Venetian Broke the Vegas Mold, Now Sets Trend
When billionaire Sheldon Adelson sold his successful Comdex computer show and decided to build a lavish hotel-casino with thousands of rooms, gambling executives ridiculed his business model.
They said Adelson’s plan for the Venetian to cater to business travelers and profit from hotel rooms and conventions wouldn’t work on the Las Vegas Strip, where everyone knew casinos were the true moneymakers.
Critics and competitors told the Wall Street Journal in 1997 that Adelson was “smoking something” and his over-the top property was doomed because Las Vegas had too many rooms and couldn’t make enough money outside the casino to support its size.
Executives of Las Vegas Sands Inc., the Venetian’s parent company, can laugh now when they read that article. The Venetian is the second-most-profitable hotel-casino in Las Vegas, after the Bellagio, Steve Wynn’s upscale creation that raised the stakes in this city and put luxury at the forefront of the Vegas experience.
And in the next few weeks, the now privately held Sands is expected to begin trading on the New York Stock Exchange under the name Las Vegas Sands Corp.
“My gut tells me this will be a very high-demand or hot” initial public stock offering, said Marc Falcone, a Deutsche Bank equity gambling analyst in New York. “You have an outstanding business model with great growth opportunities, and you have a management team that has done an outstanding job with their assets.”
With the public offering, Las Vegas Sands would become one of the largest gambling companies in the world, behind Harrah’s Entertainment Inc. and MGM Mirage Inc. -- if their recently announced acquisitions are approved next year.
Proceeds from the offering will be used for the company’s proposed $1.6-billion, 3,000-room Palazzo hotel-casino on the Las Vegas Strip and the $1.8-billion Macao Venetian Casino Resort in Asia. Both developments are scheduled to open in 2007. The company has proposed to Macao’s government the construction of six more resorts there, some of which will have casinos.
The company also is exploring projects in Britain, which is revising its gambling laws to allow for more and bigger casinos.
Las Vegas Sands executives are aiming for an IPO price of $24 to $26 a share. Under the terms disclosed in a government filing, the company could raise as much as $619 million.
Sands executives declined to comment further, citing SEC rules that impose a quiet period on companies going public.
Adelson, 71, the Sands chairman who has been described as serious, determined and demanding, doesn’t often give interviews. He is known for his attention to detail, but employees say he doesn’t micromanage.
People in the industry have called him a visionary, a label Adelson might not resist given his prophetic comments.
“Las Vegas is living in yesteryear’s strategy,” Adelson told the Wall Street Journal in the 1997 article. “We’re living in tomorrow’s strategy.”
Adelson’s U.S. business strategy hasn’t changed much since he opened the Venetian in 1999. In 2003, he added a luxurious 12-story all-suite tower called the Venezia, further driving room revenue at the Venetian complex.
The Venetian is fulfilling Adelson’s goal of profiting from room rates -- its average daily room rate during the first nine months this year was about $219, compared with $89 for all hotels in Las Vegas. The company’s percentage of gambling revenue is one of the lowest on the Strip because of its emphasis on the group convention and trade show business and the resulting higher occupancy and room rates on weekdays.
Adelson also controls the Sands Expo & Convention Center next to the Venetian, which features gondolas, a winding canal and street performers who entertain visitors at replicas of St. Mark’s Square and the Oculus.
“Mr. Adelson and his team have a lot of innovative ideas,” said Andrew Zarnett, casino industry bond analyst for Deutsche Banc. “The biggest was creating all suites and proving that you could create a significant amount of revenue from rooms, food and beverages.”
But his competitors are now reaching for the same market. Mandalay Resort Group has built its own 1,128 all-suite tower and a massive convention center. MGM Mirage will soon open a second tower at the Bellagio, with 928 rooms and suites, plus an additional 60,000 square feet of convention space.
Adelson has focused on two of the most lucrative gambling markets in the world: Las Vegas and Macao, the former Portuguese colony 40 miles west of Hong Kong. For more than a billion people in China, Taiwan and Hong Kong, Macao is the place to gamble.
In May, Las Vegas Sands opened the $265-million Sands Macao, the first Las Vegas-style casino there. And William Weidner, president and chief operating officer of Las Vegas Sands, said at the time that the company was interested in developing a casino in Singapore.
