LAS VEGAS – When billionaire Sheldon Adelson (search) sold his successful Comdex computer show and decided to build a lavish hotel-casino with thousands of rooms, gambling executives ridiculed his business model.
They said Adelson's plan for The Venetian to cater to business travelers and profit from hotel rooms and conventions wouldn't work on the Las Vegas Strip (search), where everyone knew casinos were the true moneymakers.
Critics and competitors told The Wall Street Journal in 1997 Adelson was "smoking something" and his over-the-top property was doomed because Las Vegas had too many rooms and couldn't make enough money outside the casino to support its size.
Executives at the Las Vegas Sands Inc. (search) , The Venetian's (search) parent company, can laugh now when they read that article. The Venetian is the second most profitable hotel-casino in Las Vegas after the Bellagio, Steve Wynn's upscale creation that raised the stakes in this city, putting luxury at the forefront of the Las Vegas experience.
And in the next few weeks, the now privately held Sands is expected to begin trading on the New York Stock Exchange (search) under the name Las Vegas Sands Corp.
"My gut tells me this will be a very high-demand or hot IPO (initial public offering)," said Marc Falcone, a Deutsche Bank equity gambling analyst in New York. "You have an outstanding business model with great growth opportunities and you have a management team that has done an outstanding job with their assets."
With the public offering, the Sands would become one of the largest gambling companies in the world behind Harrah's Entertainment Inc. (HET) and MGM Mirage Inc. (MGG) — if their recently announced mergers are approved next year.
Proceeds will be used for the company's proposed $1.6 billion, 3,000-room Palazzo hotel-casino on the Las Vegas Strip and the $1.8 billion Macau Venetian Casino Resort in the Chinese territory. Both developments are scheduled to open in 2007. The company has proposed to Macau's government building another six hotel resorts there, some of which will have casinos.
The company also is exploring projects in Britain, which is revising its gambling laws to allow for more and bigger casinos.
Las Vegas Sands executives are aiming at an IPO price of $21 a share, according to documents filed last month with the Securities and Exchange Commission. The company plans to sell 23.8 million shares of common stock and give underwriters the option to purchase an additional 3.5 million. The Sands could raise about $537 million, if underwriters, led by Goldman, Sachs & Co., exercise all their options.
Sands officials declined to comment further, citing SEC rules that impose a quiet period on companies going public.
Adelson, 71, the Sands chairman who has been described as serious, determined and demanding, doesn't often give interviews. He is known for his attention to detail, but employees say he doesn't micromanage.
People in the industry have called him a visionary — a label Adelson might not resist given his prophetic comments.
"Las Vegas is living in yesteryear's strategy," Adelson told The Wall Street Journal in the 1997 article. "We're living in tomorrow's strategy."
Once the stock offering is completed, Adelson and trusts for him and his family will own about 88 percent of the outstanding common stock, according to documents filed with the SEC.
Adelson's U.S. business strategy hasn't changed much since he first opened The Venetian in 1999. In 2003, he added a luxurious, all-suite, 12-story tower called the Venezia, further driving room revenues at The Venetian complex.
The Venetian is fulfilling Adelson's goal of profiting from room rates — its average daily room rate during the first nine months this year was about $219 compared with $89 for all hotels in Las Vegas. The company's percentage of gambling revenue is one of the lowest on the Strip because of its emphasis on the group convention and trade show business, and the resulting higher occupancy and room rates on week days.
Adelson also controls the Sands Expo and Convention Center (search) next to The Venetian, which boasts gondolas, a winding canal and street performers who entertain visitors at replicas of St. Mark's Square and the Oculus.
"Mr. Adelson and his team have a lot of innovative ideas," said Andrew Zarnett, casino industry bond analyst for Deutsche Banc. "The biggest was creating all-suites and proving that you could create a significant amount of revenue from rooms, food and beverages.
But his competitors are now reaching for the same market. Mandalay Resort Group has built its own 1,128 all-suite tower and a massive convention center. MGM Mirage will soon open a second tower at the Bellagio with 928 rooms and suites, plus an additional 60,000 square feet of convention space.
"If imitation is the best form of flattery, then Mr. Adelson should be very flattered," Zarnett said.
Adelson has focused on two of the most lucrative gambling markets in the world: Las Vegas and Macau, the former Portuguese colony 40 miles west of Hong Kong. For more than one billion people in China, Taiwan and Hong Kong, Macau is the place to gamble.
In May, the Sands opened the $265 million Sands Macau, the first Las Vegas-style casino in the Chinese enclave. And William Weidner, president and chief operating officer of the Sands, said in May the company was interested in developing a casino in Singapore.
The Macau and Las Vegas projects should only increase the attractiveness of the Sands company, Zarnett said.
"They have an amazing growth pipeline," Zarnett said. "Las Vegas is very strong. He's got a lot of good things going for him."
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