Gaming | The Parisian softens the blow of disappointing 2017 for LVS

Las Vegas Sands Corp.’s (LVS) latest Macau property, The Parisian Macao, may have softened an otherwise disappointing year for the firm, a new report by market analyst The Motley Fool claims.

Though the Las Vegas-based company saw its stock climb about 35 percent in 2017, it performed below expectations in Macau and was overshadowed by its rivals Wynn Resorts and Melco Resorts. The firm also recorded its worst operating year since the global financial recession.

LVS’s Macau revenue growth stood at just under 12 percent last year, far below the 19 percent aggregate expansion in the city’s gaming economy. However, the Parisian Macao’s strong posting has allowed the company to weather a particularly bad year for its other resorts, with individual revenues at The Venetian Macao, Sands Cotai Central and Four Seasons Macau dropping 7.9 percent, 12 percent and 12.1 percent from a year earlier respectively.

Macau accounts for more than half of LVS revenue through its subsidiary, Sands China Ltd.

Sands China has been the most enthusiastic of Macau operators in shifting its business model away from the VIP segment and toward mass-market players, the conferencing and exhibition sector, and the entertainment industry.

It is a strategy that may or may not pay off in the years ahead.

Macau gaming revenues climbed 19.1 percent last year to reach over MOP265 billion, the highest posting since 2014. Analysts broadly credited the 26 percent expansion in the VIP segment as the driving force behind the recovery’s strength.

This played into the hands of casino operators like Wynn Resorts, which cater mostly to high-end gamblers.

Analysts are divided over whether the VIP segment will continue to propel revenue growth or whether its relative contribution will wane this year. Brokerage firm Sanford C Bernstein predicts an 8 percent expansion in the VIP segment, while Morgan Stanley is backing a 20 percent increase.

Should the VIP segment continue to show strength in 2018, The Motley Fool warns that the outlook for LVS may not improve.

The silver lining might prove to be the firm’s next Macau property, The Londoner Macao, building on the successful branding of city-themed resorts.

The Londoner Macao is envisioned as a USD1.1 billion renovation of the Sands Cotai Central complex, featuring some of the British capital’s most recognizable landmarks. Company CEO Sheldon Adelson has promised that the resort will accommodate more overnight guests than The Venetian and The Parisian combined.

But the earliest Macau is likely to see LVS’s latest resort is in “late 2019”, according to the company, and that assumes there are no delays to its opening.

In the meantime, the company will have to contend with new entries to the Cotai scene, such as MGM Cotai and the Lisboa Palace, both of which are scheduled to open this year. DB