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Gaming Guru

Howard Stutz

The 'for sale' comes down at Sands Bethlehem

20 October 2014

A year ago, Las Vegas Sands Corp. was looking to sell its Pennsylvania hotel-casino complex, housed on the historical site of the long-closed Bethlehem Steel Mill.

Now, the company is prepared to invest $800 million in the development, now one of the top two gaming revenue producing properties among that state’s 12 casinos.

In an interview with The Morning Call of Lehigh Valley earlier this month, new Sands Bethlehem President Mark Juliano outlined a two-year expansion plan that will increase the convention center and update the property’s restaurants.

Juliano said Sands Casino Resort Bethlehem also would build a Bass Pro Shops to increase visitation to the property in eastern Pennsylvania. The casino is an 88-mile drive from New York City.

In May, the company took Sands Bethlehem off the market. Media reports had the casino being sold to Carl Icahn’s Tropicana Entertainment. But Las Vegas Sands President Michael Leven said “a new chapter” would begin.

Juliano’s comments to the newspaper confirmed the company’s pledge.

“Expansion plans are favorably reflective of a recommitment to the property and the region following ongoing rumors that the property was on the selling block for some time,” Union Gaming Group analyst Robert Shore said.

Sands Bethlehem doesn’t move the balance sheet needle for Las Vegas Sands. The resort produces 3.4 percent of the company’s overall quarterly revenue. Comparatively, Las Vegas Sands collects 88 percent of its typical $3.5 billion to $4 billion three-month revenue from casinos in Macau and Singapore.

Still, Sands Bethlehem sits atop the Pennsylvania gaming market.

According to the state’s Gaming Control Board, Sands Bethlehem took in $457.6 million in casino revenue in fiscal year 2014, trailing only the Parx Casino near Philadelphia, which took in $477 million. One difference was in table games, where Sands Bethlehem’s 200 tables collected $54 million more than Parx, which operates 154 tables.

Shore said Sands Bethlehem provides bus trips for gamblers from the Chinatown areas of New York City and Philadelphia.

“Interestingly, for a regional asset, the property generates a significant amount of its table drop from Asian customers, owing to targeted marketing efforts,” Shore said.

The Sands Bethlehem opened the casino and a few restaurants in May 2009 at a cost of $743 million. A 300-room hotel and convention space and retail facilities were added two years later. The hotel averages better than 90 percent occupancy throughout the year.

Juliano was named president of the property this summer. He was previously senior vice president of the Marina Bay Sands in Singapore. Juliano had been CEO of Trump Entertainment Resorts in Atlantic City and president of Caesars Atlantic City. Juliano also served as president of Caesars Palace in Las Vegas during his career.

Sands Bethlehem is facing a challenge in coming years. New York is adding four casinos Upstate. In New Jersey, discussions are ongoing about allowing casinos to expand outside of Atlantic City to the state’s northern racetracks.

“Capital reinvestment appears largely in anticipation of increased competition,” Shore said.

He credited Juliano with some of the expansion ideas and his familiarity with the Northeast.

“This reminds me of the early part of my career,” Juliano told Morning Call reporter Matt Assad. “We’ve got a lot of growth in front of us.”

Adding a Bass Pro Shops is directly out of the Boardwalk playbook.

Atlantic City is building an 86,000-square-foot branch of the popular outdoor sporting goods store near The Walk, an outlet shopping district between the Boardwalk and the Convention Center. Tourism officials said Bass Pro Shops — the first in New Jersey — will attract 1 million annual visitors when it opens next spring.

Juliano said the Bass Pro Shops at Sands Bethlehem — a 110,000-square-foot store built within one of the Steel Mill’s former machine shops — would attract 2.5 million to 3 million annual visitors. It would be the second Bass Pro Shops in Pennsylvania. The other is in Harrisburg, 89 miles west.

Las Vegas Sands spokesman Ron Reese said a Bass Pro Shops has long been discussed as a piece of the Bethlehem facility. Juliano said the store, along with new restaurants, might not open until 2016. A plan to double the size of the hotel also has been considered.

The challenge for Las Vegas Sands and other Pennsylvania casino operators is keeping the gambling business within the state’s boundaries. Pennsylvania has been the nation’s No. 2 gaming revenue market behind Nevada the past two years, topping $3 billion in 2012 and 2013.

The state’s casinos, which drew business away from Atlantic City since gaming first went live in 2006, face competition from casino development in neighboring Ohio, Maryland, West Virginia, Delaware and New York.

Like many regional gaming jurisdictions, Pennsylvania has suffered from declining gaming revenue. August was the state’s best-performing month for its casinos since September 2012, but the market fell again last month.

Spectrum Gaming Group LLC analyst Joe Weinert told the Pittsburgh Tribune the northeast’s increasing number of casinos means “you can only slice up that pie so many ways before certain markets and properties become impacted.”

Sands Bethlehem is taking steps to keep all its pie and even add slices.
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