Tuesday, May 26, 2009

Adelson Wishes He'd Fired Weidner Sooner

I had an extremely brief -- maybe 10-minute -- interview Friday evening with Las Vegas Sands CEO Sheldon Adelson as I prepared my New York Times piece on the opening of the Sands Casino Resort Bethlehem. But gosh, what a 10-minute interview. He talked up the Bethlehem property, of course, but he also wandered into areas I hadn't even planned to discuss.

Most importantly, he was fresh off the plane from Macau and said he believes he may have the financing in place to restart construction of the resorts on the Cotai Strip and the hotel and shopping at the Bethlehem site by the end of 2009. With the Times' blessing -- owing to a shrinking business-section freelance budget -- I did an Agence France-Presse wire service story about this development.

Ah, but there was more. In March, longtime top lieutenant William Weidner, the chief operating officer, left the company. He says he quit; Adelson has said he fired him. This culminated an epic internal struggle against the backdrop of LVS' stock freefalling from an October 2007 high of $148 to a low of less than $2 earlier this year.

I asked Adelson whether he would have done anything differently in the past year or so and this was his wallop of an answer:

"Would I have done anything different? Yes, I would’ve fired Bill Weidner a long time ago. He created a financing situation that was completely inappropriate. Now we’re getting financing that’s more appropriate. What I’d like to say, unequivocally, is it’s not a matter of the [Macau] market. The market is good, very good. You cannot change the culture of Chinese people and their love to challenge luck. If there’s some bumps in the road in terms of everything going 100 percent perfect. Our numbers have been going up and the [Macau peninsula, where casinos have long clustered and now include Sands Macao, Wynn Macau and MGM Mirage Macau] have been going down. [The Cotai Strip is] standing out as a separate must-see attraction in the city of Macau."

Before I could even ask another question, Adelson was off and running again. Steve Wynn has lambasted LVS in Asia and MGM Mirage on the Strip, particularly on Jon Ralston's TV show, for overambitious plans that lacked proper financing. Adelson battled back on that one:

"I wish I had accelerated the construction [in Macau], not cut down on it. I hear that our competitors like Steve Wynn fault us by saying, 'Oh they went too far, too fast, and they never should have built so much.' In the meantime, what’s the bottom line of our company versus other companies? Even in the economic tsunami that we’re experiencing, we’re still doing better than other companies on a proportional basis. Much better."

It's hard to know exactly what he means here, but thanks to Hunter Hillegas at RateVegas.Com for providing me with some data from recent SEC filings for comparison's sake. He found that the Wynn Macau and Sands Macao had average daily room rates in the first quarter of 2009 of $268, higher than the $216 garnered by the Venetian Macao, which is Cotai. As for the revenue per room in the same period, Sands Macao got $260, Wynn Macau got $223 and Venetian Macao got $216. So on both measures, Adelson's own property on the Macau peninsula was doing better than his property on Cotai. In Vegas, Wynn-Encore got an average rate of $222, higher than Venetian's $209 and Palazzo's $221. So it's pretty close on that front but it's hard to see how Adelson claims a clear victory in any of these markets.

Adelson did say that the one project he does not expect to restart by year's end are the St. Regis luxury condos on the Strip that now stand half-built. Yet he said that could happen, too, if he can create a situation where the developer is also the lender so the buyers can get the credit to close that banks are reluctant to provide. (Photo left by Isaac Brekken for my NYT piece in March on the Vegas condo market.)

I asked Bill Lerner, the ex-Deutsche Bank gaming analyst who now has his own firm called Union Gaming Group, about this notion. He said it's not farfetched and he expects MGM Mirage to do the same with some of their condos at CityCenter.

"I think we’ll see that with some of the residential development in the Strip corridor where the protects are built or nearly built. The operator/developer will structure seller financing. Where’s the downside? If they move ahead and do something like that, it allows them to close and collect interest payments. It’s the best alternative given the current set of circumstances."

Lerner, incidentally, is quoted in my AFP piece speculating that LVS will sell off some assets or take on equity-sharing partners to finish the stalled projects.

Finally, Adelson again defended his approach and he brought up the fact that he put $1 billion of his own money into the company to keep it afloat.

"Unless somebody thinks completely ignorant of the facts, I think I made an educated and informed investment decision that was a good decision on our part that saved our company and now we live to fight another day. I took $1 billion out of my family’s piggy bank. How many people would do that?"

Not ever having that kind of wealth, I honestly cannot say.


Anonymous said...

Good stuff, Steve. This is why your fans love you.

Jeff in OKC

Anonymous said...

Nice interview. Shel was clearly chatty. It's very hard to not to be impressed by the amount Shel pumped into the company when he needed to. As for back and forth with Wynn, you know they both could be right. Wynn is after a somewhat different market than Shel. In this environment I would think Wynn is doing better relying on high end (and some middle end based on his current rates)rather than conventions. The room rates are pretty consistent between Wynn and Shel, so the question is who is better at getting additional dollars away from their guests.

Did Shel say anything about convention bookings now and going forward?


Anonymous said...

The rate comparison is bogus . . . why dont' you examine total room revenue. Sands Macao and Wynn Macao combine for 700ish rooms - Venetian Macao has 3,000.

Also, I have seen in the past that 90 percent of the visitors to Macao stop at Venetian Macao during their stay . . . bet the penisula casinos can't say that.