IAG September 2015 - page 8

“At the heart of our company’s success is having the right
strategy,” Mr Adelson explained on the earnings call. “We have
the courage of our convictions to build early and aggressively. We
developed critical mass to scale and diversification, and we offer
productsandamenities that arebest-positioned tocapture long-term
tourism and consumptiongrowth inAsia.”
And the building continues. A fourth hotel is slated to open at
Sands Cotai Central at the end of this year, a $380million St. Regis,
whose 400 roomswill bring the total at the resort complex to 6,123.
Next year will see the debut of the $2.7 billion, 3,000-room Parisian
Macao, whichwill crownMr Adelson’sCotaimaster planwith ahalf-
scale replicaof theEiffel Tower.
VeteranhotelierMichael Leven, a trustedadvisorwhoserved four
years as president and chief operating officer of LVS, has described
MrAdelsonas the“penultimateentrepreneur, incredibly creativeand
wide-thinking, and incrediblyoptimistic,which iswhat youhave tobe
tobe a successful entrepreneur.”
Personally and through family interests he controls 54% of Las
Vegas Sands’ stock, which has enabled him to amass one of the
world’s great fortunes. He is ranked 13th on the
2015 list of
wealthiest Americans, No. 18 in the world, with a net worth valued
at $26.3 billion. It is, moreover, one of the few great fortunes that
can truly be described as self-made. He has founded more than
50 companies in his 82 years, the first a Boston newspaper stand
he started when he was 12 with $200 borrowed from an uncle. He
has run vending machines, sold advertising, developed condos
and sponsored trade shows. In 1990, he built the Sands Expo and
ConventionCenter in Las Vegas, the first privately funded exhibition
facility in theU.S., tohouseCOMDEX, the computer trade show that
was the largest event of its kind when he sold it in 1995 for $862
million. The sale provided the seedmoney for his entry into gaming
with The Venetian Resort Hotel Casino on the Las Vegas Strip, the
first convention-centered casino in the country.
CreditSuissegamingand leisureanalyst Joel Simkins remembers
rating The Venetian’s bonds back in 1998 as a junior analyst at
Moody’s. “They were telling us, ‘We’re going to get $125 midweek
from the conventioneers.’ People laughed. But the guy has had a
tremendousability forunlockingopportunities ingaming thatnoone
visualized. …Honestly, you canput himup therewith any of the big
dreamers we’ve had—SamWalton, Ray Kroc—the individuals who
thought theunthinkable.”
AsMr Adelson himself once explained it, “It wasn’t what I saw,
it was what I experienced. I was Las Vegas’ biggest convention
customer withCOMDEX. And I had a couple other shows. This was
my profession for a long time. So I saw it from a different viewpoint.
People thought, theoperators thought, that thepurposeof LasVegas
was gambling. And I said tomyself, ‘Thepurposeof LasVegas is the
fungibility ofmoney.’”
Hehasbeen certain from thebeginning that the sameholds true
for Macau, and so far he’s been right. Should the opportunity arise
he’ll look todo the same inTokyo, inSeoul, possibly inHoChiMinh
City. He has set his investment parameters high. New project costs
are tobe fundedwithno less than25-35%equity.Hedoesn’tmove in
without a reasonable expectationof aminimum 20% return.
Interestingly, he intimated some weeks back that he’s “feeling
vibrations” that just such anopportunity is about toopenup. And if
it does, he said, “There isn’t anyonewhodoesn’t think [LVS] is in the
As theoperator
with thebiggest shareof theMacauVIPbaccarat
market, Galaxy Entertainment Group continues to be hit hard by the
year-and-a-half-long slide in the city’s high-roller business, kicked
off by Beijing’s crackdown on corruption and illicit fund flows and
worsenedby theweakeningChinese economy.
GEG’s gaming revenue, which accounted for 92% of its total
revenue, fell 35.7% year on year in the first half of 2015 to HK$23.4
billion ($3 billion), roughly in line with the citywide 37% contraction
ingaming revenueduring theperiod.
The first half results reflect only 35 days of operation of the $3
billion expansion of the company’s flagship Galaxy Macau resort,
unveiledon 27thMay.
Galaxy Macau Phase 2 and the Broadway Macau annex
significantlybroadenGalaxy’snon-gamingoffering,primarily through
the addition of a full-fledged shopping mall and broadening of the
available F&B options, extension of the wow-factor Grand Resort
Deck and opening of ESPA as a new destination spa to join Banyan
Tree. It also adds three new hotels to boost the resort’s room count
tomore than 3,800.
Although the expansion unequivocally boosts GEG’s mass-
market and non-gaming appeal, themost noteworthy new elements
are aimed squarely at the higher end of the market. The 254-room
Ritz-Carlton Macau is the chain’s first all-suite hotel, each suite
measuring at least 85 square meters (900 square feet), glistening
with marble and gold. The Ritz-Carlton hotel tower also hosts the
Sky 88gaming areaon its 51st floor, designed tooffer the cachet and
ambienceof leadingVIP rooms topremium-mass players.
Commenting on the expansion, Credit Suisse analysts Kenneth
Fong and Isis Wong warned that: “Despite our full confidence in
management’s solid execution and the product, the current weak
demand, especially high-end demand which Phase 2 focuses on,
may create a challenging backdrop for the new property to ramp
up.” Unless the expanded resort stimulates new demand, Galaxy’s
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