|By Matt Assad, The Morning Call,
Allentown, Pa.McClatchy-Tribune Regional News
Apr. 8, 2010--As the Sands casino prepares to resume hotel construction and add table games, its billionaire CEO admitted something not usually heard from someone about to spend another $100 million.
Sheldon Adelson, outspoken founder of Las Vegas Sands Corp., this week acknowledged if he had to decide again, he would not build a casino in Bethlehem.
"If it were today, we probably wouldn't have started it," Adelson said in a Wall Street Journal story.
The bottom line is, Bethlehem's smallish, regional casino is a model Sands no longer subscribes to.
It doesn't help that the casino is underperforming, but Sands officials insist the world's largest casino company is in Bethlehem for the long haul. On Wednesday, the company announced plans to complete the local casino hotel by May 2011. And the Pennsylvania Gaming Control Board approved Sands' plan to add 89 table games such as blackjack, craps and roulette.
"We're a relatively young company, and since we came to Bethlehem, we've moved our focus to multi-property developments with thousands of hotel rooms in large populations," said Sands corporate spokesman Ron Reese. "It doesn't mean we're not still committed to Bethlehem -- we are. It just means we're not building that type of development anymore."
It's true the Sands Casino Resort Bethlehem is the only small property in a Las Vegas Sands portfolio that includes some of the world's largest casino complexes. It includes the Venetian, which has more than 4,000 hotel rooms in Las Vegas, and three casinos with thousands of hotel rooms in Macau, China.
Later this month, the Sands plans to open its $5.5 billion Marina Bay Sands in Singapore, which will include a shopping mall, convention center and 2,500 luxury hotel rooms.
"The direction of the company has changed," Reese said.
It's not the first time Sands executives have questioned the company's investment in Bethlehem. Within months after the casino opened with 3,000 slot machines last May, Adelson said its revenues were not reaching expectations.
Sands had originally projected the casino would bring in $465 million a year in gross terminal revenue, the money left in the machine after all winners are paid. A Gaming Control Board task force later moderated that estimate, saying it expected the casino to bring in $347 million in gross terminal revenue. Based on revenue in the first 39 weeks of this fiscal year, Sands appears likely to do less than $250 million this year.
But analysts say that in its first year, in a down economy that has hurt most casinos, that is not unexpected. The real problem, according to analysts, is that Sands Bethlehem is a lot like all those people who bought their homes during the pre-recession building boom. It built at the peak of the market when building costs were at their highest, and now the casino isn't worth the $743 million Sands paid to build it. That giant mortgage makes it difficult for the casino to meet profit projections.
"I don't think Sheldon meant to slight Bethlehem. He was merely stating in black-and-white terms that his returns in Bethlehem aren't worth the investment," said Grant Govertsen, co-founder of Las Vegas-based Union Gaming Group, Wall Street analysts for the gaming industry. "[$743 million] is a big number for that market."
Adelson has blamed past managers for cost overruns in Bethlehem. Consider that Sands originally estimated its Bethlehem casino to cost $325 million, and even with the addition of a 300-room hotel, shopping mall and a state gaming license, Sands estimated the costs at $525 million.
Ultimately, Sands spent $743 million -- the most of any casino in the state. And its attorney in February estimated that an additional $100 million would be needed to complete the hotel.
Still, Sands Bethlehem President Robert DeSalvio told the state gaming board Wednesday that hotel construction will resume next month. He said the addition of table games and expected new revenue prompted Sands to continue with the hotel project.
"That only makes sense," Govertsen said. "They're going to want a hotel to put their tables players up in."
But after that, Govertsen questioned whether Sands would put any more capital into Bethlehem.
Reese, the corporate spokesman, wouldn't predict what investment Sands would make beyond the hotel. But he said even though Sands executives are encouraged by increasing revenues in Bethlehem in recent months, the market must improve before the company can finish a shopping mall in which construction is 80 percent complete and a 3,600-seat events center that is less than 20 percent complete.
Despite that hesitation to invest more in Bethlehem, Sands has no plans to sell a casino that no longer fits its business model, Reese said. And the man who would make that decision is said to hate losing even more than he loves winning.
"Mr. Adelson is an extremely proud man who is determined to make the Bethlehem project work," Reese said. "His commitment to Bethlehem remains ferociously strong."
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