The world's most powerful casino mogul just showed us in five words that he's living a Macau delusion.
"Supply will create the demand," Sheldon Adelson, Las Vegas Sands' CEO, said at a conference in New York City on Wednesday.
What Adelson is saying is that despite a Chinese government crackdown on gambling that has decimated casino revenues over the past year, he believes that if he and other casino moguls build more casino resorts the gamblers will come.
But that's not the case. The casinos that will be built will look nothing like the ones that turned Macau into the world's gambling capital.
They can't, because Chinese President Xi Jinping won't allow it.
Since last summer, Xi has been clear about the government's plans for Macau: It is to be transformed into something that looks more like Las Vegas, a family-friendly place focused more on dining and shows than on high-rollers and baccarat. The VIP rooms are disappearing, officials are cracking down on prostitution and organized crime, and there's a smoking ban in the works for casino floors.
"We are making Macau into another shopping city," Adelson said at the conference.
Adelson said it sounds promising — turning Macau into the Paris of Asia — but that's not even close to happening yet. Gaming still makes up 90% of the revenue that comes out of Macau casinos. That's not going to change quickly.
In the meantime, Wells Fargo estimates another miserable month for casinos, with revenue down almost 40% in May from the same time last year.
There's more uncertainty to process in this story, too.
Xi capped the number of visitors of the Chinese mainland to the island to "rebalance" the quality of life of those who live there. That means it will be impossible for retail gamblers to make up for lost high- roller revenue with sheer numbers.
Galaxy Entertainment opened two new casinos on Wednesday. Unfortunately, authorities only gave the $3 billion projects 150 tables, not the 400 tables Galaxy asked for.
It's also unclear how many tables will be permitted in Macau in 2016 after casinos renew their licenses.
In the midst of all this, Adelson's Las Vegas Sands is looking for a China CEO who understands Beijing.
His former China CEO, Steven Jacobs, is suing the company for wrongful termination in what might be called the casino case of the century.
In his suit, Jacobs claims that Adelson did business with China's Triad organized crime group, which allowed them to operate VIP rooms through junket companies, among other transgressions. Las Vegas Sands' attempts to get the case dismissed and keep certain documents out of the trial have failed.
Adelson took the stand earlier this month, and he admitted Jacobs tried to stop doing business with the Triad.
“He wanted to throw out 50%, 60% of the income by throwing out the junkets,” said Adelson, according to The Guardian. “This was insanity. He purposely tried to kill the company.”
Of course throwing out the junkets is a great deal of what the Chinese government is doing right now. That's a challenge Adelson can do little about — a challenge for his next, hopefully incredibly resourceful CEO.
"I have 10 résumés in my briefcase," Adelson said at Wednesday's conference.
Any takers?
