Inside Asian Gaming

inside asian gaming September 2015 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 products and amenities that are best-positioned to capture long-term tourism and consumption growth in Asia.” And the building continues. A fourth hotel is slated to open at Sands Cotai Central at the end of this year, a $380 million St. Regis, whose 400 rooms will 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, which will crown Mr Adelson’s Cotai master plan with a half- scale replica of the Eiffel Tower. Veteran hotelier Michael Leven, a trusted advisor who served four years as president and chief operating officer of LVS, has described Mr Adelson as the “penultimate entrepreneur, incredibly creative and wide-thinking, and incredibly optimistic, which is what you have to be to be 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 Forbes 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 Convention Center in Las Vegas, the first privately funded exhibition facility in the U.S., to house COMDEX, 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 seed money for his entry into gaming with The Venetian Resort Hotel Casino on the Las Vegas Strip, the first convention-centered casino in the country. Credit Suisse gaming and leisure analyst 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 tremendous ability for unlocking opportunities in gaming that no one visualized. … Honestly, you can put him up there with any of the big dreamers we’ve had—Sam Walton, Ray Kroc—the individuals who thought the unthinkable.” As Mr Adelson himself once explained it, “It wasn’t what I saw, it was what I experienced. I was Las Vegas’ biggest convention customer with COMDEX. 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, the operators thought, that the purpose of Las Vegas was gambling. And I said to myself, ‘The purpose of Las Vegas is the fungibility of money.’” He has been certain from the beginning that the same holds true for Macau, and so far he’s been right. Should the opportunity arise he’ll look to do the same in Tokyo, in Seoul, possibly in Ho Chi Minh City. He has set his investment parameters high. New project costs are to be funded with no less than 25-35% equity. He doesn’t move in without a reasonable expectation of a minimum 20% return. Interestingly, he intimated some weeks back that he’s “feeling vibrations” that just such an opportunity is about to open up. And if it does, he said, “There isn’t anyone who doesn’t think [LVS] is in the pole positon.” Francis Lui Vice Chairman Galaxy Entertainment Group As the operator with the biggest share of the Macau VIP baccarat 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 worsened by the weakening Chinese 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 in gaming revenue during the period. The first half results reflect only 35 days of operation of the $3 billion expansion of the company’s flagship Galaxy Macau resort, unveiled on 27th May. Galaxy Macau Phase 2 and the Broadway Macau annex significantly broaden Galaxy’s non-gaming offering, 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 to more than 3,800. Although the expansion unequivocally boosts GEG’s mass- market and non-gaming appeal, the most 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 88 gaming area on its 51st floor, designed to offer the cachet and ambience of leading VIP rooms to premium-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