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Alan Snel – Spate of downtown Las Vegas closures symptom of 'growing pains'

Alan Snel – Spate of downtown Las Vegas closures symptom of 'growing pains'
Alan Snel – Spate of downtown Las Vegas closures symptom of ‘growing pains’At least it wasn’t a net loss.Las Vegas Sands Corp. said Wednesday financial issues surrounding the Macau gaming community resulted in the casino company reporting a 19.4 percent decline in revenue and 30.1 percent drop in profits during the second quarter.For the past year, visitation by gamblers to Macau has been hampered by various challenges, including economic downturn, a crackdown on corruption by the mainland Chinese government against junket operators, a potential smoking ban, and tourist restrictions. Overall Macau gaming revenue has declined 37 percent through June and the market has seen 13 straight monthly decreases.Las Vegas Sands collected more than 60 percent of its overall revenue from Macau in the quarter where the company operates four business segments and is building the $2.7 billion Parisian resort on the Cotai Strip.Company Chairman Sheldon Adelson said he wasn’t deterred by the market’s yearlong challenges.”Despite the current headwinds in the Macau market, we remain sharply focused on the consistent execution of our global growth strategy,” Adelson said. “I remain steadfast in my belief that we will grow and prosper in the long term. We remain committed to Macau.”During the quarter that ended June 30, Las Vegas Sands saw its overall net income decline 30.1 percent to $469.2 million while earnings per share fell 28.9 percent to 59 cents per share. Overall revenue declined 19.4 percent to $2.92 billion.Las Vegas Sands said second-quarter revenue at its Macau properties fell 25.6 percent to $1.77 billion. Net income from the Macau properties dropped 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 declined 31.6 percent to $277.2 million.Adelson said on a conference call with analysts that Las Vegas Sands grew its market share in Macau despite the challenges. The company attracted 16 million visitors to its Macau properties during the quarter.In Las Vegas, where the company operates The Venetian and Palazzo, overall revenue declined 2 percent to $346 million. Adelson said low hold percentages in the amount wagered by customers on slot machines and table games caused a 17.1 percent decline in casino revenue. Table game wagering grew 6 percent and 15.4 percent in slot machine handle in the quarter.In an investors note published before the quarterly earnings release, Susquehanna gaming analyst Rachael Rothman said Las Vegas Sands price per share has increased roughly 4 percent since the beginning of the month on Macau’s easing of visitation restrictions and that a casino industrywide smoking ban might be less stringent. The Macau casino market has also had to absorb competition from an expansion of the Galaxy Cotai which is owned by Hong Kong-based Galaxy Entertainment.”All eyes will be on margins this quarter as the market works to assess how promotional Macau became in the face of increasing competition from Galaxy Phase II and still declining gaming revenues,” Rothman said.Las Vegas Sands’ Sands Bethlehem casino in Pennsylvania was the only business segment reporting a quarterly revenue increase, up 9 percent in the quarter.Las Vegas Sands paid a recurring quarterly dividend of 65 cents per share in the quarter, 30 percent higher than a year ago. The company plans to pay another 65 cents per share dividend in September. Despite the challenges in Macau, Adelson said the company will continue to pay dividends.”We remain committed to the maintenance of our generous recurring dividend program, and we remain committed to increasing those recurring dividends in the future as our cash flows grow,” said Adelson, who controls almost 53 percent of the company’s stock.Las Vegas Sands said its total debt at the end of the quarter was $9.82 billion.Insert Coin(s) at 512 Fremont St. drew video gamers and was a pioneer in the rebirth of Fremont East; Bar+Bistro at 107 E. Charleston Blvd. provided a hangout for artists and visitors at The Arts Factory in the Arts District; and Downtown Project rebuilt the Bunkhouse at 124 S. 11th St. into a new-and-improved music venue only a year ago, a half-block north of East Fremont Street.Downtown Project, Tony Hsieh’s $350 million initiative to redevelop the downtown core, was the developer of only one of the three — Bunkhouse. Christopher LaPorte opened Insert Coin(s), while Arts Factory owner Wes Myles owned Bar+Bistro.Grindley, hanging music posters at The Beat coffeehouse in downtown this week, said the three closings show the struggles of a downtown trying to create an economic identity apart from Las Vegas’ economic bread and butter of gambling and the Strip.”Las Vegas is a really young city where it’s trying to create an entertainment district for locals. It’s a different business model,” Grindley said this week.”It’s an evolution,” he said. “It’s not easy.”The Bunkhouse’s closure came as the biggest jolt because it was the youngest of the three by several years. Last year, Downtown Project poured hundreds of thousands of dollars into reducing the old dive to its shell, then rebuilding it with top-of-the-line audio and music equipment.Huntridge resident Melissa Clary was surprised, but not shocked by the closings, and said each business had issues in a competitive downtown bar scene.”As a downtowner, I have frequented each of these venues before and found all three to be lacking in various keys to business success in the competitive bar scene that downtown now offers,” said Clary, president of the Huntridge Neighborhood Association. Her comments are her own and do not represent the sentiments of the Huntridge organization.”Each of these venues seemed to offer a fairly decent niche, but they truly became complacent, started straying from their core demographic, had terrible customer service or quality of experience, or had high operational costs with no real return. You do that enough and business takes a hit,” she said.LaPorte said he wants to re-open Insert Coin(s), Bar+Bistro is getting replaced by British pub Crown & Anchor, and Downtown Project is talking with a management group to take over the Bunkhouse after the previous manager, Corner Bar Management, opted out.Tim Etter, owner of Tenaya Creek brewery who is building a new craft beer development on the edge of downtown, said the closings could be due to the growing bar competition on Fremont.”There is a lot more competition on the East Fremont corridor. If you rewind to five years ago, there really wasn’t a lot of choices down there. Now you have many establishments competing for the same clientele, which is mostly local. The out-of-towners stay under the (Fremont Experience) canopy,” Etter said.”I think that these closings just represent a bump in the road. The market is already there and growing. In time, there will be enough support for downtown,” Etter said.Downtown public relations woman Ruth Furman agreed the Bunkhouse closing was the biggest stunner. And she was also surprised by Insert Coin(s) and Bar+Bistro closing their doors.”Three spots I liked a lot,” Furman said.Las Vegas Councilman Bob Coffin said the closings were the result of three different business situations that happened to play out around the same time.”There are bright spots in our economy, but we are still in a recession,” said Coffin, whose district includes parts of downtown.”The people who should be concerned are the people who own the businesses. Anyone who owns a small business risks failure. There are circumstances in each of them that are different,” Coffin said. “The odds are against you if you start a new business and you’re not well capitalized,” said Coffin, noting two of his three own businesses have failed.Clary said the closings should be a warning to other downtown bars.”This isn’t doom and gloom for downtown,” she said. “It’s a wake-up call to businesses that they need to deliver and stay competitive or risk failure.”Copyright GamingWire. All rights reserved.

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