Casino and resort company Las Vegas Sands Corporation is considering selling its Las Vegas assets for $6 billion, a company representative said.
On October 26th, Las Vegas Sands’ SVP for Global Communications and Corporate Affairs Ron Reese confirmed that “very early discussions” about a potential sale have already taken place, but nothing has been finalized.
Sands’ properties in Las Vegas include The Venetian, The Palazzo, and the Sands Expo and Convention Center. The company also partnered with The Madison Square Garden Company (MSG) for the construction of the MSG Sphere, a 17,500-seat music and entertainment arena that is set to open in 2023.
The potential sale comes as Las Vegas’ gambling industry continues to struggle amid the COVID-19 pandemic.
On October 21st, Sands reported an 82 percent drop in net revenue for the third quarter year-on-year, from $3.3 billion in the third quarter of 2019 to just $586 million in 2020.
In August, credit rating agency Fitch Ratings changed its outlook on Sands from “stable” to “negative,” saying that near-term prospects for the company’s business in Las Vegas were “dim” and “lackluster.”
Betting on Asia
Sands’ exit from the US market would allow it to focus entirely on Asia, where its more lucrative properties are located.
In its filings with the US Securities and Exchange Commission, the company said its Macau properties generated a combined revenue of $152 million in the third quarter, while its lone property in Singapore, the Marina Bay Sands, reported $281 million. Its Las Vegas properties, meanwhile, contributed just $152 million.
In an earnings call last October, Sands’ founder, chairman, and CEO Sheldon Adelson emphasized the company’s continued commitment to the Asian market, which is expected to see a faster recovery from the pandemic.
Adelson was particularly optimistic about Macau, which he believes has the potential to be one of the world’s greatest business and leisure tourism destinations. He also said the company welcomes the opportunity to “invest billions of digital investment dollars” and extend its contributions to Macau’s diversification and evolution.
In October of 2020, Sands opened the Grand Suites at Four Seasons, adding 289 accommodation units to the Four Seasons Hotel Macau.
The company will also rebrand the four-star Holiday Inn at Sands Cotai Central into a British-themed property called the Londoner, a project that is expected to cost $1.35 billion.
In Singapore, the company will spend around $3.3 billion to build a fourth tower at Marina Bay Sands, along with a 15,000-seat concert arena and additional convention and exhibition space.
Higher returns, long-term growth
Josh Swissman, a founding partner of the gaming and hospitality consulting firm The Strategy Organization, expressed his disbelief at the idea of Sands leaving the Las Vegas market, considering the company’s historical ties to the city.
Macquarie Research gaming analyst Chad Beynon, however, believes now is an interesting time for the company to engage with potential buyers, given additional convention capacity and uncertain demand levels in Las Vegas post-pandemic. He also sees higher returns and long-term growth in Asian markets.
In the October earnings call, Sands’ president and COO Robert Goldstein shared that he expects Las Vegas to have the slowest recovery out of all the company’s markets due to capacity restrictions and limited convention business.
Both The Palazzo and The Venetian rely heavily on group and convention business more than other gaming companies in Las Vegas. This, according to Launch Vegas LLC president and founder Nehme E. Abouzeid, could be the main reason why Sands has been entertaining offers from potential buyers. He added that a vast majority of Sands’ overall corporate revenue is generated in Asia, and that competition within the US market is becoming fierce.
He also shared that Adelson even considered moving Sands’ headquarters to Asia in the past but later changed his mind.
Should the sale of Sands’ Las Vegas properties push through, CBRE’s director of gaming consulting Brent Pirosch said this would highlight COVID-19’s devastating impact on the city. He also pointed out that Las Vegas is going through an evolution as the market reacts to the pandemic and prepares to face new competition. He suspects this is something that will be studied and discussed for decades.