Las Vegas Sands Gambles on Macau to Hit Jackpot Again
Las Vegas Sands reportedly has decided to place many more of its eggs in the Macau basket, having entered into negotiations to borrow $7 billion to drastically expand its operation in the far east gambling enclave.
The loan, which would be by far the largest outstanding debt by the company, would help fund a $12 billion project to build a complex of hotels and casinos, totalling over 20,000 rooms. It would also go to paying off a previous loan of $3.3 billion, used to create the Venetian Macau Casino.
Gaming analysts from Credit Suisse Group indicate that supply of gambling opportunities and tables may rapidly outstrip demand. Even though the number of gamblers and amount of revenue gambled both are increasing at a very healthy rate, new projects and plans for new venues are appearing almost daily.
Also, as bigger and more casinos continue to draw from a limited labor pool, both labor costs and inflation will come into play against the casino operators.
The Swiss bank estimated the number of new casino tables in the next year to increase by 30%, while increase in demand may rise only 20%.
Macau gambling revenue was up to $10.4 billion last year, a rise of 46%; this year, industry experts predict an increase of about 29%. The continuing revenue growth is forecast to last at least three more years.
On the homefront, Las Vegas Sands saw a JP Morgan analyst drop his expectations for the company, along with other Vegas Strip casino operators. Joseph Greff stated he feels the slump in Las Vegas may be worse and longer lasting than earlier forecasts.
Standard and Poor's and Moody's both rank the long-term debt of Sands as well below investment grade.
Macau is a gamble that has already paid off well; now Las Vegas Sands needs to hit the same jackpot again, or find itself far overextended.
