Virginia: In the Vanguard of Gaming Expansion.

Virginia is a state on the move, reinventing itself for the 21st century. The changes are startling. Statues of Jefferson Davis and Robert E. Lee and confederate flags are vanishing. Urbanization, technology companies, Amazon, casinos and sports betting are popping up all over the Commonwealth. Two years ago, it seemed that the current round of casino gaming expansion had run its course. Massachusetts, Maryland and New York had recently added new casinos, but nothing else was on the horizon. The last un-casino-ed jurisdictions were not good candidates; the deep South, Utah, and Hawaii are the last bastions of anti-casino sentiment in the nation.

Sports betting was the only exception. In 2018, the Supreme Court ruled that a federal ban on sports betting was illegal. In the wake of that decision, sports betting has become the growth segment of gaming. Twenty-plus states have authorized sport wagering since 2018. In January, the handle nationally was about $4 billion. In 2018 with only Nevada taking bets, the monthly handle rarely exceeded $500 million. The driving force behind handle is the ease of access to wagering opportunities in many states. Mobile and online sports betting accounts for as much as 90% of all wagers where they are available. The obvious popularity of sports betting is also renewing interest in the expansion of casino gaming, even where it once seemed improbable, the deep South.

Alabama, Arkansas, Georgia, Texas and Virginia are in play in 2021. Of those five states, Virginia is currently the most interesting. Four or five years ago, no gambling except the state lottery was legal in the Commonwealth. However, like most southern states, Old Dominion is trying to adapt to changes in culture and business and leap into the 21st century. The state’s motto is: “Virginia: Open for Business” and in 2021, that includes gaming. The Commonwealth has gone from never-in-my-backyard to a model for the future of gaming. Besides the lottery, Virginians can now bet on horse races live, or on historical racing machines at the Colonial Downs racetrack and at four Rosie’s scattered around the state. Colonial Downs is authorized 3,000 games and each of Rosie’s has over 500.

As of January, mobile sports betting is alive and well in Old Dominion. DraftKings, FanDuel, BetMGM and William Hill are the licensed operators. More will follow and casino operators are certain to be granted sports betting licenses. There are no casinos yet, but they are on the way. Casino gaming in Virginia has been in making since March 2019. The state legislature authorized casinos in five cities, conditioned on the approval of the voters of the state. In November 2020, the voters approved in Bristol, Danville, Norfolk and Portsmouth. Richmond is in the process of joining the other four cities.

A casino in Richmond is generating more interest than in other cities. Six companies have offered to build a casino there. The proposals range from $350 million to $650 million. The proposals are different, and each would be located in its own jurisdiction. Each bidder claims to be the best qualified and able to bring a unique resort to Richmond that no other company could match. The bidders are as interesting as their bids. The Pamunkey Indian Tribe is bidding on more than one city in Virginia. It is based in the state; indeed, it claims a 10,000-year-old history in the region. The Pamunkey are offering to spend $350 million to build a casino in Richmond. The Poarch Band of Creek Indians’ home is Alabama. It operates casinos in Alabama, Florida, Pennsylvania and the Caribbean mostly under its Wind Creek brand. The tribe’s proposal is for a $541 million resort.

Bally’s, formerly Twin River Resorts based in Rhode Island, was founded in 2004. It now operates 12 properties in seven states; its proposal is a $650 million resort. The Cordish Companies was founded as a real estate developer. It has branched into a casino-development company, sometimes partnering with Hard Rock and in other locations under its own brand, Live! The Corish resort in Richmond would cost $600 million. Golden Nugget is a subsidiary of Fertitta Entertainment, operator of Landry’s Restaurants and Golden Nugget Casinos. Golden Nugget operates five casinos in four states. The Golden Nugget’s bid is for a $400 million property. The Nugget claims it understands better than any other operator what size resort to build in any city.

The final bidding company was formed specifically for the Richmond bid. It is a combination of a black-owned media company, Urban One, and Colonial Downs. The combined entity is offering to spend $517 million. It lays claim to priority treatment. Urban One is a minority-owned company and it reflects the ethnic makeup of the area better than the other bidders. Its partner, Colonial Downs, is just trying to add one more location to the four Rosie’s and the racetrack it presently operates in Virginia. Once the city council chooses an operating company, the voters will have to approve in November. That will put Richmond about a year behind the other casinos to be built in the state, but that has not lessened the interest.

