Inside Asian Gaming

INSIDE ASIAN GAMING | September 2012 18 Asian Gaming 50 – 2012 Not too shabby, considering that Mr Tracy was new to China when he arrived in 2010 at the age of 57 with 20 years of industry experience under his belt, all of it in North America, marked by a stint in the late ’80s and early ’90s as Donald Trump’s CEO in Atlantic City and later as head of a chain of US riverboat casinos. His stabilizing presence has been evident as well in improved relations with the government of the SAR, which could pave the way for lucrative sales of luxury apartments at the Plaza’s Four Seasons host hotel and may have helped to win the company a four-year extension to develop its Parcel 3 site on the Cotai Strip next to the Four Seasons. Shareholder relations have been bolstered, too, thanks to the board’s decision earlier this year, which some credit to Mr Tracy’s influence, to authorize Sands China’s first dividend. He also gets high marks for employee relations. He lives at The Venetian, where workers are likely to see him any time of day or night, and he is said to go out of his way to take an interest in their wellbeing. It’s an area many in upper management tend to overlook, and it’s a pretty big deal for a company with a staff of 21,000. In terms of his own position, he received a sizable vote of confidence this summer with a contract renewal through August 2013 and options on 260,000 shares of stock to add to 1,225,000 options he held at the end of last year. he’s plowed money into The Venetian Macao’s high-limit areas, and he’s overseen an expansion and improvements next door that have considerably enhanced the appeal of the Plaza Macao Casino as a VIP destination. This year, rolling chip volume was up almost 12% at The Venetian in the first quarter, compared to the same period in 2011. It more than quadrupled at the Plaza (+221.8%). The momentum carried into the second quarter, with rolling volume company-wide growing by 36.3% (174.4% at the Plaza). Including 81 days of results from Sands Cotai Central, which opened inApril with 145VIP tables, gross gaming revenue in the sector was up a heady 161%. In terms of growth rate, the second quarter saw Sands China outperform the market in all three gaming segments—rolling volume, non-rolling drop and slot handle—for the first time since 2008. Its share of Macau’s total GGR, factoring in the addition of Sands Cotai Central, grew during the quarter by more than 100 bps to 17.7%. It’s beengoodgrowth, too, smartlymanaged. Adjusted EBITDAhit a record US$456.4 million in the first quarter on a sparkling operating margin of 32.1%. The second quarter’s 29.5% operatingmargin drove a 9.6% increase in adjusted EBITDA over 2Q11 to $429 million. While on the non-gaming side, hotel and retail revenues were up 19% and 30%, respectively, in the first quarter, and 24% and 37.1% in 2Q, with the added capacity on Cotai. 14 Michael Leven President and COO Las Vegas Sands Corp Sheldon Adelson called Michael Leven the most competent and productive businessman he has ever worked with during the June announcement that Mr Leven’s contract with Las Vegas Sands Corp had been extended through 2014. While Mr Adelson is known as the visionary, Mr Leven is often referred to as the man who gets things done. As he explained to Inside Asian Gaming , “I think when you’re a chief operating officer the job is getting things done. You can do some strategy, but you better make sure it gets executed, so I’m the one that has to take Mr Adelson’s vision and make sure it happens.” Since taking on that job in 2009, Mr Leven has helped guide LVS to several milestones: the Marina Bay Sands and Sands Bethlehem openings; Sands China’s US$2.5 billion IPO; several billions of debt paid down or refinanced; fresh momentum injected into Cotai via partnerships with Hilton Worldwide, Intercontinental Hotels Group and Starwood; a 10-year deal struck with InterContinental to cross- market The Venetian and Palazzo in Las Vegas with IHG’s 180 million- strong data base; and, last but not least, management stability largely restored at the corporate and property levels. Whereas Marina Bay Sands has emerged as perhaps the most profitable casino in the world, the latest addition to LVS’ Asian portfolio appears to have got off to a disappointing start. The US$4.4 billion Sands Cotai Central in Macau opened at a time when VIP gaming revenue growth is slowing, and it has been accused of cannibalizing Sands China’s other Macau properties. It also signals a drastic reduction in the company’s returns on its Asian investments. Whereas The Venetian Macao and Marina Bay Sands are comfortably exceeding the company’s expected 20% ROI, the $51.8 million adjusted property EBITDA generated by Sands Cotai Central during the 81 days it was open in the second quarter falls short of that mark. Granted, the property is still ramping up, with the second phase scheduled to be unveiled this month, and the new amenities therein could well boost its appeal. Also, SCC is the continuation of Sands’ penchant for being more aggressive than any other Macau casino operator in developing non-gaming amenities. As SCC hits its stride following the Phase II opening, Mr Leven says it could emerge as “a game-changer for MICE in Macau”. As a veteran hotelier he would know. A former president of Days Inn and Holiday InnWorldwide, he founded a company that developed the Microtel and Hawthorne Suites brands. He and Mr Adelson have known each other for decades, from the days when Mr Adelson was operating charter tours. Later, when Mr Adelson owned the Comdex computer trade show and Mr Leven was running Days Inn, they’d meet occasionally for dinner. He declined an offer to run the Sands when Mr Adelson bought the venerable Las Vegas Strip resort in 1988. But when MrAdelson tookLasVegas SandsCorppublic in2004,Mr Levenaccepted a seat on the board of directors and served for about a year. Under his extended contract, he will be guiding LVS to further expansion in Asia. In addition to the second phase of Sands Cotai Central, the company is developing a fourth Cotai site, known as Parcel 3, where Mr Leven says he hopes to be “putting pylons in the ground” by November. The company also continues exploring other opportunities across the region, with particular focus on Japan, Korea and Vietnam.