Give Las Vegas Sands President Rob Goldstein credit for his candor is discussing the current operating environment in Las Vegas.
Just don’t expect to hear those remarks on the next tourism advertisement promoting the Strip.
Goldstein, during the company’s second-quarter earnings conference call, didn’t sugarcoat his assessment of the nation’s largest gaming market, which is trying to rebound after a 78-day closure due to the coronavirus pandemic.
Sands has taken a one-two punch on the economic chin from lack of airline flights into McCarran International Airport – especially travel from international destinations – and limits placed on the capacity that locked out the company’s meeting and convention business.
“We’re in a world of hurt here in terms of Vegas,” Goldstein in response to an analyst question.
“I see nothing indicates that 2020 would return at all,” Goldstein added. “We cannot, Las Vegas cannot, perform without return of these segments. It cannot make money with limited hotel occupancy or negligible occupancy midweek, maybe 50% capacity weekend.”
During the quarter that ended June 30, Las Vegas Sands’ total revenues fell 97.1% to $98 million. The company’s Las Vegas properties – Venetian and Palazzo – saw revenues decline 92.3% to $36 million. The resorts were open just 26 days during the quarter.
Goldstein said the company is basically “running a regional casino predicated upon drive-in businesses.” Last week, Las Vegas Sands shut down the Palazzo’s 3,000-room hotel to midweek customers.
Las Vegas Sands President Rob Goldstein
The 1.8 million-square-foot Sands Expo and Convention Center remains empty. Most of the major 2020 tradeshows and conferences have canceled, including the Global Gaming Expo.
“I don’t have a crystal ball into 2021. I remain pessimistic about group and convention,” Goldstein said.
Those comments came Wednesday. By Friday, Las Vegas Sands’ shares lost roughly 25% of their value from where the stock began the week.
The COVID-19 pandemic delivered a body-blow to Las Vegas Sands in all three of its markets – Las Vegas, Macau, and Singapore.
Analysts, not hearing the rosy outlook that is often associated with Las Vegas Sands earnings, credited Goldstein with being honest.
“We found the call commentary to be straight forward, and while less bullish than (first quarter) commentary in our view, we viewed the tone as balanced and realistic,” said Deutsche Bank’s Carlo Santarelli.
“In Vegas, the outlook, as expected, is bleak without any clarity in the convention calendar and lack of airlift to the market,” said Macquarie Securities’ Chad Beynon.
He agreed with Goldstein’s assessment that the company’s casinos in Macau and Singapore will have a much quicker economic recovery once coronavirus-influenced travel bans and social distancing restrictions are lifted. That view was shared by Chairman and CEO Sheldon Adelson and CFO Patrick Dumont.
Las Vegas Sands is spending $5.5 billion on its Asian resorts. In Macau, $2.2 billion is budgeted on the renovating Sands Cotai Central into the Londoner, while $3.3 billion is being spent on new non-gaming developments, including a 1,000-room hotel tower, at the Marina Bay Sands in Singapore.
“As the world grapples with waves of reopening and closing, we prefer to own names with strong balance sheets, liquidity positions, and segment diversification during this time of uncertainty,” Beynon said. “In our view, Las Vegas Sands checks all the boxes while continuing to invest in Macau and Singapore to support its long-term growth.”
The Venetian on the Las Vegas Strip
As for Las Vegas, the comments by Goldstein were probably not met with a welcoming resolve by the competition. MGM Resorts International reports second-quarter results on Thursday while Caesars Entertainment – now operated by the former Eldorado Resorts team following completion of their $17.3 billion merger – will report earnings on Aug. 6. Both companies have still not reopened a handful of their Strip resorts.
Santarelli noted the comparison of the Sands’ Strip operations to a regional market, means the company “essentially loses money five days a week and is profitable on the weekends.” Goldstein’s comments on the lack of future group business bookings were more cautious than three months ago.
“The negative tone regarding the domestic recovery is likely to resonate with investors and will likely create further anxiety around the length of the timeline to recovery,” Santarelli said.
Goldstein did not do anything to diminish the blow.
“In all the years as I’ve been here, I’ve never felt more gloomier about what’s happening in Las Vegas short term,” he said. “(I) hope, long term, we can see a better day.”
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
