Las Vegas has been the Restaurant Capital of America, the Convention Capital of America, the Marriage Capital of America, the Divorce Capital of America and, of course, the Gambling Capital of America. All unofficially, of course. It will change to be anything you want it to be, as long as it will bring visitors to the 89109 Zip Code, and as long as those visitors bring money with them and have no problem spending it.
Recently significant change came to corporate offices when Las Vegas Sands decided that enough was enough, and it was time to pull up stakes and concentrate on its more lucrative properties in Macau. Only a few months after the death of founder and CEO Sheldon Adelson, eyes were opened in the industry when the property – hotels (Venetian and Palazzo), casino, retail outlets and convention center – was sold to a pair of real estate companies.
The new New York-based owners, Apollo Global Management and VICI Properties, are gambling that pent-up demand will bring vacationers, bettors and conventioneers back to Vegas as soon as the pandemic has passed, and appear willing to take the next few months (or more) to get to know the property until that happens.
At the height of the pandemic several months ago Las Vegas was basically a ghost town, with many hotels operating only on weekends, if at all, a non-existent entertainment / club scene, minimal gambling with more cleaners than blackjack dealers. Things got so bad that all but one casino pulled the plug on their iconic buffets. Any worse, and there would have been tumbleweed blowing down Las Vegas Boulevard past the Bellagio fountains.
Las Vegas Sands obviously didn’t have the stomach to wait for a turnaround that most everyone thinks is coming but can’t say exactly when or to what extent, so it chose discretion over valor and somehow was able to negotiate a deal that puts some $6.25 billion in its bank account as it focuses on its Asian interests. It will now fall on the shoulders of the suits at Apollo and VICI to figure out a way to get people back to the city and convince them to stay and play at the Venetian or Palazzo. Hotel occupancy rates are rising ever so slowly, and the Venetian and Palazzo have a combined 7,117 rooms available 365 days a year. That’s 2,597,705 room nights.
[Note: During the 2008 economic meltdown which caused a significant downturn in Vegas, Adelson was famously one of the few hotel owners refusing to cut prices to fill room nights. It will be interesting to see if Apollo follows that model. As of this writing, a weeknight room could be had for $113, with weekend nights running at about $180 – plus resort fees of about $40 a night.]
This is Apollo’s second bite of the apple in La Vegas, and the first one didn’t go all that well. In January 2008, a few months before the economy tanked and slipped into a deep recession, Apollo and Texas Pacific Group engineered a $28-billion buyout of Harrah’s Entertainment. Apollo assumed nearly $11 billion in debt in that one, and things went from frying pan to fire, forcing Harrah’s (later called Caesars) to declare bankruptcy and sell. But in the NBA shooters keep shooting even after they miss 6 or 7 shots in a row, and real estate investors invest. It’s what they do. So here we are.
The new owners have no choice but to wait. Wait for the vaccine to get into enough arms to make Americans and foreign visitors comfortable enough to visit Vegas again (or for the first time). Wait for the government to ease restrictions. Wait for the convention business to return to pre-Covid levels. Wait for the opportunity to compete with 30 other Strip casinos for gambling dollars. Wait for Americans to forget all about Zoom and put the virus behind them so everyone can have fun again.
For Apollo and VICI, that all can’t happen soon enough.