Las Vegas Sands, Inc.

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Las Vegas Sands, Inc.

3355 Las Vegas Boulevard South, Room 1A
Las Vegas, Nevada 89109
U.S.A.
Telephone: (702) 414-1000
Toll Free: (877) 883-6423
Fax: (702) 414-1100
Web site: http://www.venetian.com

Private Company
Incorporated: 1988
Employees: 4,000
Sales: $523.9 million (2001)
NAIC: 72112 Casino Hotels

The Las Vegas Sands Hotel was a Vegas institution for 44 years. In its heyday, it was the center of entertainment in Las Vegas, with some of show business’s biggest names performing there, most notably Frank Sinatra and the “Rat Pack” (Sinatra, Dean Martin, Sammy Davis, Jr., and Peter Lawford). For the last seven years of its existence, the Sands Hotel was run by Las Vegas Sands, Inc. (LVSI). When LVSI closed the Sands in 1996, a spectacular new resort, the Venetian Casino Resort Hotel, was built in its place. The Venetian, according to The Gambler Magazine, “raised the bar of expectation of what is considered a world-class mega-resort.”

A Rocky Beginning: 1988

Chairman and sole owner of LVSI, Sheldon G. Adelson, made a name for himself as creator of COMDEX, the world’s premier computer trade show, held in Las Vegas, that grew in size and prestige exponentially during the 1990s. COMDEX was produced by The Interface Group (TIG), a 21-employee trade show company that Adelson and his partners built into a vertically integrated organization that owned its own travel agency and airline. However, for convention-goers available hotel rooms in Las Vegas were often difficult to find. “Comdex and (similar) shows were bringing a lot of people into there who didn’t gamble,” said Harold Vogel, at the time a vice-president at Merrill Lynch Capital Markets. Hotel-casino owners were therefore reluctant to set rooms aside for convention guests. Also, as Adelson explained, “If we generate the passengers and carry them to their destinations, it only makes sense to own the destination, too. It gives us quality control over the product we sell to the customer.” So in 1988, TIG purchased the Las Vegas Sands Hotel. Adelson felt the TIG’s choice of the Sands was natural: “Las Vegas is something very special. There’s only one Las Vegas, there’s only one strip. And the Sands is the crown jewel of the strip,” Adelson said.

Adelson and his partners incorporated LVSI in Nevada in 1988 for the purpose of buying and running the Sands. The hotel was purchased from financier Kirk Kerkorian, who earlier purchased the hotel from Howard Hughes’ heirs, the Summa Corporation. In February 1989, the Nevada Gaming Control Board approved the sale. Adelson appointed Henri Lewin, a former Hilton executive, as the hotel’s president.

Lewin was a colorful figure, and his style clashed with Adelson’s, often publicly. Gaming revenues at the Sands were disappointing, and ten months after he was appointed president of the Sands, Lewin was fired from his job. He later sued LVSI and settled out of court. Management of the hotel was handed to a team headed by Al Benedict, a former executive at MGM Grand. Benedict’s team resigned seven months later, and Steve Norton was appointed interim president of the Sands.

LVSI added the Sands Expo and Convention Center to the hotel, a 575,000-square-feet convention facility. The plan was to add another tower to the hotel, almost doubling its capacity. The initial architect for the expansion project, Nikita Zukov, was fired four months into the job. According to LVSI, he failed to develop the project on budget. He later sued for breach of contract and won a $1.3 million award. During the trial, Henri Lewin testified for Zukov, blasting Adelson and his management style. The convention facility opened and was making money, but the old Sands, with 750 rooms, could not compete with the new mega-resorts sprouting around it, especially the gilded Mirage that opened across the street.

In 1991, Adelson assumed leadership of the hotel, and in the ensuing years the convention center nearly doubled in size, to 1.15 million square feet. The casino area expanded as well. The new rooms, however, were never added, and despite a $20 million refurbishment, the hotel, in the words of one Mirage guest, still looked “seedy.”

A New Resort and a Look Ahead: 1995

In 1995, TIG sold its Trade Show division to Japan’s Softbank. Adelson used the proceeds from the $800 million cash sale to buy out his partners in LVSI, becoming sole owner of the company. William P. Weidner became LVSI’s president and COO. Adelson had already expressed his interest in opening a mega-resort, and in early 1996 the news broke that the famed Sands Hotel would be closed and demolished, to make room for a new themed resort.

