By Dave Berns  H&MM Contributing Editor

Las Vegas - May 1998 - He never yearned to be a member of the dice-tossing, card-players club, so it wasn't particularly surprising when Las Vegas hotel developer Sheldon Adelson delivered a scathing speech that ripped some of the most powerful figures along the city's Strip, including the president of a gaming giant and the chief financial officer of the industry's most respected brand.

"Today, here in Las Vegas, there is a syndrome in casino development that I call 'Strip of Dreams,'" Adelson said. "That is the mentality that says, 'If we build on The Strip, then the customer will come, no matter what we build.' But the difference here is that we already have over 100 ballfields."

The builder of the $1.4 billion Venetian resort at the site of the old Sands hotel and casino spoke to a crowd of gaming executives, who work in an industry that observers believe is about to enter a period of much uncertainty. As many as 20,000 new hotel rooms are planned to open by 2001, bringing the city's total room base to 125,000. The additions would come just as Las Vegas has been struggling to absorb 12,000 since 1995. As a result, the citywide occupancy rate dipped 4 percent in 1997 to 86 percent from a record high of 90 percent a year earlier, according to the Las Vegas Convention & Visitors Authority. The average daily rate was $62 in 1997, up from $58 in 1996.

"No market is unlimited," Adelson told the opening session of the International Gaming Business Expo. "Ours has room to grow, but I personally don't believe that it is unlimited."

Circus Circus Enterprises, which operates 15,000 rooms along The Strip and is building an additional 3,700 upscale rooms at its $950 million Mandalay Bay, has failed to understand the changing market, he said. The company has been plagued by declining room rates and tightening profit margins at its Strip operations.
"You can't make a bottom line until you have a top line," Adelson said. "[Circus Circus] tried to migrate upward from their well-deserved budget niche into the midmarket, while the midmarket properties tried to skim the higher end of the budget market. The result - everyone's room rates suffer."

Adelson later said he had delivered his comments because Circus Circus President Glenn Schaeffer privately had been critical of Adelson's Venetian, a high-end Italian-themed resort that will cater to upscale travelers and conventioneers who attend conferences at Adelson's adjacent Sands Expo & Convention Center. The founder of the Comdex computer show - who sold the international show in 1995 for a reported $900 million - said Schaeffer and others privately had attacked him as an outsider who didn't understand the workings of the Las Vegas gaming market.

Schaeffer, who was contacted after the speech,  said: "Circus Circus and Mirage Resorts generate a considerable portion of the profits made on the Las Vegas Strip. What is Sheldon's portion?"

Battling over budgets

Mirage Resorts Chief Financial Officer Dan Lee also was the target of Adelson's ire. He charged that Lee had been trashing the progress of The Venetian in talks with bondholders of the project. Mirage Resorts is building the $1.6 billion Bellagio on the opposite side of Las Vegas Boulevard, about one-half mile south of The Venetian. The two competitors will target many of the same upscale tourists.

"Dan Lee of Mirage Resorts told two of our bond investors that we are running substantially over budget," Adelson said. "Maybe he's just confusing us with the now legendary $400 million to $600 million and growing cost overruns at his own Bellagio as they panic over there to try to improve the Bellagio to compete with The Venetian."

Lee, who did not attend the speech, denied afterward that he had bad - mouthed Adelson's project to bondholders. "I don't make false statements," Lee said, after the speech. "I know nothing about his budget."

Bellagio is scheduled to open Oct. 15 at a cost of $1.6 billion. In 1996, Wynn projected Bellagio's budget to be $1.25 billion, but purchases of classic European art to be displayed at the resort have contributed to the increase in the capital expenditure.

Adelson's strongest enmity was reserved for the Las Vegas Convention & Visitor Authority. He considers the publicly funded agency a bureaucratic boondoggle that has done little to effectively market the region to tourists and conventioneers.

"They're not actively promoting expansion into the broadened universe the emerging markets have created," he said. "What Las Vegas needs is better growth planning, infrastructure development and diversified resort casinos catering to new segments of the population."