Why is Las Vegas Sands President Michael Leven Smiling?
$800 million Investment in Sands Casino Resort Bethlehem Appears to Have Paid Off
|By Matt Assad, The Morning Call,
Allentown, Pa.McClatchy-Tribune Regional News
June 10, 2011--When Las Vegas Sands President Michael Leven came to Bethlehem a year ago, he candidly admitted the South Side casino wasn't making enough to pay the massive debt the company accumulated to build it.
He was back Thursday, and this time he had a lot to smile about.
Not only was he cutting the ribbon on a new 302-room hotel, but the table games that opened since his last visit have become some of the busiest in Pennsylvania. Perhaps most importantly for the man who holds the purse strings of the world's largest casino company, Sands Casino Resort Bethlehem appears to be justifying the company's $800 million investment.
"I wasn't sure this property would ever get there, but it's just about able to pay the bills. It will very shortly be in the black and I never thought it could turn around this quickly," Leven said in the Foundry meeting room of the new hotel.
It is a very different situation than it was a year ago, when Leven came to town after Sands CEO Sheldon Adelson had expressed regrets over investing in the Christmas City. Leven acknowledged Thursday that Sands' small-market experiment in Bethlehem is something the company probably won't repeat, but he also said the casino's growing revenues make it an asset that Sands wouldn't consider selling anytime soon.
While Leven is pleasantly surprised at Sands' 12-month turnaround, Larry Klatzkin, a Wall Street analyst who has been following the casino industry for 25 years, isn't.
"Look, it's the closest casino from Manhattan," Klatzkin said. "A lot of people thought they spent too much on the building, but I always believed their revenues would turn around once everyone realized how close it was."
Leven, who's also the chief operating officer for the $30 billion gambling empire that stretches from Las Vegas to Singapore, was in Bethlehem for the grand opening of its hotel. The hotel, which opened to guests May 27, has amenities that include a swimming pool, fitness center, free Wi-Fi, meeting facilities and continental breakfast. Room rates range from $149 a night for a standard room to $419 for an executive suite.
The grand opening included not only a ceremonial celebration of a hotel that came two years late, but was highlighted by an intimate performance by crooner Paul Anka, who was scheduled for a sold-out concert at the casino later Thursday evening. Before a crowd of more than 100 business and government leaders from around the region, Anka performed a rewritten version of "My Way," the song he wrote for Frank Sinatra.
While people expected to be entertained by his velvet chords, it was Anka's comedic banter that had them applauding, as he envied Mayor John Callahan's hair, called Arnold Schwarzenegger the sperminator, and joked about the Las Vegas Sands CEO's Jewish roots.
"And Bethlehem, we know for sure, is not just for Jesus anymore," he sang. "Now your job is done, 'cause Sheldon Adelson has blessed it his way."
Leven roared with everyone else, but he didn't need Anka to put him in a good mood. Leven first arrived in Bethlehem a year ago to restart construction on the hotel that was halted when the global recession hit in November 2008.
At the time, he was optimistic about the casino's future, but the recession had taken its toll. Revenues were disappointing, a month earlier the casino laid off 80 workers, and Adelson said if he had to do it over, he probably wouldn't have built in Bethlehem.
Leven acknowledged the company had made spending mistakes, and estimated that paying the building debt alone would require an EBITDA -- that's earnings before the deduction of interest, tax, depreciation and amortization expenses -- of $80 million a year. Yet, back then, the casino was on pace to do little more than $50 million in those earnings.
Now with 129 table games and the largest hotel in the Lehigh Valley, Sands has grown to have the third-busiest slot machines in the state and the second-busiest tables, trailing only Parx Casino in lower Bucks County .
Perhaps most importantly, that critical EBITDA number was $22 million in the first quarter of this year, doubling last year's total. And with more table games like blackjack, craps and roulette on line, and new revenues coming in from the hotel, that number is expected to grow every quarter this year.
In November, the 35-store mall will begin opening, and next February an event center that will accommodate up to 2,500 people for concerts, expos or corporate meetings is scheduled to open.
Leven said he expects EBITDA in Bethlehem to be a profitable $80 million to $100 million for 2011. And he noted that a year ago, less than 40 percent of Sands' visitors were from outside the Lehigh Valley.
"Now, it's up to 50 percent and I think this hotel will help us hit our goal of 60 percent," Leven said.
Why? Well, that's easy, Klatzkin said. In addition to being a gambling industry expert, he lives in Manhattan. So when his friends recently asked him to recommend where they could spend a weekend gambling, he had little trouble coming up with an answer.
"Atlantic City is 21/2 hours, Connecticut is 31/2 and Yonkers doesn't have tables," Klatzkin said. "Sands is 75 minutes and now it has a hotel. It's a no-brainer."
A look at how Sands Casino's revenues have grown since last year
Average monthly slots\19.1 million\$22 million
Average monthly tables\ NA\$6.2 million
Average daily total gambling revenue\$663,000\$933,000
First quarter EBITDA\$11 million\$22.1 million*
Source: Pennsylvania Gaming Control Board
*Earnings before the deduction of interest, tax, depreciation and amortization expenses
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