IAG September 2015 - page 7

September2015
inside
asiangaming
7
Thethingthat
hasalwayssetSandsChinaapart fromthecompetition
is the unshakeable belief of its chairman, backed at the risk of his
company’sbillions, thatMacaucould, andwouldoneday,beabouta lot
more thanhigh-limit baccaratpits thickwithcigarettesmoke.
With the crash of the VIPmarket that once propelled the city’s
casinos toaggregategaming revenuesseven times thesizeof theLas
Vegas Strip’s, it appears that day has arrived.
As SheldonAdelson phrased it in his inimitable style during Las
Vegas Sands’ second-quarter earnings call—“Now, everybody is
cuttingoff their arms toget intoCotai.”
Cotai … More than US$20 billion is being poured into the
reclaimed marsh a short drive by bridge from Macau’s southern
tip to create an enclave of super-resorts, each of them in their way
designed to replicate the success of the tourist-oriented business
model Mr Adelson pioneered almost a decade ago at The Venetian
Macao. Until they open, The Venetian is likely to remain the most
visitedand themost lucrativecasinohotel in thecity,withmore retail
shops, more conventions andmeetings space, more entertainment
andsportingevents,moreoperatingprofitonmore revenue, thanany
single rival. Evenwhen they do open, none will be able to approach
the scale of the $9 billion or soMr Adelson has invested inCotai to
date,most of it under the auspices of Sands China, theHong Kong-
listed subsidiary 70% owned by Las Vegas Sands, founded in 2009
to manage and grow the company’s expanding portfolio of Macau
assets. Thatportfolio todayencompasses45%of thecity’s total hotel
inventory andmore thanhalf of the gaming industry’s—some 9,300
rooms and suites in all, housed in four resort complexes supported
by 1.5million square feet of shopping, 2million square feet ofMICE
space, the city’s largest multi-purpose arena, dozens of restaurants
and leisureand family-styleattractionsandfivecasinos totalingmore
than 1,500 live tablegamesandmore than3,900machinegamesand
electronic tablegamepositions. Combined, theseoperationsemploy
more than 24,000 people full-time. Through the first six months of
this year, they generated$901million in cash.
Given the sheer breadth of the business, Sands China’s EBITDA
lead over the rest of themarket, calculated by the company through
thefirstquarter at a34%shareona trailing 12-month’ basis,maywell
beunassailable.
At the same time, thedownturn themarket is suffering through—
principallytheresultofaweakeningChineseeconomyandanationwide
crackdown by the ruling Communist Party on corruption and capital
SheldonAdelson
ChairmanandChiefExecutiveOfficer
LasVegas Sands
ChairmanandChiefExecutiveOfficer
SandsChina
flight—isof a scale that noneof the six gaming concessionshasbeen
untouchedby it. SandsChina isweathering it thebest todate, though,
thanks to the breadth and diversity of the offering. It’s far less reliant
ongaming,whichaccounts foronly85%of total revenues, far less than
itscompetitors.VIPaccounts foronlyone-quarterof its table inventory
andcontributesamere 12%or so togaming revenue. Itsmass-market
tablesareweighted toward the lowerendof thespectrum,what it terms
“base”mass,ataratioofalmost3:1overhigher-limit“premium”mass.
SandsChina’s resiliency relative to themarket was clearly apparent in
the six months ended in June, when the company was able to hold
up a net revenue decline of 30.7% year on year against themarket’s
minus-37%. Room revenuewasdownonly6.6%onanoccupancy rate
that beat the citywide average by 500 basis points. Itsmarket-leading
retail sector, which runs at an85%profitmargin, continued to expand
andactually grew revenue in thefirst half andby a robust 22.6%.
Then, of course, there isMarina Bay Sands in Singapore, whose
trio of curved 55-story hotel towers stand as the city-state’s most
recognizable landmark. An outdoor park stretches the length of
the summit and features a 150-meter infinity pool. Below are 2,600
rooms and suites, 160,000 square feet of gaming, 1.2million square
feet of conventions and meeting space, two theaters, a trademark
array of restaurants and a full one-third of LVS’s 1.92million square
feet of Asia retail, secondonly toTheVenetianMacao.
Singapore andMacau account for a combined90%of LasVegas
Sands’ EBITDA andmore than 85%of revenues, the cornerstones of
the largestmultinational resort gamingoperation in theworld.
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