The Sands Hotel closed on June 30, 1996 and was imploded on November 26 of that same year. On April 14, 1997, the Venetian Resort-Hotel-Casino broke ground. The hotel was themed after renaissance Venice, down to the Grand Canal reproduction in the Grand Canal Shops area. Two historians checked the accuracy of details during the hotel’s construction. The Venetian opened on May 3, 1999. At a cost of $1.5 billion, and with 500,000 square feet of retail space and suites averaging 700 square feet, the Venetian “raised the bar of expectation of what is considered a world-class mega-resort,” according to The Gambler Magazine.

The hotel was run by Venetian Casino Resort, LLC, with Robert Goldstein as president and COO. Venetian Casino Resort, LLC was owned and managed by LVSI. The property was physically connected to the Sands Expo and Convention Center, making the entire complex one of the largest hotel and meeting complexes in the United States (the Sands Expo was run by The Interface Group Inc.—Nevada, a separate entity from LVSI, though both companies are owned by Sheldon Adelson). In 2001 and 2002, the Venetian was featured in Condé Nast Traveler magazine’s “Gold List of the World’s Best Places to Stay.” The hotel strove to cater to both gamblers and business travelers in order to drive revenues. In the first quarter of 2002, the Venetian was one of only three Las Vegas hotels that showed increased cash flow compared with the same quarter the previous year.

LVSI planned to construct a second resort, of equal size to the Venetian, at a future unspecified date. Concrete plans for this development were suspended in the wake of the September 11, 2001, attacks in New York City that severely impacted the tourism industry.

In early 2002, it looked as though the company was heading into global and virtual expansion. In February 2002, Galaxy Casino, Inc., a joint venture between Venetian Casino Resort, LLC and Macau and Hong Kong investors, had been granted a provisional concession for Macau Gaming License. Macau, a small territory that was controlled by Portugal for over 400 years, reverted back to China in 1999, but was allowed to retain its capitalist system for the following 50 years. The Macau gaming market was closed to competition for decades. Galaxy Casino and Stephen Wynn’s Wynn Resorts (Macao) Ltd. were the first outside gaming companies to be granted concessions in Macau. Sheldon Adelson also announced plans for the Venetian to develop a convention center in China. LVSI announced it was looking into Internet gambling as an additional source of revenue. In May 2002 the company issued $850 million in second mortgage notes to refinance their debt and allow for these expansions.

Principal Subsidiaries

Grand Canal Shops Mall LLC; Venetian Casino Resort, LLC (100%).

Principal Competitors

Mandalay Resort Group; MGM Mirage; Park Place Entertainment.

Company Perspectives:

The Company’s primary business objective is to provide a premium destination casino resort experience in order to drive superior returns on invested capital and to increase asset value. To achieve this objective, the Company: operates a “must-see” destination resort at a premier location at the heart of the Strip; captures premium room rates through a differentiated superior all-suites product; drives hotel occupancy and casino utilization through the link to the Expo Center and the Congress Center; caters to a higher-budget customer mix by offering a unique combination of assets and facilities; leverages the Casino Resort’s premium co-branding strategy to drive revenues; and targets premium gaming customers.

Key Dates:

1988:: Financier Kirk Kerkorian buys the Las Vegas Sands Hotel, announces its sale to The Interface Group (TIG); and TIG forms Las Vegas Sands, Inc. (LVSI) to run the property.
1989:: LVSI completes the Sands purchase and Henri Lewin is named hotel president.
1990:: Lewin is fired; Al Benedict assumes leadership of the hotel, resigns in August; and Steve Norton is named interim president.
1991:: LVSI Chairman Sheldon G. Adelson takes over the running of the hotel.
1995:: TIG sells its Trade Show division to Japan’s Softbank; and Adelson buys out his partners’ share in LVSI.
1996:: The Sands Hotel is closed and imploded.
1997:: The Venetian Resort Hotel Casino breaks ground.
1999:: The Venetian opens and is run by Venetian Casino Resort, LLC, owned by LVSI, with Robert Goldstein as president and COO.
2000-2001:: The Venetian is featured in Conde Nast Traveler magazine’s “Gold List of the World’s Best Places to Stay” two years in a row.