His Venice Isn't Sinking
Some people just aren't happy unless they're making others' lives difficult. Sheldon G. Adelson, the 67-year-old owner of The Venetian, is that kind of person. And these days he's pretty happy. In the year and a half since his $1.2 billion hotel and casino opened in Las Vegas, Adelson has managed to pick a fight with just about everyone in town. He has made enemies at the Culinary Union because he won't allow it to represent his employees. He's suing the lead contractor on The Venetian for missing the construction deadline. And he has stirred up local politics by challenging two huge public projects, the expansion of the municipally run Las Vegas Convention Center and the construction of a monorail along the Strip. "Sheldon likes to fight, that's part of his personality," says William Thompson, a professor at the University of Nevada at Las Vegas and a longtime observer of the gambling industry.
For causing such a fuss, Adelson makes no apologies. Indeed, the 5-ft. 5-in. Boston native, who sounds a lot like Mel Brooks, is more likely to boast about taking on the Las Vegas Establishment. It's not that the city hasn't been good to him. Adelson started the world's largest trade show, the COMDEX computer exhibit, in Las Vegas some 20 years ago. He sold the business in 1995 to Japanese software distributor Softbank Corp. for $862 million. And the fighting isn't just a matter of pride. It's his business philosophy. As he says: "I challenge the status quo."
The Venetian is a case in point. From the start, Adelson ignored the Las Vegas formula: Draw in vacationers, and keep them in the casinos. He rejected nearly everything that made the traditional hotel there such a strangely enticing, slightly entrapping place--the hard-to-find clocks, the hard-to-miss buffets, the small, spare rooms.
BUSINESS FIRST. Instead, Adelson wanted to attract business travelers, those finicky customers who supposedly wouldn't gamble with any real enthusiasm. He didn't have to look far to find them: He already owned the world's largest private convention center, the 1.2 million-square-foot Sands Expo Center, which he built in 1990 to house COMDEX. Adelson demolished the famous Sands Hotel next door in 1996 to make way for The Venetian. Its 3,000 rooms are sizable, to say the least; at 700 square feet, they are the largest standard hotel rooms anywhere, according to the Guinness Book of World Records. And they've got mini-bars, safes, fax machines, even telephones that allow conference calls. "In the past, everything in Las Vegas was designed to get you into the casino," he says. "They intentionally withheld creature comforts."
But Adelson's desire to build a different kind of hotel has made him public enemy No. 1, as far as labor unions are concerned. That's because Adelson refuses to hire union workers or follow union rules. For one thing, the Culinary Union requires that hotel owners operate their hotel's restaurants--with the employees on their payroll. Adelson figured that was fine for all-you-can-eat buffets. He wanted to attract world-class restaurateurs who would put their own money at stake.
UNDER ATTACK. The Culinary Union didn't like being edged out. It prepared two critical reports about Adelson's project and circulated them to prospective investors, retail tenants, and convention planners. The union picketed the construction site and still pickets the hotel today. Adelson, who is Jewish, says vandals spray-painted swastikas on the building and wrote "Dead Jew" on the grounds of his home.
The Venetian's opening in May of last year was a disaster. The shopping and restaurant spaces were still under construction. The fire marshals hadn't approved many of the hotel rooms. Actress Sophia Loren came to dedicate the building but had to stay elsewhere. Now, Adelson and his contractors are fighting in court: Adelson claims they were late; the builders say he made too many changes to the original plans.
Still, Adelson is more than pleased with the hotel these days. Visitors to The Venetian walk past life-size replicas of such Venice landmarks as Doge's Palace, the Campanile Bell Tower, and the Bridge of Sighs. Gondoliers take guests on boat rides, singing in Italian as they row. Every half-hour, 250 white doves--trained to return--are released in front of the hotel. "We keep 1,000 in reserve just in case the first group goes on strike," Adelson jokes.
More important for Adelson--and backers such as the Bank of Nova Scotia who lent him over $900 million--The Venetian could become one of the most successful new properties on the Strip, say analysts who follow the private company. Weekday room rates have averaged more than $200 a night this year, 60% above the average rate in the area.
Adelson says that although conventioneers gamble less often, they bet higher amounts when they do. The Venetian also appears to be luring high-rolling leisure travelers. Merrill Lynch & Co. analyst Eric Matejevich estimates that the casino will generate more than $2,600 in profits per square foot per day this year, the fourth-best performance in town, after the Bellagio, the Mirage, and Paris Las Vegas. Analysts expect the complex to generate more than $170 million in cash flow this year, on revenues of some $600 million. Adelson plans to add 1,000 rooms next to the main hotel in 2001. Then he hopes to build another 3,000 rooms and a casino on land nearby. "This will be the highest-grossing hotel in the history of hotels," he vows.
Well, maybe. In the meantime, The Venetian's success is spurring rivals to reconsider the old formula. Many competitors are now adding meeting space to their hotels. "Everyone is copying him," says Bear, Stearns & Co. leisure analyst Jason N. Ader.
The son of a cab driver, Adelson grew up in the working-class Boston neighborhood of Dorchester. "This could be a rags-to-riches story, but my family was too poor to own rags," he quips. Adelson was 12 when he started his first business venture: He borrowed $200 from his uncle's credit union to buy the rights to sell the Boston Globe on a corner near his home. He has been hustling ever since. By his early twenties, Adelson had a business selling small packages of shaving cream, shampoo, and the like to motels, at a time when most weren't offering such amenities. Adelson got the sample-size soaps from the manufacturers for free. In what would become typical Adelson fashion, he spotted a need and filled it.
CREATIVE WAYS. It was much the same with COMDEX. Adelson was a small-time venture capitalist and investor in trade magazines when he read about a new product--desktop computers. That was 1979. Adelson began promoting a new trade show for this nascent industry. Tandy (RSH), Heathkit, and a little company called Apple Computer Inc. (AAPL) were among those who bought booths at the first COMDEX show, held in Las Vegas later that year. Adelson soon developed a reputation for finding creative ways to make money. He sold advertising on banners hung throughout the hall, in a special daily paper, and on tote bags. "I was criticized for squeezing every ounce of profit," Adelson says. "I must admit I was good at that." He still doesn't use a computer.
Meanwhile, Adelson continues to fight. In July, 1999, he sued the Las Vegas Convention Center to prevent it from expanding. Adelson wants the municipal convention center, which receives half of a 9% tax on hotel rooms in the city, to be privatized since it competes with his Sands Expo and can offer lower rates. He lost the court battle, however. The Convention Center just raised $150 million in bonds for a 1.3-million square-foot expansion. Adelson has also recently settled a lawsuit against the builders of a $650 million monorail on the Strip. He was worried that the project would lose money and taxpayers would get stuck with the bill. He gave in when the monorail backers bought private insurance. "In some ways I think principle is more important to him than money," says Adelson's longtime friend and business partner Irwin Chafetz. It certainly hasn't hurt Adelson's bank account to be stubborn.