Venetian results good despite onus of attacks

David Strow

Tuesday, Feb. 5, 2002 | 11:12 a.m.

The $1.5 billion Venetian resort on the Las Vegas Strip squeaked out a profit for the fourth quarter of 2001, despite a Las Vegas-wide slowdown in tourism that persisted throughout the last months of the year.

Parent company Las Vegas Sands Inc. today reported net income of $1 million for the quarter ending Dec. 31, down 80 percent from the year-ago period.

Revenue was down 18 percent to $121.8 million, while cash flow was off 14 percent to $42.2 million. Cash flow is a more widely followed indicator of Las Vegas Sands' performance, as the company has publicly traded debt, but no public stock.

Though down, the Venetian's business fared far better than some of its competitors on the Strip, said gaming analyst Andrew Zarnett of Deutsche Banc Alex. Brown.

"Clearly they reported very strong numbers, given the circumstances after 9/ 11," Zarnett said. "Their business showed remarkable resilience on an isolated and a comparative basis."

And the numbers also indicate the Venetian is taking market share from other Strip properties, Zarnett added.

"Their decline in revenues wasn't nearly the decline of others," Zarnett said. "Taking market share from others in Las Vegas mitigated the decrease in revenue."

Cost cutting also played a role in shoring up the company's finances. The Venetian's cash flow fell 16 percent to $36.9 million, but it was able to increase its profit margin from 31.2 percent to 32.6 percent.

"This favorable increase in operating margins was a result of focusing and improving on significant operating efficiencies within the Venetian," said Las Vegas Sands President Bill Weidner, without elaboration. The company cut corporate expenses by $200,000 during the quarter, and saved $2.5 million from lower interest rates on its debt.

"People were expecting (profit) margins to be down," said Larry Klatzkin, gaming analyst with Jeffries & Co. "Everyone's down (in revenues and cash flow), but everyone's outdoing what people were expecting."

And once revenues begin recovering, cost-cutting measures will mean companies will stay more efficient, resulting in more profitable operations, Klatzkin said.

At $36.9 million in cash flow, the Venetian was the second most profitable resort in Las Vegas during the fourth-quarter, surpassed only by the Bellagio's $56.2 million in cash flow.

The Venetian's room business showed the most strength during the quarter. Though hotel revenue fell 14 percent to $44.5 million, the 3,036-room hotel was able to average 95.2 percent occupancy for the quarter. This was actually an increase of 0.8 percentage points over the fourth quarter of 2000.

Not surprisingly, the Venetian's room rates did not hold up as strongly. The hotel reported an average daily rate of $168, down $29 from the year-ago quarter. But these numbers are strengthening, Weidner said -- the hotel's January occupancy reached 96 percent, and its ADR hit $213 that month. Occupancy was down from January 2001 by 2 percentage points, but rates were up an average of $6.

"(Hotel revenue) is a big bottom line number, especially for this company," Klatzkin said. "That (recovering hotel rates) could be a strong positive for this company."

The Venetian's casino business did not fare as well. Casino revenues fell 25 percent to $53.1 million, primarily as a result of far less play on the resort's gaming floor. The amount wagered on the Venetian's table games plunged 32 percent to $184.3 million, while slot win per machine per day fell 6 percent to $132.

Weidner attributed the decline in table play to "a reluctance to travel from certain casino marketing segments early in the fourth quarter, and our heightened selectivity of casino customers in a competitive market."

Food and beverage revenue fell 27 percent to $12.9 million.

One of the brightest points of the quarter for the resort was its Grand Canal Shops, which was able to post a 13 percent increase in revenues, to $8.7 million. Cash flow from the mall rose 6 percent to $5.3 million.

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