CASINO

Adelson says Macau visitor cap as likely as him waking up with a full head of hair

TAGs: las vegas sands, Macau, sheldon adelson

sands-macau-adelson-hair-growingCasino operator Las Vegas Sands couldn’t escape the doldrums plaguing Macau, as both revenue and earnings tumbled in Q1.

Revenue in the three months ending March 31 fell 24.9% to $3.01b, while earnings fell 29% to $1.05b. Operating income fell 37.8% to $711.1m and profit fell 34% to $511.9m.

As expected, Sands China provided most of the revenue and the decline. Sands China revenue was down 34.9% to $1.77b, while adjusted earnings fell 43.4% to $531m and profit fell a hefty 54.2% to $344.7m.

As one might expect from the broader Macau market profile, the VIP share of Sands’ profit fell from 18% in Q1 2014 to just 13% this year. Mass market tables slipped one point to 52% while slots held steady at 8%. Hotel and mall revenue each gained two points to 14% and 12% respectively.

The Venetian Macao saw gaming revenue fall 37.1% to $677m. Not only did VIP turnover fall 44.4% but win rate fell to 2.83% from 3.49% in the same period last year. Mass market table drop fell 22.5% and slot handle was down 26.8%.

Sands Cotai Central’s gaming revenue was down 34.3% to $493m. VIP turnover fell 60.8%, mass market table drop fell 8.6% and slots were down 9.8%.

Sands Macao fared slightly better, with gaming revenue down a mere 28.6% to $218.8m. VIP turnover fell 53% but win rate rose 0.27 points to 2.86%. Mass market table drop fell 27.7% and slots handle fell 12%.

The Four Seasons Hotel Macao and Plaza saw gaming revenue tumble 63.1% to $125.4m. VIP turnover fell 56.9% and win dropped 0.8 points to 2.8%. Mass market table drop fell 34.9% and slot handle dropped 53.8%.

Macau retail mall revenue was the lone bright spot in a sea of negative numbers, with sales up at the Venetian (15.9%), Sands Cotai Central (+53.4%) and Four Seasons (+29.1%). Total Macau retail mall revenue was up 25% to $87.4m while overall Asian retail mall revenue rose 17.3% to $127.2m.

In Singapore, Marina Bay Sands (MBS) reported total revenue down 4.6% to $784.8m, while gaming revenue fell 7.1% to $631.9m. VIP turnover fell 22% and the VIP share of MBS’ overall profit fell four points to 11%. Mass market table drop was down 4.2% but slots handle actually rose 1.1%. MBS’ traditionally high occupancy rate fell 4.5 points to 94.8%.

Stateside, Las Vegas operations saw overall revenue slip 1.6% to $376.4m, despite a 1.8% rise in gaming revenue to $111.8m. Table game drop rose 2.8% and slots handle rose 22.3%. The Sands Bethlehem property in Pennsylvania saw both overall and gaming revenue rise 9% to $127.7m and $118.8m respectively.

ADELSON ‘COMFORTED’ BY CONSISTENT MACAU DECLINES
On the analysts’ call, Sands chairman Sheldon Adelson (pictured) celebrated his firm’s focus on the higher-margin mass market business for preventing an even worse decline. Adelson said he wouldn’t offer a prediction for when Macau might rebound, saying operators were “sailing in uncharted territory, at least for the short-term.”

Later in the call, Adelson modified this claim, saying Sands was “sailing in uncharted waters and I hope we don’t sink like that boat in the Mediterranean.” This apparent reference to the recent drowning of around 800 migrants trying to reach Italy prompted some nervous laughter from the other Sands execs, until Sands president Rob Goldstein felt the need to add: “We’re not sinking.”

Adelson did note that the range of Macau’s monthly revenue declines was “staying in the 39-40% range.” Adelson said this gave him “a more comfortable feeling” than if the declines were swinging between 30% and 50%. Adelson hesitated to say whether this consistency indicated that some bottom had been reached.

In answering a question about ways to improve margins during the downturn, Goldstein claimed that Sands were “the only people in town not doing phone betting, which hurt us somewhat in the junket segment.” Sands and at least one other operator curtailed their telephone aka ‘proxy betting’ business last year – apparently over fears of getting their knuckles rapped by US regulators – but some of these operators recently resumed the practice to partially offset the VIP decline.

On the development front, Sands suggested its new $2.6b Parisian project in Macau would likely open in 2016, although it could be as early as spring or as late as winter.

MAINLAND VISITOR CAP NOT GOING TO HAPPEN
Adelson poured cold water on reports that Macau planned to cap its mainland visitors at 21m per year. Adelson said this idea represented the “suggestion of one minister” who, despite “very good intentions,” didn’t represent the view of the Macau government. Adelson said he’d had discussions with the minister’s staff, and even they confessed the plan was “just not doable.”

Adelson said Macau’s Meetings, Incentives and Conferences and Exhibitions (MICE) business would completely dry up if organizers felt there was a danger of attendees being prevented from entering Macau because “the guy who came through the gate before me was the last guy, the 21 millionth person.” Bottom line, Adelson said a visitor cap was as likely as his ability to “wake up tomorrow morning and all my hair will be grown back.”

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