Weidner still upbeat despite Macau results

By Liz Benston (contact)

Tuesday, May 17, 2005 | 10:57 a.m.

Shares of Las Vegas Sands have fallen more than 6 percent from a couple of weeks ago when analysts said the company's first-quarter gambling revenue in the Chinese enclave of Macau was much lower than expected.

But Las Vegas Sands President and Chief Operating Officer Bill Weidner isn't sweating such details. At a gaming conference Monday sponsored by the Nevada Society of CPAs, Weidner said executives are bullish on future prospects in Macau, where the company opened the region's first American-owned casino.

The company's Sands Macau casino accounted for more than 90 percent of Macau's 17 percent growth in gambling revenue in the first quarter versus a year ago, Weidner said. But analysts were expecting growth of roughly 40 percent -- a sign of the turbocharged expectations for the small waterfront enclave a world away. With little more than a dozen major casinos, Macau has already overtaken the annual gambling revenue generated on the Las Vegas Strip.

April gambling revenue in Macau already has rebounded and the future looks bright, he said.

Weidner said the number of middle-class Chinese -- now estimated at 150 million -- is expected to triple in the next four years.

Moreover, the region is densely populated, with an estimated 3.1 billion people living within a five-hour flight of Macau. That compares with the roughly 460 million people who live within five hours of Las Vegas, he said.

The Chinese are renowned gamblers but also save a significant amount of their income, he said. An estimated $1.7 trillion in savings -- roughly 48 percent of the country's gross domestic product -- is sitting idle, he said.

Weidner said the company expects China's gross domestic product to grow at least 8 percent over the next decade. Fueling that is an estimated $600 billion in foreign investment in China -- a number that will soon surpass the $1 trillion mark, he said.

The company opened the Sands Macau casino last year. The property has already generated some $260 million in operating cash flow -- about what it cost to build.

By 2008, the company expects to open a series of hotels as part of its "Cotai Strip" development in Macau. The $2 billion project will include a duplicate of its Venetian resort in addition to six other properties built with hotel partners.

Even with Macau's relatively steep tax rate of 39 percent, the casino can still maintain a high profit margin of more than 30 percent because employment costs are low relative to Las Vegas. The company's profit margin is similar in Las Vegas because higher labor costs are offset by lower taxes, he said.

The company will own and operate the Venetian and the other casinos in each of the hotels.

At the conference, Weidner also extolled the company's success in the face of criticism from "special interest groups" such as the Las Vegas Convention and Visitors Authority and the Culinary Union.

"They aren't actors, they are reactors," he said. "They don't put their own money at risk."

Las Vegas Sands has previously criticized the Las Vegas Convention and Visitors Authority for collecting room taxes from hotels that subsidize discounted convention space that competes with the Venetian resort and the Sands Expo.

The LVCVA recently authorized a major renovation of its convention center.

Subsidizing more convention space using room taxes when private industry can build the space itself is inefficient and "doesn't make sense," Weidner said.

Adelson was the first to create an integrated luxury resort with a major convention center, a controversial strategy that has fueled the highest occupancy rates and highest room revenues for a single property on the Strip as well as the Strip's biggest profit margins, Weidner said.

"We've added up the scorecard and the market has spoken," he said.