Sands Anticipates Lower Room Revenue Than ‘09
Las Vegas may be seeing an increase in the number of tourist and business travelers, but the number of available hotel rooms has also grown, according to Las Vegas Sands Corp. (LVS: 19.73 +4.67%) COO, Michael Leven.
During a webcast conference with investors Leven stressed that casino operators have little leverage with pricing.
“We are going to continue to do business, but it will be much more price-oriented than what it would have been two years ago,” Leven said explaining that Sands recently booked a group of rooms for April at a rate 70% below what the cost would have been two years ago.
“We are not worried at all about (the volume of) group business in ‘10 or ‘11,” Leven said. “Our problem is getting that business at the kind of rates we used to have — that is not going to happen in 2010, or early 2011.”
Leven said he expects that the combination of room revenue and occupancy rates will drop this year compared to 2009 and that the company’s cost structure is much different than it used.
After several rounds of cost-cutting driven by the recession and debt crisis Leven noted that gaming company’s profitability is still in pretty good shape, since it has the ability to accommodate large groups and conventions and can make money on high margin businesses like food and beverages.
Sands’ U.S. based operations remain highly leveraged, but Leven said the company is in no danger of breaching loan covenants.
He said lenders have offered to ease covenants in exchange for higher interest rates, and Sands will consider all its options after the Singapore resort is up and running.
Join the forum discussion of this news story - (1) PostsRelated posts:
