Hitting the Jackpot
According to Las Vegas Sands Chairman Sheldon Adelson, opportunities are everywhere, it's just a question of seeing them
Staff -- Tradeshow Week, 2/7/2005
Sheldon Adelson says he could never describe his life as a true rags-to-riches story because, while growing up, his family was too poor to afford rags. Today, he is chairman of the board of the Las Vegas Sands Corp., which he took public less than two months ago. As a result, his estimated net worth is now $15.3 billion and, according to the Forbes 400, he is the ninth richest individual in the United States and the 18th richest in the world.
And, of course, most Tradeshow Week readers know also that he started ("from scratch," as he puts it) the famous COMDEX tradeshow for the computer industry. Adelson sold what had by then become a set of very successful shows in 1995 for more than $860 million; last year, COMDEX's current owner, MediaLive Intl., suspended the show indefinitely.
In one of the first in-depth interviews Adelson has given in several years, he spoke late last month to TSW Editor in Chief Michael Hart about his plans for a massive gaming/resort/exhibition project in Macau; an upcoming expansion of the Sands Expo & Convention Center; the recent Sands IPO; the current state of the tradeshow industry; and his personal plans for the future.
Question: First off, tell me what you're doing in Macau.
Answer: We're reproducing the (Las Vegas) Strip to the fullest extent we can. It won't be as big as Vegas because there's not enough land to build the buildings, although in Macau they live with buildings a lot closer than we do here.
Q: Yes, but why Macau?
A: I like to challenge the status quo and try to do things better. I saw the operator over there — Stanley Ho. I looked at what he did. He puts little casinos in hotels. They're not destination resort hotels, which is what you need to have. They're just what I call city hotels — regular business-type hotels. He takes a restaurant or a ballroom and he puts a casino in there, and he thinks he's doing the same thing as Las Vegas. Of course, he's not because Las Vegas puts up resort hotels.
The experience for a casino is an entertainment experience. It's not a gambling experience in a hotel. So I said to myself, in this city of Macau, which is the only place legally allowed to have gaming in the country of China, surely we can add a lot of value. That's the status quo, putting casinos in city hotels; we build resort hotels with casinos as one of the elements of entertainment.
Q: Once you saw that there was an opportunity in Macau, what was the next step?
A: We need critical mass, so the first phase of our development there is (the construction of) seven hotels. What we have done so far is just a big casino; it's the biggest casino in Macau. The service is American-style, where we give comps and where we treat the customer like they're the customers who put food on our table.
Q: Which was not the case in Macau before?
A: If you go in there with $1,000 and if you play $100, you lose nine hands and you win one hand, you would think that nobody would touch your winnings. They do; they take 5 or 10 percent of that and they take it away from you.
Our idea was to treat them differently, to treat the customer like they want to be treated. That's what we do and, essentially, we've captured the mass market over there. We do all our business there in the mass market. We haven't yet taken over the high-end market.
Q: What made you think the market was no longer satisfied with the Stanley Ho-style gaming?
A: It's very simple. Anybody in business would see it in a heartbeat. They are only catering to day-trippers. There are 80 ferries that go just from Hong Kong. There are other destinations that they serve with ferries, but just from Hong Kong, there are 24,000 people that come in. They come in buses and cars. They come in from the adjacent part of the mainland in Guangdong Province, which only has 92 million people.
They haven't gone after the overnight-stay market. (In Las Vegas,) 75 percent of the rooms are taken up by the tour-and travel market. That's the business that grew Las Vegas, so why don't we do it over there?
More and more people in China are getting money. There are 105 million people that they call middle class today. The projection is, by 2012, they'll have 590 million middle-class people. They're looking for a place to go within China. They're looking for something else to do. After all, how many times can somebody see the Golden Buddha?
If we provide a destination resort complex with elements of entertainment like Las Vegas, they'll come in floods, in waves of people.
Q: Will there be exhibition space at your project in Macau, or are your plans limited to gaming and entertainment?
A: I'm building about a 1 million square foot exhibition center. Plus a couple of hundred thousand square feet of what we call carpeted space — ballrooms. If I'm building a Las Vegas, Vegas today has 15 percent-plus of visitors that come here for conventions.
Q: Who will be using this exhibition space in Macau?
A: We're going to meet with different show producers that want to start shows, that want to tie in with us as a joint venture.
They've got a good convention and tradeshow business in Hong Kong, which is a sister city to Macau. It's only 40 miles away by the sea. Their facility has many levels and is not that big.
Q: When you say you'll be tying in with show producers, do you mean Chinese show producers?
A: No, international. Of course, the people who run their operations over there are typically (Chinese) nationals. They'll come to us, we'll do a joint venture, and we'll become an incubator.
Q: When will this exhibition space be ready?
A: The first quarter of '07. It's a foregone conclusion. That's why they gave me the concession. They wanted my experience to change the image of Macau from a seedy gangster-ridden venue to a very respectable business-type venue for exhibitions and conventions.
Q: What is dealing with the Chinese like?
A: I've met with the vice president, with the chairman of the SAR (Special Administrative Region) committee. They've promised they'd keep their hands off and let them run things the way they were running them for 50 years — which is now 45 years left.
We deal with the chief executive, the equivalent of a governor of Macau. They've been lovely people to deal with. Very, very nice.
Q: What will you do to change Macau's reputation?
A: What we're building here is the equivalent of Las Vegas. If I get 20 lots, they're going to have one property per lot, each with 3,000 rooms. That's 60,000 rooms. People fall of their chair when you say you're going to do that. They just say it's not possible, nobody's ever done that.
I say, "No, it's been done in Vegas." The example was already set. All we have to do is follow what people did in Vegas. What's so difficult about that?
Sure, we've got to set up the financing; we've got to get people to invest; we've got to get brand names, but what's so difficult about that?
Q: It's really going to be that easy?
A: I got my vision and I laid it out in a series of steps, and it's working like a charm.
We've got the best names in the hotel industry ... Four Seasons, Marriott, InterContinental, Holiday Inn. We're going to open up our property and six more in the first phase. Then, hopefully, we'll go on to the second and third phases. Eventually, we'll end up with 60,000 rooms.
Over there, it's the biggest thing in their history. We're going to put up seven hotels, which is 10,500 rooms in the first phase. It's really something different and something new for these guys.
We expect to open up with a bang. I know that sounds kind of arrogant, but that's the way it happens. I've done it here (at the Venetian).
Q: Turning to Las Vegas, what are your plans for expanding the Sands Expo & Convention Center?
A: We're doing it right now. I bought some land in back of us and I'm going to build another 800,000 sq. ft. We bought it from some people who owned it, we tore down houses and we're ready to build.
Q: What makes you believe there's a need for another 800,000 sq. ft. of exhibition space in Las Vegas?
A: Because there's a demand for it, coming from existing shows, and shows that have moved out because they needed more space and went over to the LVCC (Las Vegas Convention Center). We want to make sure we have enough space for them here.
Q: Some who follow the industry say the pressing need in the future will be for more meeting space rather than exhibition space. For instance, the LVCC has announced it is building more meeting rooms. Do you disagree with that?
A: Do you know how many meeting rooms we have here? We have 175 now and when we finish this building at the end of this year or in 2006, we'll have 330. I think they put meeting rooms over there (at the LVCC) because they want to try to get within range of competing with us.
That's not their responsibility. They're a public entity trying to compete with private enterprise. They've always considered us the competition. We want to make sure our shows don't move out because they grow.
They're spending $400 million to renovate their property and add a little something — which is outrageous. You know what it cost me to build my place here? Seventy-five million dollars, and I was larger than they were before they expanded. What can they spend $400 million on? They're just using the public's money like it had no value. If it weren't for me, they wouldn't spend that money.
Q: When will the expansion be done?
A: It depends on when we start it. It won't take more than a year or so to build it.
Q: At least on a day-to-day basis, you've been out of the tradeshow business a while. Have you seen any changes to the industry in your absence?
A: It's different because there are more private operators. The pendulum has swung from a high percentage of association-owned and -operated (shows) to the other direction. People are buying out associations, which they never thought of before. MAGIC was bought out; that was an association. People have picked up the shows and made profit-making vehicles out of them.
Q: In your opinion, was the demise of COMDEX inevitable?
A: No, Fred Rosen blew it. (It was) his demeanor, the way he operated it. I heard that one of the first things he did when he came in, he lined everybody up and he said, "Everybody turn to your right. Everybody you see won't be here in six months." That's not the thing you say to somebody when you want to create some good morale. He treated people like dirt. He was a crass person.
Q: If things had gone differently, would COMDEX still be around today?
