Las Vegas Sands Head Likes Macao's Odds
Las Vegas Sands (LVS) is betting big on Macao. Its 740-table Sands Macao casino opened in February, 2005, and has snagged a 23% market share. It was the first foreign casino to open after Macao ended a 40 year-old monopoly run by gambling doyen Stanley Ho. But that's just for openers. In the fall of 2007, the Venetian Macao Resort Hotel is scheduled to open as part of a $2 billion project to open a Las Vegas-style strip on reclaimed land called Cotai.
By that time, gambling revenues in Macao are expected to surpass those on the Las Vegas strip thanks to an insatiable demand for gambling by mainland Chinese players. Asia correspondent Frederik Balfour recently caught up with William P. Weidner, president and chief operating officer of Las Vegas Sands, at a pre-launch ceremony for the Venetian on Aug. 28. Edited excerpts of their conversation follow.
How will you duplicate what has happened in Las Vegas here?
Not that long ago, pharmaceutical and insurance companies, as well as financial institutions, wouldn't think of holding a meeting in Las Vegas because it was a gambling place that grew out of organized crime. Now it is a primary place for them to hold conventions and meetings.
That's one reason we won a [gaming] license here, because we can offer large, integrated, convention-based facilities so people who wouldn't have come to Macao will come. What they don't expect is an integrated resort that includes shopping, dining, entertainment, high quality room products similar to what they would get on the strip in Las Vegas.
Have you lined up marquee conventions for your fall, 2007, opening?
Sheldon Adelson [Las Vegas Sands' chief executive] changed Las Vegas by creating Comdex. That changed everyone's view of Las Vegas. Here, we have booked 26 major shows, six of them from October to December in 2007. One is a doctor's group dealing with blood. One is [an auto parts exhibition. When that group] came to Las Vegas in the 1980s, there were zero mainland Chinese exhibitors. Last year there were 600.
How important are non-gaming revenues for you in Macao?
Gaming revenues will always be—no, at least for our business lifetime—they will be the dominant factor here because it has such huge gaming opportunities and because of how Asians use disposable income. They spend more for entertainment than non-Asians. There are larger wins per person on the gaming floor. But we aren't doing conventions to be a charitable entity. They will be more profitable for gambling [by bringing more people to the tables.]
What's the breakdown between gambling and non-gambling revenues in Las Vegas and how does that compare with Macao?
In Vegas we get 31% to 33% of flow-through revenue from casinos. In the Sands Macao it's about 90%. In the [new] Venetian, it will be about 60%.
How much of group revenues will come from Macao once the Venetian opens?
About two-thirds, including the Venetian, and the casinos in the Four Seasons Hotel, the Shangri-La, the Sheraton and St. Regis.
Do you think the Chinese are hardwired as gamblers?
They are certainly more comfortable with it. You get lucky-money envelopes on Chinese New Year, feng shui has good fortune, and there is luck in the culture. I don't know if it's hardwired but it's culturally acceptable as a use of leisure.
How did you capture such a large market share in so short a time?
At the Sands Macao [which only has a few dozen rooms reserved for VIP guests] this is the better product for the day-tripper market. This is one thing Stanley Ho didn't focus on, the mass market. The quality and opportunity of the mass market was underappreciated.
What has happened [since Stanley Ho's gambling monopoly was broken up] is that mainland China has allowed more freedom of travel and the transfer of money. This has allowed legitimate operators into the VIP business.
Are you implying that there are non-legitimate operators in Macao?
Well, only in the last two or three or four years was the Chinese yuan allowed to be brought across the border. Now they can bring $20,000 worth. Before that, the only people committing an illegal act [financing Chinese gamblers] would be intermediaries.
How do you ensure that you are dealing with legitimate junket operators?
They are vetted by the Macao government and we do our own process of vetting them and Nevada holds us accountable. We have to always be vigilant.
Do you have any problems with triads [Chinese organized crime groups]?
We vet all our employees, vendors, junket representatives, and we have had no interface with those organizations. But you never know. While we speak of triads here, organized crime is still active in the U.S. in various businesses. We have to be vigilant in Macao and we have to be vigilant in the U.S.