The trends that ended 2014 have continued, and accelerated, into the new year.
U.S. regional gaming revenues in January rose substantially over last year, double digits in many cases.
Macau gaming revenues continued their swoon heading into Chinese New Year, which starts February 19.
And Las Vegas appears to be maintaining its upswing, though the Las Vegas-Macau operators—Las Vegas Sands, Wynn and MGM Resorts—might be suffering some of the same decline in Chinese high rollers that they are experiencing in Macau.
Likewise, the stocks of the big cap casino operators continued the decline that sent them swiftly and steeply downward in the fourth quarter.
But the story of the first weeks of 2015 is that we still don’t know what the year holds. Indeed, there are more questions than answers:
• Is the rise in regional revenues the long awaited recovery in consumer spending? Or is it just that last winter’s weather was so severe that it depressed results to the point that anything—including weak business volumes—look good in comparison?
• Will Macau revenues begin to rise with the opening of the first of the next, and perhaps final, wave of mega resorts at mid-year? Or is the pressure from the Chinese government that is suppressing gambling in Macau relentless, and the second half of the year will see the worst of both worlds – major new supply meeting lessened demand?
There are good arguments on both sides of these questions and for the answers, we suspect, we’ll just have to wait and see.
A Distinction Without A Difference?
Give Sheldon Adelson credit. He’s not only the visionary who built a multi-billion dollar empire in Las Vegas Sands by developing his own business model, he still, at the age of 81, is in total command.
Thus, it was no surprise that Adelson has taken over as CEO of Sands China.
In effect, he has been CEO all along, the guy who sets the strategy and makes the policy decisions.
In his company’s fourth quarter conference call, Adelson made two key points that should be obvious to all:
1) The majority of the company is Sands China, thus the structure of top management was a little awkward with what amounted to two CEOs.
2) He can hire a COO to run operations in Macau.
There have been a couple of downsides mentioned in the move like Adelson might not be far enough removed if any legal issues arise in Macau, or that his powerful personality might alienate Macau and Chinese officials.
And, in fact, we have long thought one of the strengths of LVS had been that life-long friend Mike Leven was able to smooth ruffled feathers when he served as corporate COO. Leven is recently retired, though he still serves on the board of directors.
Like regional and Macau gaming trends, we’ll have to wait and see if Adelson’s firm hand on the helm in Macau steers his ship safely, or whether his strong personality proves counter productive.
What we know for now is that if Adelson proves right again, and his properties fill with the newly affluent middle class of China, LVS shareholders will continue to benefit.