A: Yes. Now, the industry changed. When I sold it, I said you've got enough momentum to carry you through the next three years. But after three years you have to change the people, you've got to bring in new people who are more familiar with the way the industry is evolving, and you have to roll with the punches. They never did that.
Rosen knew nothing about the business. He said, "I'm going to own the entire tradeshow industry." You see how far he got. Humility is something he never learned.
I lucked out. They tell me I'm No. 9 in the United States and No. 18 worldwide (according to the Forbes 400), and they presided over a bankrupt company.
All I got from Rosen was lawsuits. In the final accounting, when it was settled they gave me a check. It was nasty.
The industry did go down and COMDEX would have got hurt under anybody's stewardship, but would not have gone into bankruptcy.
Q: What do you see for the future of the tradeshow business?
A: The associations don't have the wherewithal to retrieve their shows, and the privates aren't going to give it back to the associations. There's no way the associations are going to bring shows back.
Q: Why not?
A: Association show guys run their shows like dictators. I remember hiring a guy who came from an association. I saw him write a contract and it said booths shall be no higher than 8 feet. I said why not? He said because it looks nice and even. I said nobody gets up and looks at the roofs of the booths. I said why don't you give the exhibitors what they're coming to the show for, a chance to compete with their competitors.
Q: Again, some who follow the industry believe the trend will be away from large horizontal shows and toward smaller vertical ones. Do you agree with that?
A: They're unrealistic. They're just looking at where they are today. Look, I've got a Life magazine from 1955. On the front cover is a picture of a Vegas cancan show. The caption said "Is Las Vegas Overbuilt?" That was 1955. There were 2,000 or 3,000 rooms and they asked, is Las Vegas overbuilt?
Q: Is Las Vegas becoming more of a place to do business rather than to just have fun?
A: Yes. But the convention market has not overtaken the leisure market. I don't think it will ever do that, but it takes up about 15 percent. It used to be 5 percent, then it was 10, now it's 15.
When we started the Venetian five and a half years ago, pharmaceutical companies never came here. Now all of them come here. It's not the Sin City everybody thought it was. We have gaming but it is only one of the forms of entertainment. We have celebrity chef-type restaurants, world-class spas and shopping malls that are both mid-market and high-end.
The casino (at the Venetian) only contributes 31 percent to our bottom line, and we're one of the most successful casinos in the city. It isn't that casinos are going down, it's that everything else is going up so dramatically.
Q: Why the decision to take your company public?
A: My objective was always to grow. I wanted to increase equity as fast as possible. That's what we've done and I want to continue to do that.
I couldn't reflect the value of what I had as a private company. I wanted to diversify. I wanted to be able to spread my holdings to my children and my family. I wanted to be able to give out stock options to my employees and attract other people, to keep the management at a high level.
I want a currency to acquire other companies if we saw any reason to acquire other companies. All of which pointed to being public as a way of accomplishing this. It's worked out like a charm.
Q: How does all that become easier as a public company?
A: Now we can borrow money at 3 or 4 percent, which is amazing.
If you're building multibillion-dollar properties, you've got to borrow money. And if you're wealthy and you have a way to get money, your cost of getting money is reduced. You then end up making more money because you save money on interest.
Comparatively, we've now become the richest company in the industry. We're not the biggest, we're probably one of the smallest. For the last couple of years, we've been one of the richest. We were private, now we're public and you can see it in the price of our stock.
Q: Over the course of your career, how did you see opportunities that others were not able to?
A: You go out the front door here, you take a left. You get on the I-15. You go down the I-15 to the I-95 and you go across the United States. Whatever you see in this fabulous country is opportunity. If you don't know it when you see it, then you'll never be able to do anything about it.
Q: You're 71. How much longer do you plan to work?
A: Until I die. I'm not going to stop.
What if I cashed it all in? I already have all the luxuries I could ever want. I just have to take the money and pass it on to my children, my friends and relatives and set up a charitable foundation so I can pursue a line of philanthropy that makes my wife and I feel good.
A guy like me doesn't want to wake up in the morning and not have a place to go. I don't play golf. I don't play tennis. I've got a bad leg. My wife is a physician, she's busy every day. I don't want to be Mr. Mom.
I don't know what else to do, so I'll just keep working.
Q: Are you headed back into the tradeshow business?
A: You never know. We may be tempted.
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