Adelson: MICE paying off
The Las Vegas Sands Corp. posted a 19 percent drop in revenues and a more than 30 percent drop in profits for the second quarter. Despite the decline, Sands Chairman Sheldon Adelson is upbeat about “current headwinds” in the world’s premier gaming market. The numbers were positive in the mass-market gaming column for the Vegas-based operator.
“I remain steadfast in my belief that we will grow and prosper in the long term,” Adelson said in a conference call. “We remain committed to Macau.”
The Sands said second-quarter revenue at its Macau properties fell 25.6 percent to $1.77 billion, with net income down 37 percent to $388.7 million. In Singapore, Marina Bay Sands saw net revenue decline 11.4 percent to $713 million. The property’s operating income dropped 31.6 percent to $277.2 million.
However, reported Bloomberg, Sands China Ltd. surged in Hong Kong trading as the company gained share in the mass-market segment. “The strength of our premium direct business has offset a lot of the weakness in the junket segment and enabled us to outperform the Macau VIP market,” Adelson said.
The earnings report “handsomely beat consensus,” agreed Karen Tang, analyst at Deutsche Bank AG, in a note to investors. “We see Sands’ second-quarter margin resilience as truly remarkable, but company-specific. We still expect margin decline for the other operators which have less room for cost rationalization.”
Sands President Robert Goldstein noted in the earnings call that Macau is “very clearly” a mass market and “no longer driven by junket GGR.
“A mass market is emerging. And again, mass markets demand lots of product: retail products, room product, diversity pricing, lots of tables, lots of spots, ETGs—that’s who we are. That’s our background. We built our products for that.”
According to the Asia Gaming Brief, analysts Tim Craighead and Margaret Huang observed that nearly 90 percent of Sands China profits derived from nongaming amenities as well as mass-market gaming.
Moreover, Adelson pointed out, Sands’ emphasis on meetings, incentives, conferences and exhibitions has helped in Macau. “We’re struggling less than our competitors because we have a unique tool. It’s called MICE. They can’t fill up the rooms with MICE, we can. So that’s why our occupancy is higher, our rates, our high cash rates are higher, and we have more of the mass market in the casino.… The other guys can’t catch up with us, the train has already left the station.”
He chided his competitors in the market, saying they gave rooms away instead of selling them. “I’m sorry to sound boastful like this but we have to look at reality,” Adelson said. “The reality is that our experience tells us what to do, when other people are confronting experiences they have never confronted before.”
Revenue figures for the whole market are not yet available for July. But Secretary for Economy and Finance Lionel Leong Vai Tac says the numbers likely will not exceed 18.355 billion patacas (US$ 2.294 billion), a “red line” that could kick off for austerity measures. Officials have pledged that the belt-tightening will only affect government entities, and social services will not be cut, according to the Macau News.
In a note to investors, BNP Paribas analyst Shengyong Goh wrote that July and August “will serve as a litmus test for whether the Macau gaming market has indeed bottomed and moved into a growth mode,” reports the South China Morning Post.