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Best of Liz Benston

Gaming Guru

Liz Benston

Las Vegas Sands is Eager to Expand

7 April 2005

LAS VEGAS -- Less than four months since it pulled off the most lucrative initial public offering in casino history, Las Vegas Sands Corp. is boldly trumpeting the company's accomplishments as part of its worldwide expansion efforts.

Once the Palazzo resort is built next to the Venetian and its attached Sands Expo Center, the three buildings will constitute "the largest integrated hotel and convention facility in the world," the company said in its recent annual report.

The two attached resorts would have nearly 7,100 rooms and a combined 2.25 million square feet of meeting and convention space. That's roughly the same amount of meeting and exhibition space at the Las Vegas Convention Center, the third-largest convention center in the country.

The company's track record at the Venetian and more recently, with its Sands Macau casino in China, has created a "showcase of success to the world of our abilities as the casino developer and operator of choice," the report said.

"We believe this ... will allow us to win new development opportunities from governments and other corporate partners as jurisdictions, both foreign and domestic, turn to large-scale casino resort projects as catalysts for economic expansion."

The Las Vegas Sands, unlike some of its competitors, has built major destination resorts "from the ground up," President and Chief Operating Officer Bill Weidner said Wednesday.

Some of the companies have simply managed or acquired casino properties, he said.

In a thinly veiled reference to Strip kingpin MGM Mirage, Weidner said that some competitors have bought rather than built their properties.

Along with the company's recent proposal to develop a resort in Singapore, land it hopes to develop in Pennsylvania, and preliminary deals to build resorts with two soccer teams in the United Kingdom, Las Vegas Sands is eager to develop anywhere in the world considering major resorts, he said.

Besides Singapore, the company expects to leverage its experience in Macau to develop properties in other Asian countries such as Thailand and Japan that are considering large-scale casinos, he said.

The company is building a replica of its Venetian resort in Macau as an anchor for what will eventually become a Chinese version of the Las Vegas Strip with up to seven other hotels.

In the company's annual report, Las Vegas Sands also revealed further details about its ambitious, 3,000-room Palazzo resort, a property rivaling the Venetian in size and scope.

The combined Venetian-Palazzo would be bigger than the Wynn Las Vegas-Encore resorts envisioned by Wynn Resorts Ltd. Wynn Las Vegas is expected to open this month with about 2,700 rooms while Encore, an attached resort that would share some public space with Wynn Las Vegas, would add another 2,000 rooms by early 2008.

The Venetian was designed with the eventual construction of the Palazzo in mind in order to create a seamless transition from the casino and Grand Canal Shops in the Venetian to the casino and retail mall of the Palazzo, Weidner said.

The two properties will have different themes and check-in areas but customers will be able to walk from one property to the next without leaving the building.

The two themes will complement each other, Weidner said.

"Some people like vanilla, some like chocolate," he explained.

Employees will use the same "back-of-house" areas for both resorts, which will allow the company to build the Palazzo for less money and with less overhead expense than if the resorts were operated separately, he said.

The $1.6 billion Palazzo, scheduled to open in the second quarter of 2007, will share about $300 million to $400 million worth of infrastructure with the Venetian, saving the company from duplicating such costs, he said.

The resort will feature rooms that are slightly larger than the Venetian's as well as 375 more-expensive concierge suites, compared with 122 concierge suites at the Venetian's newer hotel tower. The Venetian concierge suites had an average daily room rate of $334 last year.

The Palazzo also will feature a 105,000-square-foot casino and 450,000 square feet of meeting space that will be part of the existing Congress Center at the Venetian. A mall connecting to the Grand Canal Shops will offer about 400,000 square feet of retail, dining and entertainment space on two levels. It will feature about seven restaurants and 80 high-end to mid-level stores.

The resort will have a design reminiscent of "Beverly Hills, Bel Air and Rodeo Drive" with landscaping featuring palm trees and "exotically shaped topiaries," the company said. The lobby will feature a 60-foot glass dome, multiple two-story fountains, imported marble and bronze columns. In addition to the casino and mall entries, guests coming from the Venetian will be able to enter the Palazzo via another glass dome.

The expansion of the Venetian brand worldwide will be fairly limited because of its full-blown Italian theme, Weidner said. By contrast, the Sands and Palazzo brands are more flexible because they can be used in more places, he said.

The Venetian runs neck-and-neck with Bellagio in the race to be the most profitable Strip resort. The Venetian reported an average daily rate of $220 last year and an occupancy rate of 97 percent, while MGM Mirage's Bellagio reported an average daily rate of $239 and occupancy of 96 percent.

Through Wednesday, Las Vegas Sands stock has fallen about 19 percent since a high of $53.98 in December. But shares have still more than doubled from their initial offering price of $21 per share in mid-December.

In a research note to investors last month, UBS Warburg analyst Robin Farley said the company "remains an industry stand-out in terms of strategy in Las Vegas, new project developments and returns." Even so, the stock is moving up and down based on how the market is valuing volatile cash flows from Macau, she said.

The Macau government recently reported that its casinos generated some $5 billion in gambling revenue last year, a 44 percent increase from 2003.