Vol. 3, No. 10, October 2007
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Category Killer
Venetian Macao opens to rave reviews, huge crowds
When the Venetian opened in Las Vegas in 1998, it was Sheldon Adelson’s intro to the gaming industry. His focus on non-gaming revenue through meetings and conventions, retail, food and beverage, and entertainment was widely criticized. When the Las Vegas property proved a huge success, spawning more hotel towers, retail outlets and additional meeting space, Adelson knew he had a formula that could work in any market.
Nevertheless, the opening of the $2.4 billion Venetian Macao is being met with similar doubts. While the property and its “Cotai Strip” location were compared to the Las Vegas Strip (in fact, LVS warned competitors against using the trademarked Cotai Strip and “Asia’s Las Vegas” under threat of litigation), the market is currently more akin to Atlantic City than Las Vegas. Macau customers generally stay for less than one day and have shown a singular interest in gambling, and not much else. Forays by existing properties into non-gaming amenities such as nightclubs, retail and theaters have thus far been less than successful, but Adelson is confident that the Venetian Macao has a dynamic business model that will succeed.
He’s hanging his hat on the meetings and conventions business, known in Asia as MICE (meetings, incentives, conventions and exhibitions). With 1.2 million square feet of meeting space, Adelson expects Asian expos and corporations to consider relocating their business to Macau.
LVS President and COO Bill Weidner pointed out that the Hong Kong convention market is sold out. All dates are taken by shows and exhibitions organized by the Hong Kong Visitors and Convention Authority, so with Macau’s proximity to one of Asia’s most popular cities, he expects the Venetian to succeed.
“We’ve been very encouraged by our initial sales,” he says. “We expect that to increase now that we’re open.”
By offering what the company calls an “integrated resort,” complete with all the elements found at the Las Vegas property, including gaming and entertainment, Adelson says the Venetian and the Cotai Strip will appeal to all market segments.
“Entertainment is something everybody in the world wants,” Adelson says. “There has never been an entertainment center in the history of Asia. All of the entertainment elements that are attractive to the majority of people are here in a single building, which is what we call an integrated resort.”
Adelson says LVS is spending $115 million to produce and stage a Cirque du Soleil show at the Venetian.
While they talk about the non-gaming elements, it’s clear LVS has not downplayed the gaming. The Venetian hosts the world’s largest casino at 550,000 square feet, with 870 table games and 3,400 slot machines. Opening night saw virtually every gaming position filled.
While some LVS executives were saying privately after the opening that they could see the property reaching $1 billion in EBITDA in the first full year, Jefferies gaming analyst Larry Klatzkin says he’s estimating Venetian EBIDTA at more than $700 million.
“But when you add in the Sands Macao,” Klatzkin says, “the company should easily surpass the $1 billion mark.”
And unlike the debut of the Venetian Las Vegas, which opened only partially completed, the Macau property is opening fully realized. While Adelson would not reveal what he learned from the Las Vegas Venetian and exactly what he changed in Macau as a result, some things were obvious.
“We wanted to open with enough rooms and meeting space so we don’t have to consider expansion immediately, as we did in Vegas,” he says. “And the layout of the retail space is also improved after learning some things in Las Vegas.”
Another element added in Macau still not offered in Las Vegas is a 15,000-seat arena that can be used for meetings, entertainment shows and sports events.
The Grand Canal Shoppes has not one, but two canals, plied by the signature gondoliers. More “central squares” and an improved traffic flow promise to make it one of Asia’s most profitable retail spaces, according the Steven Weaver, LVS’ president of Asian operations.
“One of the benefits of building many different hotels,” says Weaver, “is that we don’t have to make the Grand Canal Shoppes everything to everybody. When the Four Seasons opens, we’ll have some very high-scale retail over there so we can bring more mainstream shops to the Venetian.”
Although table games, specifically baccarat, are the king of the Macau market, the president of Venetian Macao and the Sands Macao, Mark Brown, says they haven’t abandoned the slot player.
“When we first came here,” he says, “we were told that Asian players didn’t play slots. We found that wasn’t true, so we’re offering an expanded variety of machines and promotions that appeal to all kinds of players.”
New to Brown, former president of Trump Hotels and Casino Resorts, was the concept of the “rolling chip” program, an incentive plan that allows junket operators to get a piece of the revenue casinos obtain from their players. Brad Stone, executive vice president in charge of development for LVS, says the program will run a little differently at the Venetian.
“We will have a competitive program under our VIP business division,” he says. “It certainly won’t be the top end. It’s no secret that most places are paying 1.1 percent commission on the roll. We’ll be consistent with that, very competitive but very rational.”
Aristocrat Technologies has the biggest piece of the slot market-share pie at the Venetian, and other games such as electronic baccarat and sic bo have already proven popular.
The Venetian is only the first property to open on the Cotai Strip, a concept Adelson says came to him in a dream.
“When they first told us they were giving us this land, I thought they were trying to exile us,” he says. “I’m sure that’s what our competitors thought. But after thinking about it all day, I went to bed and woke up with the idea to build a mini-Las Vegas Strip here and include some of the most recognizable hotel brands around.”
LVS made deals with several hotel companies, bringing in such brands as Four Seasons, Sheraton, Shangri-La, Traders, Hilton, Conrad, Fairmont and Raffles. LVS will build and own each hotel, as well as operating the entertainment and casinos in each. When it’s completed, the Cotai Strip alone will combine to feature 20,000 hotel rooms, more than 3 million feet of retail space, and nearly 30,000 seats for live entertainment.
The Venetian is not the only casino opening in Macau recently. Just some of the properties that have debuted in the past two years are Wynn Macau, Crown Casino Macau, the Grand Lisboa, the Grand Waldo and others. Scheduled to open late this year is the MGM Grand Macau, which features a partnership between MGM Mirage and Pansy Ho, the daughter of longtime Macau gambling magnate Stanley Ho. Also under way are Studio City Macau, a joint venture between David Friedman, a former LVS executive and two Asian entertainment companies, and City of Dreams, a joint venture between Crown Casinos and Lawrence Ho, another of Stanley Ho’s offspring. City of Dreams will also include some other hotels, including Hard Rock and a Hyatt, with a show produced by Franco Dragone. Both these casinos will be adjacent to the LVS Cotai Strip properties.
With a need to expand the market, LVS has concentrated on making the journey from Hong Kong and mainland China more convenient. The company has purchased ferries, planes, buses and cars to convey visitors to the doors of the Venetian.
Stone says the company needs to get people to its Cotai Strip projects more quickly.
“When you build resorts of this nature, you have to make easy transport of guests a top priority,” says Stone. “The government is talking about building a light-rail transportation system, and we welcome that, but we need to get started now, so we’re going to take control of our own destiny.”
It’s developing a new market that makes Brown excited.
“We’re going to answer the question, ‘If you don’t gamble, why would you come to Macau?’” he explains. “We’re giving that segment a reason to come to Macau. There are now so many reasons to come here that people will come from all over the world to visit for two or three days at a time, whether they are gamblers or not.”
