Las Vegas Sands Corp., Singapore, and Spain. If Only…

Eurovegas-spain

Last Friday, Sheldon Adelson, Chairman and CEO of Las Vegas Sands Corp. [LVS], announced the company’s abandonment of the project to build a more than US $20 billion gambling complex in Alcorcon, a suburb of Madrid. The project, announced earlier in February —the so-called Eurovegas—, would have been Europe’s largest resort, and the first Las Vegas-style operation on European soil.

The cancellation of the Eurovegas project was a major blow for both Madrid and Spain. Madrid had already suffered an earlier blow this year when its bid to host the Olympic Games failed for the third time in a row.

The reason cited by LVS for dropping the project was the lack of clarity in the regulatory environment. Las Vegas Sands Corp. was looking for an increased level of certainty in tax and regulations. Unfortunately, the political atmosphere in Spain is far from inspiring enough confidence about the most likely future scenario. Sheldon Abelson and his team, being very savvy hotel and casino developers and operators, seem to have reached a logical conclusion  after about a year of analysis and interactions with top local and federal Spanish government officers.

According to information provided by LVS, the job creation projected by this development was in the range of 164,000 direct jobs, plus around 97,000 indirect ones. The proposed first phase would have included four casino-resorts with 12,000 rooms. The Eurovegas project was to be developed in phases during a 10 to 12 year period, and would have totaled 12 casino resorts with 36,000 rooms.

After dropping the project in Madrid, the gaming group stated that it will continue aggressive pursuit of opportunities in Asia.

LVS (US $13,191 million in sales in the 12-month period ended September 2013) is the largest operator of casinos, entertainment, hotel, retail, food and beverage, and convention center operations in the world, and has been extremely successful in its Asian operations, in Macau and Singapore. In fact, over 85% of its income is derived from Asia. Thus, LVS global credentials are very well established.

Nobody knows for sure how Eurovegas would have exactly fared. However, given the stellar track record of LVS, in most likelihood it would have been very successful for investors, and in employment creation for the Madrid region. Yes, it is true that the type of jobs that hotel/casinos generate are not the most enviable ones from the social standpoint, not to mention the understandable negative connotation that gaming operations entail. It is precisely because of all these factors that it is relevant to contrast the Spanish case with Singapore’s.

The Marina Bay Sands in Singapore

The Marina Bay Sands in Singapore

Singapore’s society is very well known for its conservatism, and despite being one of the most affluent nations in the world, Singapore went ahead and approved in 2006 the construction of the world’s most expensive casino standalone property, at about US $5.7 billion, including the cost of the land. Up to now, it seems like it was a good decision for both sides, Singapore society and LVS shareholders.

It is very difficult  to reconcile the Singaporean case with the Spanish one —Spain is one of the less affluent among developed nations— particularly given Spain’s current dire social and economic conditions, with unbearable high levels of unemployment, 26%.

Within Spain, Madrid has fared worse than Barcelona, the second largest city. A recent example is that visitors to the Madrid region fell by 20% during August, while visitors to Catalonia —home to Barcelona— rose by 12%, during the same period.

To really know what is best for society in such a complex social issue as hotel/casino operations is extremely challenging, given that there are many conflicting sides and angles at play.

Alternatively, it is safe to assume that the comparative level of cohesiveness and discipline of these two societies is miles apart, which in turn is reflected in how their respective political systems are run, and reach decisions. In Singapore, in the midst of affluence and conservatism gaming operations were given the green light, and the gorgeous Marina Bay Sands is a thriving reality; in Spain, despite being in the midst of a horrendous economic crisis, and of being an essentially more liberal society, it wasn’t able to take off.

Of course, there is also the possibility that the concessions LVS was trying to extract from the Spanish government —both levels, local and federal— to go ahead with the project were beyond logical limits, and, if that were the case, Eurovegas was inevitably doomed for cancellation. There is simply not enough public information for a deeper analysis and for a proper understanding of the whole affair.

Beyond all previous considerations, the would-be Eurovegas is unquestionably an excellent case for reflection about the huge contrasts the global society constantly presents us with.

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About Martin Marmolejo

Global Investment Manager | Founder & Managing Director at MMA Global Investment Management | Proud husband and father | Follow me @globalmarmolejo.

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