The Convention King
Billionaire Sheldon Adelson is bringing the Vegas Strip to Macau.
From the Print Edition:
Tiger Woods, May/June 2008
(continued from page 2)
It's nice to be the man that Forbes magazine has dubbed the third richest in America. But it's also pretty good to be his friend. That point becomes abundantly clear on a recent afternoon in Sheldon Adelson's big football field of an office. Between sips of a freshly made cappuccino and bites of specially baked pound cake—only 30 calories per slice, he points out—Adelson, founder and chairman of Las Vegas Sands Corp., the parent company of The Venetian Resort Hotel Casino in Las Vegas and Macau, practically begs a friend to take his private jet on an impending trip from the East Coast to Vail, Colorado.
When the gentleman refuses, Adelson, via telephone, puts the pressure on him. "If you don't take it," he says, "I'll have the jet follow you. It'll be at the airport in Vail, waiting for you to use it."
Eventually the friend gives in. But that's not surprising. You don't become the third richest man in America without being extremely persuasive. I can't help but wonder who this lucky fellow is. Perhaps a high roller, poised to drop a cool million into Adelson's casino coffers? "He is one of the top terrorism experts in the world," says the 74-year-old Adelson, wearing a custom-tailored pink shirt and exuding the demeanor of a wise great-uncle. "He's done a lot for us. I felt that I could do this for him. He flies all the time and he's tired. We can't afford to lose him."
Adelson is something of an anomaly in the casino industry. Most successful practitioners usually range from steely-eyed hard-asses to charismatic impresarios. Adelson's tough, to be sure, competitive as anyone, and prickly enough that he continually stokes a long-standing feud with Steve Wynn (whose eponymous casino is literally across the street from both Adelson's Venetian and his recently opened Palazzo, casting a shadow that has to be irksome). But he's also surprisingly down-to-earth and approachable.
Adelson generally comes across as a mensch, albeit a cranky one. He's a bottom-line realist who clearly has a knack for offering what his customers want—whether it's Barneys New York in Vegas or Cirque du Soleil in Macau. His properties may not be as cool as some, or as stylishly sexy as others, but they do manage to hit a sweet spot. Affluent men in search of no-nonsense high quality (and high stakes) seem drawn to the Venetian properties. So much so that the Vegas operation boasts a 96 percent occupancy rate. Adelson's newest spot, the decidedly un-themed Palazzo, is expected to draw similar numbers. Big rooms, great restaurants and a willingness to tolerate swings from some of the highest-rolling gamblers in the world all serve as attractions. Beyond that, it's no coincidence that the casinos owned by the cigar-loving Adelson house Davidoff kiosks that boast the ritziest selections in Vegas. (Adelson himself hints that he's no stranger to Cuban Montecristos.) Add it up and his two connected properties in Vegas have 7,100 rooms, which combine to create the largest hotel in the world.
It doesn't end there. Now, with Asian beachheads in Macau and Singapore (set to open in 2009), Adelson is poised to continue expanding and attracting discerning players drawn to the oversized digs, top-shelf amenities and superstar chefs. This synergy makes clients in Asia want to check out facilities in America and vice versa. That, of course, is all part of the master plan.
But the biggest key to his success is a very unsexy end of the casino business that has nothing to do with fancy new games or exotic massages or exclusive cuts of beef. One way in which Adelson manages to keep his hotels booked and gaming tables full is by catering to convention business. Vegas ranks as America's top spot for conventions and, in that arena, Adelson is also No. 1. "Conventions keep us busy midweek," he says, of events that range from the mundane (American Academy of Anti-Aging Medicine) to the extravagant (Consumer Electronics Show). "We run the highest occupancy of any hotel in history and we bring in more money in one year than any hotel in history. We understand the need of the convention market better than anyone else," he says. "One thing doesn't go right, that is the end of the show. People have confidence working with us. In Asia, they have a term: MICE. That stands for meetings, incentives, conferences, exhibitions. We're called the MICE giants. And me? I am called the MICE rat." Adelson laughs self-consciously, then adds, "Just kidding."
The Vegas holdings are impressive and his fleet of private jets is nice, but what's really audacious about Adelson is his plan for the Far East. It clearly ranks among the most ambitious casino projects ever undertaken. After Adelson explains it to me, I suggest that it sounds as if he is creating something like the Las Vegas Strip in Macau. "Not like the Las Vegas Strip," he patiently corrects. "It will be the Las Vegas Strip in Macau and it will eventually be like the Vegas Strip versus downtown there." Left unspecified is that, in Adelson's mind, MGM Grand Macau and Wynn Macau will become the equivalents of backwater casinos on Fremont Street.
