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Gaming Guru

Richard N. Velotta

Adelson Plans Separate Macau Strip, IPO

18 May 2004

As owners of the Venetian opened their $240 million casino in Macau today, another opening -- the opening of bids to begin site preparation work for another project at another Macau location known as the Cotai Strip -- holds even greater potential for the Las Vegas casino company.

Venetian parent company Las Vegas Sands Inc. has signed letters of intent with five hotel companies to develop the 120 acres into a mini-Las Vegas Strip, anchored with a 3,000-suite version of the Venetian, complete with a mall and convention center.

"We have introduced to the government another seven or eight brands and investor groups, and as we finish those deals, we'll end up with a Las Vegas-style strip of approximately eight different brands, one of which is the Venetian," said William Weidner, president and chief operating officer of Las Vegas Sands Inc.

Venetian officials hope to develop a strategy in Macau similar to the one that contributed to a record level of first-quarter cash flow in Las Vegas this year.

"The Venetian in Cotai is a destination-style resort, 3,000 rooms, very similar to the Venetian here (in Las Vegas)," Weidner said. "It has approximately 1 million square feet of meeting and exhibition space. It is the demand spine for that whole strip."

Weidner said as in Las Vegas, the Venetian wouldn't be able to accommodate all the guests it expects to generate through conventions in Macau. That's where the other hotel properties come in. Weidner said they would develop rooms to serve what is expected to become a strong mid-week convention market.

"The concept of Cotai is kind of a re-execution of the strategy here in Las Vegas but on a broader scale since we now have investors interested in the kind of demand we develop," Weidner said.

Weidner named Starwood Hotels & Resorts Worldwide Inc., White Plains, N.Y.; Marriott International Inc., Bethesda, Md.; Four Seasons Hotels Inc., Toronto; Hard Rock International, Orlando; and InterContinental Hotels Group PLC, Windsor, England, as signers of letters of intent to participate in the Cotai project.

Representatives of those companies did not give details of their development plans, and some could not be reached for comment.

Hard Rock has nine hotel properties worldwide, some with casinos. Among the company's Asian properties are developments in Bali, Indonesia, and Pattaya, Thailand.

InterContinental owns the Crowne Plaza, Holiday Inn, Holiday Inn Express and Candlewood Suites brands.

Starwood is a partner in the company attempting to acquire the Aladdin hotel-casino and convert it into a Planet Hollywood hotel-casino. Starwood has had a revitalized interest in the Las Vegas market with its Westin brand at the Westin Casuarina, but it doesn't operate casinos.

Marriott and Four Seasons each have hotel operations in Las Vegas but don't operate their own casinos.

Weidner said each of the hotels at Cotai would have casino and entertainment venues that would be run by his company.

"Most of these operators aren't necessarily interested in operating casinos anyway," Weidner said. "Their business is hotels and meetings, food and beverage. They couldn't operate the casinos if they wanted to, because only the licensees can actually operate the casinos, but most of them are not in the business anyway."

Las Vegas Sands' hope is that the casino opening today in Macau (Monday night Las Vegas time) will give Chinese gamblers a taste of what they can expect from the company.

Weidner said the casino debuting today is unlike anything the Chinese have ever seen in Macau.

"In Macau, normally what you have are hotels with smaller rooms that are casinos," he said. "We essentially have a very large casino."

He said the decor combines Eastern and Western cultures, including a tea pit with 200 different varieties of the world's best teas available.

But Weidner said even with the future development of Cotai, he doubted that casino development in Macau would ever outdo Las Vegas.

"We could never rival the Strip, with billions and billions of dollars in investment, 130,000 rooms and 20 or so megafacilities," Weidner said. "We could never rival the Strip, but we can create the sense and feel in a smaller way of the Strip in Las Vegas, right there on the doorstep to China."

Still, Venetian owner Sheldon Adelson said: "The market is just exploding here. The larger the pie you bake, the more you can eat out of it. That's how I see business."

Separately, Weidner said Las Vegas Sands plans to raise at least $200 million by selling shares for the first time to the public as early as September.

Goldman Sachs Group Inc., which is advising the five-year- old company, helped Las Vegas Sands raise more than $2.8 billion in the first three years of its operation, Las Vegas Sands said.

Gambling revenue in Macau, which reverted to Chinese rule in 1999, is forecast to reach $4.7 billion this year from $3.6 billion in 2003. Las Vegas draws about $5 billion a year.

Macau's boom comes after China began last year to free up travel to the city and Hong Kong. Residents of its richer cities, including Beijing, Shanghai and Guangzhou, can now visit independently of tour groups.

Macau, a 26 square-kilometer (10 square-mile) territory with a population of 440,000, is the closest place for the 1.3 billion people of greater China -- including Taiwan and Hong Kong -- to gamble legally in casinos.