Phase 2 of The Londoner’s refurbishment involves the total closure of the Pacifica Casino and a reduction of around 52% in the quantity of room keys offered at the Sheraton, affecting the EBITDA margin for Sands China’s portfolio of properties.
The Sheraton hotel brand will no longer remain at The Londoner Macao and will be replaced with “Londoner Grand” by December of this year.
Parent company of Sands China, Las Vegas Sands, revealed the announcement during its second quarter earnings call with analysts.
“Our margins were directly impacted by the disruption caused by the Londoner Grand renovation. We closed the casino [with] 1,500 keys out during the quarter,” said Patrick Dumont, president and chief operating officer of Las Vegas Sands.
The executive disclosed that the operator is now “deep into our Londoner Grand renovation program,” with plans to complete the first tower by year-end 2024 and of the second tower by May of 2025.
The gaming operator experienced a complete closure of Pacifica Casino for the entire quarter, compared to only a 60% closure in the subsequent quarter.
The casino has been shut down since May and is set to reopen in December.
“As these products come online, between the end of 2024 and the first half of 2025, our competitive position will be stronger than ever. We expect meaningful EBITDA growth and margin growth in the future,” said Dumont.
Sands China’s total gain revenues for the market grew 24% in the second quarter of 2024 when compared to the second quarter of 2023. In addition, mass gaming revenue grew 29% compared to one year ago.
However, the gaming operator recorded an Adjusted Property EBITDA of USD561 million in the second quarter of 2024, representing a 3.7% rise year-on-year but an 8% drop compared to the January to March period of the same year.
The company attributed the decrease to low hold on rolling play in Macau, impacting Adjusted Property EBITDA by USD4 million.
Macau operations generated a net revenue of USD1.754 billion, marking a 7.7% increase from the previous year but a 3.3% decrease from the previous quarter.
“We remain confident in the future growth in the Macau market. I believe Macau market for gross gaming revenue will exceed USD30 billion next year and continue to grow year after year. Our business strategy is predicated on investing in high-quality assets that scale,” Dumont said.
“We delivered solid EBITDA for the quarter despite material disruption caused by The Londoner’s renovations, and continue to lead the market in gaming and non-gaming revenue, as well as EBITDA market share. We will capture high-value, high-margin tourism over the long term,” remarked Robert Goldstein, chairman and chief executive officer of Las Vegas Sands.
The gaming operator remains positive of the outcome of the ongoing Londoner renovations, with hopes to become “one of the best – if not the best” property in Macau.
Data from the group shows that The Londoner’s win fee per day on the table side is the second best in its system.
“Now, we’re going to open up the better half, hopefully, by the end of the year. Certainly, the limiters are going to come off,” said Dumont.
Amid carrying all the costs now associated with the shuttered casino and 1,500 rooms, “the potential of the future is really there.” The company stated that it feels “very strong about the potential for the margins to reach where we need to go,” citing slot, table win, hotel, and non-gaming amenity performance win.
Institution CLSA has pointed out that the peak of the impact on the ongoing renovations at The Londoner is expected to be felt in the third quarter of 2024.
Grant Chum, CEO and president of Sands China, said in the earnings calls that disruption will actually increase from a room perspective.
“We’re operating around 2,500 keys at Sheraton in the second quarter on average over the quarter, and we expect to be down to about 1,300 on average across the third quarter.”
For Chum, it is clear there are more keys utilized in the initial part of the quarter, followed by a decrease towards the end.
Additionally, the Cotai Arena, which has been undergoing renovations since January, is set to be fully operational by the year’s end.
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