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What Will Come Of The Venetian And Palazzo Sale?

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(AP Photo/Joe Cavaretta, File)

Reports last October of a possible sale of the Venetian and the Palazzo raised eyebrows in the gaming industry and beyond. 

Why would founder, CEO and chairman Sheldon Adelson want to offload one of the most successful properties on the Strip? 

The ailing billionaire would not live to see a deal happen. But two weeks ago, Las Vegas Sands Corporation reached an agreement with two companies worth $6.25 billion. It includes the adjoining Sands Convention Center.

Josh Swissman, a founding partner for The Strategy Organization, a Las Vegas consulting firm for the gaming and hospitality businesses, said the reason Las Vegas Sands wanted to offload its Las Vegas properties is mainly because its other properties in Asia are doing much better. 

"As any smart manager of a portfolio of assets does, you tend to trim the bottom performing assets to try and generate more funds to deploy towards those assets that are performing better."

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Swissman believes Las Vegas Sands will use the money it freed up with the sale of The Venetian and The Palazzo to fund more casinos in areas like Macau, Singapore, other properties in the U.S. and online gaming. 

Two companies are part of the deal: One is Vici Properties, which bought Las Vegas Sands' land and assets. It's a deal that is known as a REIT, or real estate investment trust - when one company owns the actual property but management of the resort is handled by another company. 

Swissman said REITs are a great way to unlock the value of the physical assets of gaming companies.

The management of the resort facilities will be done by Apollo Global Management, which bought the operations of the three facilities.

Both have not had the best luck on the Strip. Apollo bought a company that became Caesars Entertainment. It filed for bankruptcy during the recession. Vici got the property. Now Vici and Apollo are investing in the Sands deal during the pandemic downturn.

Swissman explained that Apollo's purchase of Harrah's (which became Caesars Entertainment) was more of an investment deal. This deal with Las Vegas Sands gives the company a chance to actually manage a resort.

When a new company takes control of a property, the biggest question is what will happen to the employees. 

Swissman said Adelson and Las Vegas Sands were known for treating and paying their employees well, which translated into better customer service.

"I would hope that when Apollo comes in that they take all of that into account and don't necessarily make cuts right away."

In addition, Swissman said the Venetian campus is an extensive one with three very important businesses within it - international gaming, business and convention travel, and general tourism. 

"These are all complex businesses unto themselves, let alone operating altogether in concert. For that reason, I would think that Apollo will be much more thoughtful and methodical about any sort of workforce changes that they might make."

For a number of years, Adelson and his company did not embrace online gaming, but Swissman believes Apollo is likely to change direction and develop more online gaming.

Apollo is also gaining a huge asset in the form of the new MSG Sphere, an innovative entertainment venue under construction behind the Venetian.

"With any of these big properties on the Strip, anything that they can do to stand out in the eyes of the gaming customer and the tourists to really draw customer volume to their buildings is something that's of value," he said.

Sheldon Adelson was a visionary not just in the properties that he built on the Las Vegas Strip and elsewhere, but also in his development of large city-wide conventions that have contributed billions to the economy.

Swissman admits that Apollo has big shoes to fill, but he believes the new owners of the Sands Convention Center will be working on the conventions of the future.

"I think Apollo, just like all of the other Strip operators, will be incredibly focused on what the convention business of tomorrow looks like. There are behaviors - love them or hate them - like Zoom meetings and video conferencing that I think become part of the norm to some degree in the future even with the convention business."

Guests

Josh Swissman, partner, The Strategy Organization

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