Situated on what had been a swamp, the Cotai Strip, as Adelson's innovation has come to be called, will comprise 14 glitzy renderings of 14 well-known hotel brands. "We own the real estate and gave management contracts to 13 other brands"—including Shangri-la, Traders, Sheraton and St. Regis. (An InterContinental, will open but it will not be owned by Adelson.) "Hotels are being built sequentially and will be up and running by 2010." Macau's Venetian outpost, which employs 5 percent of the island's workforce and is an enlarged version of The Venetian in Vegas, is already operating on Cotai. It opened with a flourish: nearly 4 million people visited the casino during its first 65 days of operation and they won a lot more than the statisticians predicted they would (or, as company president Bill Weidner told Wall Street analysts last November, "We got shellacked!"). For the near future? Expect loads of gambling, convention business and fine dining.
At least that's the plan. On the other, less optimistic end of things, beyond an unexpected fluctuation of luck, it's easy to wonder about the possibility that there may not be enough business to support so many properties in a relatively small space. This may have been what compelled Steve Wynn to describe the Cotai undertaking as "the most stupid idea I've ever heard of in my life" when Adelson suggested that they join forces there. Nevertheless, Adelson insists that there will be plenty of business since Asia is a big place with lots of people.
When I mention that maybe Vegas, as well as Macau for that matter, may be built out to its limits, Adelson reaches for a framed cover of the June 20, 1955, issue of Life magazine. He is not the first casino executive I've seen brandishing this, but it does make a point. The cover depicts Vegas showgirls in can-can attire and asks, "Las Vegas: Is Boom Overextended?" The point being that Vegas keeps growing and people keep challenging its ability to keep growing, yet the city defies all expectations. "We're now at 135,000 rooms," he says, "and that question gets asked every 1,000 rooms."
Bullishness suits Adelson in a way that it might not suit others in the casino business for the simple reason that he's got convention action to fall back on. He's right when he says that visiting groups keep his hotel-casinos busy midweek and that his properties function as fully integrated resorts. "What I mean by that," says Adelson, "is that all the elements for entertainment, conventions and exhibitions are in one place. We're the only integrated resort builder in the world. MGM will say that they are building City Center, but that is not an integrated resort. It's a real estate development."
It may sound as if Adelson is splitting hairs with his definitions in order for things to fall in his favor—and he probably is—but his ability to put it all together has made an impression. Proof of that can be seen in that Adelson was the only American operator tapped to open a casino on the highly desirable island of Singapore. "They saw how we changed Las Vegas and Macau," says Adelson, referring to his synergizing the hotel, resort, casino and convention profits. "The convention business here was always belittled and demonized."
Adelson is quick to point out that Steve Wynn was in the running for the Singapore project but dropped out before a decision was made. "I can only speculate that he couldn't stand losing to me," Adelson maintains. Coincidentally, I interviewed Wynn, in Macau, just days after Adelson was awarded the obviously lucrative concession in Singapore. At the time I asked Wynn why he chose not to keep his hat in the ring for that particular project. He told me that he dropped out because he was too committed to both his upcoming Encore hotel-casino project in Las Vegas and Wynn Macau to give Singapore his full attention.
Whatever the case, the reality is that influential people are taking note of Adelson's ability to create high-profit alchemy. They recognize that it can translate across borders and overcome unique cultural predilections. Such is the hope in Singapore. With the help of Israeli architect Moshe Safdie, Adelson will be putting up the three-towered Marina Bay Sands there. The hotel-casino boasts theaters, an ice rink, an art and science center, a two-acre sky park and what will seem like miles of convention space. It's an impressively conceived spread and, with a budget of $2.75 billion, it's slated to be the most expensive hotel-casino in the world (just squeaking past Wynn Las Vegas, which came in at $2.7 billion). Now rumblings from Japan, South Korea and India indicate a desire for Adelson to duplicate his success on their soil. "My competitors can build beautiful hotels and operate the casinos," says Adelson, pointing out that he has an edge in new markets where city fathers want more than just gambling and restaurants and resort amenities. "We bring the convention strategy and the convention experience that nobody else has."
Adelson may now rank as America's casino and convention king, but it's definitely not the sort of life he was born into—or even born near. As the oft-told story goes, he was the son of poor immigrant parents and grew up in a tough section of Boston. His dad drove a taxi and young Sheldon wanted nothing more than to make money. He hawked newspapers as a kid and owned his first business by age 12. He was in the vending machine biz, worked as a court reporter and brokered mortgages. A serial entrepreneur, he claims to have developed more than 50 companies and brought them to various stages of maturity.
Though the breadth of his businesses was clearly broad, casino gambling was not what he found himself naturally drawn to. Las Vegas was pretty much off Adelson's radar during the early stages of his climb to self-made billionaire. Certainly, Sin City was far from his mind when he experienced the first of several coincidences that would conspire to lead him to his destiny in the desert.
In 1969, Adelson and a partner were happily tooling along as venture capitalists with their fingers in a lot of different pies. "Then," Adelson remembers, "one day the market crashed. Suddenly, my partner and I couldn't get second-round financing for investments that we had hoped to take public. Money dried up almost overnight." He relates this in an unemotional tone and explains that they dealt with the situation by splitting up their holdings. One of the pieces that went to Adelson was a trade magazine aimed at people in the data communication world.
