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China – Adelson takes softer approach on Macau downturn

By - 23 October 2015

Despite challenging results in Macau that drove third quarter revenue down, Sheldon Adelson did his bit to ease Macau/American relations following criticism of the government by rival operator Steve Wynn.

Whilst revenue for Sands’ Macau casinos dropped by 28.8 per cent to $1.66bn, Mr Adelson held his nerve.

“We remain fully committed to playing the pioneering role in Macau’s transformation into Asia’s leading business and leisure tourism destination,” Mr. Adelson said. “We have steadfast confidence in our future success. We have a belief our gaming license is a privilege and not a right. We have always been respectful of the Macau government’s desires. We were the pioneer of the integrated resort business model. That’s what the government wants. We will continue to do that.”

Behind the scenes though, Mr. Adelson’s business sense is likely to be more in tune with Mr. Wynn’s. The latter slammed the Macau government’s table game limits as being ‘the single most counter-intuitive and irrational decision that was ever made.’ Sands is opening two more Macau resorts next year, a St. Regis-branded hotel which is part of the Sands Cotai Central, and the $2.7bn Parisian. In total, it will operate more than 13,000 hotel rooms in Macau but of course it has no idea, yet, how many tables it will operate at its new resort.

Las Vegas Sands overall third quarter results benefited from a good quarter in its other three markets, made up of the Las Vegas Strip, Sands Bethlehem and Singapore.

Profits dropped by 22.7 per cent to $519.4m and revenue by 18.1 per cent to $2.89bn.

Mr. Adelson, said: “While the operating environment in Macau, particularly in the high-end gaming segments, remained challenging during the quarter, our focus on the higher margin mass and non-gaming segments and the geographic diversification of our cash flows allowed us to again deliver in excess of one billion U.S. dollars of adjusted property EBITDA during the quarter and weather this cyclical downturn better than the industry overall. We remain sharply focused on the consistent execution of our global growth strategy, which leverages the power of our unique convention-based Integrated Resort business model.

“Our convention-based Integrated Resort business model appeals to the broadest set of customers, generates the most diversified set of cash flows, and delivers the industry’s highest revenue and profit from non-gaming segments while bringing unsurpassed economic and diversification benefits to the regions in which we operate. We remain confident in our ability to both further extend our global leadership position and deliver strong growth in the future.

“In Macau, notwithstanding a challenging environment in the VIP and premium mass gaming segments, we delivered $536.8 million in adjusted property EBITDA across our Macau property portfolio in the third quarter. We remain confident that our market-leading Cotai Strip properties, which will be complemented in the future by the St. Regis tower at Sands Cotai Central opening in December 2015, and by The Parisian Macao, targeted to open in late 2016, will continue to provide the economic benefits of diversification to Macao, help attract greater numbers of business and leisure travellers, and provide an outstanding and diversified platform for growth in the years ahead.”

Mr. Adelson was particularly pleased with the Marina Bay Sands in Singapore, where revenue grew to $750.7m in the quarter with EBITDA of $389.7m, represnting an increase of 10.8 per cent compared to the year-ago quarter.

Sands Strip revenue grew by 1.3 per cent to $385.5m at The Venetian and Palazzo resorts. Casino revenue at the two venues dropped by 22.5 per cent although this was off-set by a 34 per cent increase in food and beverage revenue and a 19 per cent jump in hotel revenue. Net revenues for Sands Bethlehem in Pennsylvania increased 13.1 per cent to $144m and adjusted property EBITDA increased 25.8 per cent to $37.5m for the quarter, which was an all-time quarterly record for the property.

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