Sands Corporation: Vegas NV or Bethlehem PA

It's now been slightly over 3 years since Sands PA opened (May 22, 2009). Sands Macau opened on May 18, 2004, and Venetian Macau opened Aug 28, 2007.

Initially Sheldon Adelson publicly announced that the Bethlehem property was a corporate error that he regretted. The legalization of table games changed the equation in Pennsylvania. Although the huge bulk of gambling is still slot machines, the 55% tax rate vs the 14% tax rate on table games means the table games are in the same ballpark as slot machines in return to the casino. They also represent the greatest growth opportunity.

The Casino in Bethlehem made $377 million in gross revenue, vs $413 million from the Venetian/Palazzo in Vegas. Non gaming revenue in Vegas was $894 miillion vs $23 million in Bethlehem.

Earnings before Interest Taxes Deductions and Amortization (EBITDA) in Vegas was four times Bethlehem.

The Venetian opened on May 3, 1999 at a cost of $1.5 billion, which seems rather small compared to prices being paid today. The Palazzo had its grand opening on January 17, 2008 at a cost reported between $1.8 billion and $3 billion. Bethlehem Sands cost $850 million.

I think the Venetian has been open long enough that it is more profitable than Bethlehem. But the question is would anyone invest that kind of money today into a domestic property today? I think not, the better gamble would be on a lower cost gambling intensive middle class facility in the right location.

Quote: pacomartin

I think the Venetian has been open long enough that it is more profitable than Bethlehem. But the question is would anyone invest that kind of money today into a domestic property today? I think not, the better gamble would be on a lower cost gambling intensive middle class facility in the right location.

Couldn't the right location easily be domestic? Boston, Miami, Dallas, Houston, Atlanta, Nashville, and DC all seem like prime targets for a cheap-but-local option (really, any close option)

Quote: pacomartin

But the question is would anyone invest that kind of money today into a domestic property today? I think not, the better gamble would be on a lower cost gambling intensive middle class facility in the right location.

The problem is that rarely are such investments made "today". Entrepreneurs and their bankers make decisions regarding the current economy and perhaps throw in a little bit of slack into the numbers. Once the commitment is made then its a matter of doling out the money. This is why some real estate projects got completed after the downturn. The entrepreneur has already invested his money and the bank has already made its commitment to advance construction funds as required. The trick seems to be to get the bankers on board with out any recourse to non-project assets. No one really wants to foreclose on a shell of a building, only a completed structure can be rented out to repay the investors.

Would a working man's casino be a good investment now? Sure. Just about anywhere but near people might be best. Which of course means relatively near New York City.

Quote: pacomartin

I think the Venetian has been open long enough that it is more profitable than Bethlehem. But the question is would anyone invest that kind of money today into a domestic property today? I think not, the better gamble would be on a lower cost gambling intensive middle class facility in the right location.

The problem with most major companies currently operating casinos in the U.S. today is that most are not financially stable. CET is having to sell off profitable casinos in order to make the books (i.e. St Louis), while MGM is forever sunk in City Center. The only growing domestic company is Penn,which I don't think is sustainable at the rate they are opening. They would most likely be the major group to put in bids for future large casinos, unless CET or MGM can find a suitable partner (like Horseshoe/Dan Gilbert in Ohio).

I think as casino gambling expands into larger markets, the latter will become more common. A potential project in Boston is being co-branded with Caesars. The question then becomes can THAT model be sustainable. If the companies are profitable, then CET could get bought out by the other half. If not, CET may be forced to pick up yet another property.

When are we going to hear about Sands Cotai Central?
We know that the casino has been earning just over $3m per day for the first 12 weeks of operation.

Quote: pacomartin

We know that the casino has been earning just over $3m per day for the first 12 weeks of operation.

Who are the people gambling in these casinos, dropping all
this money? What are the demographics of the clientele?

Quote: EvenBob

Who are the people gambling in these casinos, dropping all
this money? What are the demographics of the clientele?

I am tempted to say there has to be money laundering in Macau. I am not referring to Sands Corporation in this statement.

I see that Station Casinos in Las Vegas won $2.44 million per day last quarter in Vegas (just casino revenue from their 17 locations). I don't think most people expected the owner of the local casino to end up as billionaires.

What is the tax rate on revenue in Macau?

There will always be a place for mega-resorts. If you build it, they will come. However, the timing is important.

In 20 years, the current latest and greatest (CityCenter?) will be "mature". Something new and shiny will need to take it's place (Echelon?).

Quote: Ayecarumba

What is the tax rate on revenue in Macau?
Something new and shiny will need to take it's place.

I think the tax rate varies in Macau depending on VIP baccarat or not. But the high 20% is what I have heard. It is much higher than Vegas, and about double Singapore. While at one point it was worth flying whales to Nevada instead of Macau, now for Sands Corporation, it is probably fine to fly them to Singapore. The expense of transporting people 1500 miles by air is much less than flying them over 6000 miles.

If Echelon is revived, then what about the Plaza?


While the bankers are open to renovations at the Sahara, I don't think they are going to finance a new project. If Sahara reopens, maybe Carl Icahn will be open to finishing off the Fountainbleau.

Quote: pacomartin

...maybe Carl Icahn will be open to finishing off the Fountainbleau.

I'm pretty sure he would sell it first (for a profit), to let the buyer take on the headache and expense of finishing it. The guy does not invest to grow businesses, he buys below market, cuts expenses, takes cash out, then sells when the cash dries up. He's like a financial vampire.

Sands in Bethlehem had a record month at table games $20.9 million at table games vs $23.2 million at slots. Tax laws in PA are much lighter on table games. The casino keeps $18m from the table games after taxes, but only $11m from the slot machines.

For PA outside of Sands Bethlehem the industry takes in 3X as much money in slots as it does in table games.

Bethlehem Sands Event Center ranked 6th among world's world's similar size venues with 200,000 tickets sold, topped only by:.
1) Boston's House of Blues, with 314,392 tickets sold; the
2) 9:30 Club in Washington, D.C., with 284,309;
3) New York's Terminal 5, with 266,159;
4) Ancienne Belgique in Brussels, Belgium, with 229,134; and
5) First Avenue in Minneapolis, with 215,706.


Of course, while this casino is the runaway success in PA it is pennies compared to MAcau whose YoY drop in gaming revenue was a staggering 30% in December.

Sheldon Adelson's net worth dropped from $37b to $27b this year and was the single biggest reversal of fortune experienced by an American billionaire in 2014,.
Mark Zuckerberg added another $10b (+24%) to his cash pile.

Quote: pacomartin

Bethlehem Sands Event Center ranked 6th among world's world's similar size venues with 200,000 tickets sold, topped only by:.
1) Boston's House of Blues, with 314,392 tickets sold; the
2) 9:30 Club in Washington, D.C., with 284,309;
3) New York's Terminal 5, with 266,159;
4) Ancienne Belgique in Brussels, Belgium, with 229,134; and
5) First Avenue in Minneapolis, with 215,706.

Is there a definition of similar size? it'd have to be like 1,200 at First Ave to 3,500 at Sands. Even adding First Ave's secondary stage, Sands is still more than twice as large.

I always got a kick out of the acts that Sands a) got, and b) thought I'd want to see. In Feb, they have Foreigner, Hall & Oates, and Mike & the Mechanics - all bands I grew up listening to (edit: and they know my age). They think I want to see something called Chuggington Live. Or, maybe, they just want to give away the Chuggington tickets while the Foreigner show will actually sell out.