Inside Asian Gaming

21 20 Adelson understands trade shows intimately. In 1979,he launched COMDEX (the Computer Dealers Exposition), with the inaugural event hosted at the MGM Grand in Las Vegas and drawing 157 exhibitors and 4,000 attendees. COMDEX expanded at a rate rivaling the in- crease in computer processing power, and by the mid-90s, the event drew 2,200 exhibitors and 225,000 attendees. Mr. Adelson made COMDEX the world’s largest trade show with a presence in over 20 countries. COMDEX in Las Vegas grew so big that it had to be hosted at multiple venues across the city, but there still was not enough space. With nobody else planning to build new large-scale convention and exhibition facili- ties, Mr. Adelson decided to do it himself. In 1989, he bought the Sands Hotel and Casino for US$128 million, in order to build an ad- joining convention and exhibition center. With construction commenced in Feb- ruary 1990, the Sands Expo and Convention Center was ready by the end of October that same year. The center had 555,000 sq. feet of space at the time of opening.Just as with LVS’ current projects under construction inMacau, many feared it was too ambitious in scale. It was not big enough for COMDEX, however, which filled up not only Sands Expo in the center’s first year of operation, but also all of the exhibition space at the larger Las Vegas Convention Center, Hilton and a couple of other hotels. The success of the Sands Expo and Convention Center led to its expansion to 1.2 million sq. feet. The 715-room Sands Hotel was also ob- viously too small for Mr. Adelson, who had purchased the property at the center of the Las Vegas Strip as a means to fulfill his trade show ambitions rather than for its iconic ap- peal – opened in 1952, in its heyday, Sands Hotel played stage to the country’s top per- formers, including Frank Sinatra and the Rat Pack, and was the preferred lodgings of most US presidents visiting the city. But the jaw-dropping attractions of the new mega- resorts emerging along the Strip proved a greater draw than sentimentality, and Sands Hotel was rendered obsolete. Flush with cash from selling the Interface Group Show Division – owner and organizer of COMDEX – to SoftBank for more than US$860 million in 1995, Mr. Adelson imploded the Sands Hotel in November 1996 to make way for a jaw-dropper of his own. The luxuri- ous US$1.5 billion Venetian Resort Hotel Ca- sino opened in 1999 with an indoor canal replicating the historic Italian city of Venice, complete with serenading gondoliers and pe- rennial blue-skies under a painted ceiling and mimicked natural daylight.TheVenetian along with the Venezia hotel tower extension now has 4,027 suites, and along with Sands Expo currently houses a combined 1.9 million sq. feet of meeting space, with more on the way. Conventions have been key to the success of Vegas,as reflected by the name of the city’s official tourism authority: The Las Vegas Con- vention and Visitors Authority. Conventions also underlie the success of LVS by driving mid-week occupancy at the Venetian Las Ve- gas, which has a year-round occupancy rate of almost 100%. Las Vegas is the convention capital of the US, and convention delegates on expense accounts spend twice as much in the city as other tourists. Mr. Adelson points out that conventions and exhibitions also breed non-business tourism. When conven- tioneers and exhibition attendees “come to a city they haven’t been to before and they like what they see, they’re going to come back with their friends and family,”he explains. Conventions are the fastest-growing com- ponent of tourism globally, but at present, there is almost no conventions and exhibitions industry to speak of in Macau. Hong Kong hosts some of the biggest trade shows in Asia, but is constrained by infrastructure, which it is working to expand. Venetian Macau’s 1.2 million sq. feet of convention and exhibition space will eclipse both the downtown 689,000 The multi-night overnight market will multiply demand for rooms exponentially. According to CLSA, if every visitor stayed just one night, the city would need another 20,000 hotel rooms, and if each stayed two nights, an additional 50,000 rooms would be needed. The key is to bring “stickability” to Macau, and that’s just what Mr. Adelson be- lieves the Cotai Strip will do. Inside Asian Gaming spoke to Mr. Adel- son, and looked at the Las Vegas experience to see what shape that new market could take. On Obsolescence and Trade Shows Obsolescence will pervade the new Macau. Macau’s scruffy, older casinos will soon become ghost towns as over 3,000 new ta- bles appear at the glitzy new resorts around Friendship Avenue and on the Cotai Strip by the end of 2007. The monopoly-era proper- ties continue to