Macau concessionaire Sands China is eying group-wide margins approaching 40% in the coming years, aided by a new look Londoner Macao that the company says could become the best IR in the city.
The bullish outlook was explained by Sands China executives during parent company Las Vegas Sands’ 2Q24 earnings call on Thursday (Asia time), where the prospects for The Londoner Macao were a key area of discussion.
The property formerly known as Sands Cotai Central saw its net revenues fall by 21% quarter-on-quarter to US$444 million, with EBITDA margin of just 23.2% due to major renovation works currently taking place in the Sheraton hotel tower and old Pacifica casino.
However, margins elsewhere were strong with The Plaza Macao and Four Seasons Macao hitting 40.8% and The Venetian Macao 38.6% even with the drag of Cotai Arena also being offline for upgrade works.
According to LVS President and COO Patrick Dumont, it is this sort of EBITDA result The Londoner Macao will be targeting once its Phase II renovations are complete and the newly branded Londoner Grand hotel and Londoner Casino are complete.
“The Venetian Macao did US$262 million of EBITDA in the quarter at a 38.2% margin and it’s missing about half its volume of unrated play,” Dumont explained. “So, even with the arena out – which is a very valuable amenity to drive premium mass performance – look at the strength of the performance of The Venetian. The same thing is true in The Plaza and when you look at what the Four Seasons did: 40% margin with US$100 million of EBITDA.
“So, when we look at The Londoner, we basically took out an equivalent property – like [Melco’s City of Dreams] or an equivalent property to Wynn Palace – we took that capacity out of the market to renovate it. For us to put up US$550 million in the quarter, in my mind, is a great result because we know that we have a limiter in place.
“We’re missing a significant portion of what is ultimately going to be one of the best properties in Macau, if not the best property.
“When you think about that, our model has been proven and the investment [into The Londoner Macao revamp] has been validated. Now we’re going to open up the better half [of the IR] by the end of the year and the limiters are going to come off.”
Noting that The Londoner’s Q2 margin was due to carrying “all the costs” of having one of its two casinos and 1,500 hotel rooms shuttered, Dumont said he expects Sands China margins to hit new heights in the years ahead.
“We feel very strong about the potential for the margins to reach where we need to go,” he explained. “Remember, pre-pandemic we were at 35% to 36% EBITDA margin on a hold-normalized basis in aggregate. So we’d like to believe we’re in a good spot. We’re competing effectively, we have great assets, we’re investing for the future and when we’re done, we’re going to have the newest and best products in the market.
“So, we feel very strongly about the path that we’re on – it’s just going to take a little bit of time to get there.”
Robert Goldstein, LVS Chairman and CEO, backed that sentiment, stating, “The only structural change we need is to get open again. The market is going to be US$30-plus billion next year and we’re going to have the two most important assets in the market speaking with each other – Londoner and Venetian with over 7,400 keys between them.
“There will also be the full power of Cotai Arena and all the amenities between those two, but I think those buildings will be very, very intertwined and give us US$2 billion-plus assets speaking with each other. The Parisian and Four Seasons and Sands will keep doing what they’re doing, so we will be a US$3-plus billion [EBITDA] company. People think we will be a US$2-plus billion company, well I believe that sometime near future we will have the highest EBITDA creation in this company’s history, all without Las Vegas.”
