the divergence potential into these other markets. We understand Macau has changed in terms of how they -- what type of a customer they have accepted. Perhaps you can share with us your thought on that front. And that's the first question.
And then the second question is in relation to actually more on the grind mass. We can see how strongly your property performed, back to 100%, actually even better than some of the other so-called premium mass-centric properties. But I think one of the reason part that we've been waiting for has been grind mass. Can you share with us how -- what you're observing on the grind mass? Basically, having seen the summer season, we have seen very strong headcount, but on the GGR translation, how do we see that?
And then the last thing, I think you touched on EBITDA as well, just on StarWorld. I remember last quarter, you mentioned that you wanted to drive the profitability. And we also see in other pop-up operator like MGM and, I think, Wynn also done some renovation work over there in Peninsula, how are you thinking about Peninsula in the longer run? And what sort of things are you doing on the StarWorld?
Great. Simon, so let's go to the travel. I understand there's some concern in terms of competition of customers from other countries in Asia after the visa opening for the traveling. As much as I can, but I do not really see anything happen impacting in Macau at this very moment. We see very strong visitation numbers, particularly in summertime. And also, we also look at our booking pace, currently in the summer period, fully booked; and stepping into September, also very high, very strong. So unfortunately, I don't have any insight in terms of changes, but it looks like the impact in Macau is really minimum at this stage.
In terms of grind mass, you're absolutely right, the GGR was actually a positive impact by premium mass and driven by premium mass at these 2 quarters. And our base mark and our premium mass already in terms of unique customer base, in terms of this number, it's already up to almost 100% of the 2019 level. Grind mass currently was about 63% of the pre-pandemic number. And if you look at this number, it's quite correlated with the inbound visitations, around 60% to 70%. So we are seeing some improvement, but basically, it's roughly correlated with the inbound visitation number at the moment. Peninsula. I always believe that Peninsula is quite different in -- for -- as a product and also customer behavior to Cotai. And I think StarWorld is quite lucky in [ fitting ] that position close to the cluster of the gaming areas next to our very prominent neighbors. And you see the performance from Q1 to Q2, even though with a roughly GGR improvement of around 30%, the EBITDA actually increased almost like over 70%. And our EBITDA margins actually increased from high teens to 25% in Q2.
The early direction I can see, StarWorld is only north, not south. And so with the -- some of the initiatives we put together, we believe that the property will be yielding up going forward. This is a very good example of operating leverage and flow-through in StarWorld. I hope that I responded to all your questions.
That's very clear. Can I just double check with you, on that grind mass number that you gave, 63%, were you referring to the second quarter number? Because obviously, visitation, I think in the last month or so, actually, have been hovering more like 80%, 90%. Are you seeing that the grind mass also back to 80%, 90%, for example, in the recent weeks?
No, I referred to inbound visitations overall to 67%, and we see our grind mass number is also reflecting similar to that number, 60% to 70%. In fact, accurately, by the end of Q2, it's actually 63%.
And there are currently no more questions in the queue.
Thank you, everyone, and see you next time.
This is the end of GEG's conference call. Thank you for joining us today. You may now disconnect.