survive only because Macau faces a serious shortage of gaming tables – 1,757 at last count. Even some of the new properties could be rendered partly obso- lete, however, as the table count rises to al- most 10,000 by 2010. Macau has an average win per gaming table ten times greater than in Las Vegas, though the gap will diminish as supply in- creases. The decline in win per table will not be felt evenly across properties as crowds flock to the latest and greatest properties and the market becomes more clearly segment- ed. Our industry sources tell us that even the Emperor Palace Casino, which opened with a Jackie Chan-hosted bang in January, appears to have lost ground to Galaxy’s elegant Rio Casino, which opened in February targeting a similar clientele. Mr. Adelson likes to think the Venetian Macau will render the upcoming property of his “nearest rival” obsolete. For example, in terms of retail, “I don’t see any reason why a customer would go shopping in a place that’s got ten to thirteen retail shops, when exactly those same shops are with over 500 different shops [on Cotai]. They don’t get an adequate selection [at Wynn Macau].” Obsolescence also drives trade shows, which will provide one of the main anchors around which Mr. Adelson will develop the new multi-night overnight market. “It’s the nature of business to constantly put out new product in order to render the old product obsolete,” he explains. In our consumption society, “everybody wants to buy something new,”from clothes and furniture to high-tech gadgets. At trade shows, manufacturers vie to show off their new offerings to buyers who must keep abreast of the latest trends. Mr. “It’s the nature of business to constantly put out new product in order to render the old product obsolete,” he explains. In our consumption society,“everybody wants to buy something new,” sq.foot Hong Kong Convention and Exhibition Centre and the 750,000 sq. foot AsiaWorld Expo, which opened in December 2005 next to the Hong Kong International Airport. Las Vegas will continue to eclipse both cities com- bined, and currently has over 9 million sq. feet of convention and exhibition space. The Hong Kong press is highlighting the threat to its conventions business posed by Macau’s development, though there is arguably room for both to expand. All of Hong Kong had 47,712 hotel and guest house rooms as of February, and Macau just 11,015, compared to over 133,000 in Vegas. Hong Kong hosted 320 exhibitions in 2004. Vegas hosted 10 times as many, while Ma- cau hosted about 50 mostly small-scale conventions last year. It would take several Hong Kongs and Macaus combined to host a COMDEX-scale event. Both could replicate the growth in conventions seen in Vegas at an accelerated pace – in 1970, Vegas hosted a mere 300 conventions and had just 25,000 hotel rooms. Skeptics doubt the underdeveloped con- ventions business in China can grow quickly enough to support a Venetian-scale venue in the near term, and that the property will have to seek customers from elsewhere in Asia and further. Mr. Adelson claims, however, that de- mand from China has been so overwhelming that “we may consider not even allocating capacity to operators from other countries.” He says there is also great demand from Ja- pan, Korea, Taiwan, Singapore and Thailand, and that “India is another market we intend to cultivate.” Mr. Adelson points out that the flying time between Macau and Calcutta is four and a half hours—though no direct flights exist yet between the two. “That’s shorter than it takes to go to Las Vegas from New York City,” he adds.In fact,“more than 50% of the world’s population is in a distance to Macau that is shorter than NewYork to Las Vegas,”and New Yorkers regularly fly down to Vegas for the weekend. Macau’s current limited international air connectivity is another concern to Venetian Macau’s convention hopes, though the gov- ernment is expanding the airport’s capacity and Mr. Adelson says “we believe that the infrastructure required to get people here ei- ther exists or is in the process of being devel- oped.” LVS expects 80% of Venetian Macau’s guests to hail frommainland China and Hong Kong in the early stages, and establishing ad- ditional flight routes to get them in will be much easier than commencing broader in- ternational services. LVS President and COO “I don’t see any reason why a customer would go shopping in a place that’s got ten to thirteen retail shops, when exactly those same shops are with over 500 different shops [on Cotai]. They don’t get an adequate selection [at Wynn Macau]” The Venetian Resort Hotel Casino opened in 1999 with an indoor canal replicating the historic Italian city of Venice, complete with serenading gondoliers and perennial blue-skies