Not long after, Adelson happened to attend a trade show for condominium developers put on by a magazine covering that industry, and Adelson came to the logical conclusion that his publication could do the same thing. So he organized a data communication show. It went well and, six years later, he started buying trade shows. It wasn't long before Adelson discovered the need for a show aimed at people in the personal computer realm. As he remembers it, "The price/performance ratio [of PCs] was increasing almost hourly; I saw something that nobody else saw." That gathering of technology's burgeoning titans grew up to become Comdex, which hit just as the incredible growth in the PC industry began to surge. Adelson's timing was perfect.
Trade shows and exhibitions became his bread and butter. Las Vegas emerged as the place to do the shows. In 1989, he purchased the Sands, a second-tier casino on the Vegas Strip, for $128 million. A former executive has commented, "The [Mirage's] front desk looked better than our whole hotel." But at the time that didn't bother Adelson. He had no real interest in entering the casino business. "I bought the Sands so that I could build a convention center," he says of the property that lost money for its first five years under Adelson. "Nobody saw Las Vegas turning into a series of mega-resorts. For me it was just an investment. I had to buy a hotel so that I could get the land. I wasn't even interested in owning a hotel."
Maybe not. But he eventually took to the business, recognizing that owning an event center and the bunch of disconnected buildings that comprised the Sands wouldn't cut it in the new Vegas. In 1995, he sold Comdex to the Japanese software distributor Softbank for $862 million. In 1996, he used some of that money and 100 pounds of dynamite to implode the Sands and began building The Venetian. Eventually he brought a lot of innovations to the Vegas hotel-casino market: minibars and in-room safes (the old thinking was that you wanted to make customers walk across the gaming floor to retrieve cash from the cage or have a late-night Scotch), fax machines in the rooms and an all-suite hotel. In 1999, The Venetian opened in Las Vegas and, at age 65, Adelson embarked on the most successful business venture of his career.
Anytime you interview Sheldon Adelson, it feels as if there is an 800-pound gorilla sitting in the room, not waiting to pounce, but definitely taking up space and serving as a bit of a distraction. That gorilla is the long-running feud that Adelson has with fellow Vegas billionaire Steve Wynn. It peppers our conversation in a surprisingly blunt way. I was warned ahead of time about a journalist who came to interview Adelson with the hidden agenda of getting him to dish on his problems with Wynn, and how it ticked off Adelson.
So I tread lightly on the subject, preparing to skirt it all altogether, but it takes only a small suggestion for that 800-pound gorilla to rise up and overtake everything in sight—as it has done so many times in the past. The beast awoke as Adelson told CNN that he's learned nothing from Wynn but that Wynn has learned plenty from Adelson. In an interview with the Las Vegas Review-Journal, Adelson expressed hope that Wynn does not achieve success in Macau "because I don't think he deserves it." And three years ago, as reported on MSNBC, there was a major battle between the two moguls over the size of the Palazzo's parking lot. "Why does he have to give us such a hard time?" Adelson now wonders. "That parking lot baloney delayed us two years and cost us a couple billion dollars."
Adelson says the troubles date back to when he was trying to get financing for The Venetian. He claims a representative of Wynn's went to his investment bank, Goldman Sachs, and said, "If you finance Sheldon Adelson, you cannot finance Steve Wynn or the Mirage corporation." Wynn says, "I was informed that [an employee of mine] made disparaging remarks. I asked him not to do it and asked him to apologize to Sheldon."
At the opening of the Palazzo, Adelson says that Wynn walked around and declared, "It looks like a retail mall. Who wants to go to a hotel that looks like a retail mall?" Adelson stews for a minute, then says, "It's a beautiful place." As Wynn remembers it, he made a comment directly to his wife. "I said that the first impression you get, coming over from my hotel, is that of a shopping center, not a hotel," says Wynn. "It's a hotel in a shopping center rather than a shopping center in a hotel."
Entertaining as it is to watch a couple of billionaires duke it out in the media, it's a bit strange. For all their success, intelligence and business savvy, you'd think that they'd figure out a way to work together or at least keep their differences private. But they won't, and who am I to smother those entertaining flames of dissent? Even Charlie Rose, a good friend of Wynn's, seemed to enjoy it when Adelson knocked his adversary on Rose's PBS talk show. When Rose supported Wynn by playing up the casino magnate's design skills, Adelson cut him off and said, "I think [Wynn] got insulted once because I asked him to do PR for me. That's how good I think he is."
The "shopping mall" insult begs a question: what does Adelson think of Wynn Las Vegas? He smiles tightly and dismissively replies, "I wouldn't know. I've never been in there."
Michael Kaplan is a Cigar Aficionado contributing editor.
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