The Commonwealth of Virginia is reflective of the times. The companies bidding are part of the new wave of gaming entities. They are 21st century companies, formed to take advantage of the new landscape of a new century. And like the older 20th century gaming companies Wynn, Sands, MGM, Boyd, Penn and Caesars, they want to take advantage of mobile/online sports and other gambling. We are entering the decade of mobile gambling. Virginia and Richmond are bringing that trend into clearer focus.

Andrew Yang, the Big Apple and a casino

Andrew Yang is seeking to be elected mayor of New York City. Yang has no political experience, although he has campaigned for public office once before. In November 2017, he filed to run for president of the United States, leaving the race in February 2020. Yang is not rich, nor is he well-known nationally. He graduated from law school, but only practiced law for “the worst five months of my life.” He is usually referred to as an entrepreneur, author and now of course politician. He has written two books; the second, The War on Normal People, contains his political philosophy, worldview and a prescription for solving a major challenge of our time, the widening economic divide.

Yang sees society as divided into two categories, “normal people” and “the other people.” Normal people are all those who perform routine tasks: factory workers, transportation, food service and white-collar administration. The others work in law, medicine, finance, consulting, technology, and academia in one of six major cities. The second group is inheriting the Earth, while the normal people are being overtaken by technology and automation—marginalized and losing their jobs and any hope of a better future.

The book is not about casinos, but Yang does mention them. “One thing that has surprised me is that many of these places — Baltimore, St. Louis, New Orleans, Detroit, Cleveland — have a casino smack dab in the middle of their downtown. I’ve visited some of them on a weeknight and they are not encouraging places. Most of the people there do not seem like they should be gambling.”

The people he saw at the casinos, who he thinks shouldn’t be there, are the normal people. The other people make at least $200,000 a year and can afford a night out to play the slot machines, blackjack or craps. Yang’s book and his political campaigns advocate protecting and helping the normal people and clearly, he does not believe casinos do either.

So it came as a bit of surprise when as a mayoral candidate, Andrew Yang suggested building a casino in New York City. He said, “That casino would generate so much money it would be bananas. If the city could get that in place and harness some of that, that would be one of the engines of recovery.”  Yang thinks most of the money gambled in the casino would come from tourists and people who would have spent that money in Connecticut or New Jersey. He is not specifically targeting the normal people of the city.

It is at this point that Yang becomes a politician. He is looking for money to fund his pet plans and believes a casino could provide it. His spokesperson estimated $1.5 billion in licensing fees and $900 million in taxes annually.  These estimates are typical of political rhetoric, i.e., inflated and unrealistic. It might be possible to find companies willing to pay $10 million or even $100 million in licensing fees, but $1.5 billion is a bit steep for any gaming company, though maybe Microsoft, Google, Amazon or Facebook might be interested. Except those mega-companies don’t build buildings or restrict their customer base to one small geographical area, do they?

The tax projections are, likewise, quixotic. Nevada collected $711.3 million in gaming taxes in 2018 from more than 400 casinos. Pennsylvania has the highest gaming-tax rate of any state. In 2020, the Keystone State collected $700 million in taxes on $2.6 billion in gaming revenue. In 2017, the best year for gaming in Pennsylvania, the state collected $1.1 billion in taxes.  For a casino in New York to pay $900 million in taxes, it would have to generate between $8 billion and $10 billion in gaming revenue.

Nevada casinos generated $12 billion in revenue in 2019. Las Vegas alone gets over 40 million visitors a year and generated $6.5 billion in gaming revenue in 2018 and 2019. Pennsylvania’s casinos produced $3.2 billion in 2017, its best year. Resorts World Casino New York City generated $625.8 million in revenue from 5,500 slot machines, $322 a day from each one. Those are big numbers and to get to Yang’s predictions, a casino would have to generate many times that amount of activity. It is a tall order.

Yang has fallen into the trap that often snares politicians: letting their desire to fund pet programs outweigh their critical analysis. Yang appears to be an honest person, with a political agenda of doing good according to his values. He does not seem to be seeking personal riches or public acclaim. He believes that the plight of his normal people is dire and the government should step in and help them. He advocates paying everyone a universal basic income of $1,000 per month. And whether it is administered by the federal government or the city, it has to be funded. Who can fault him for looking for a golden goose? Sadly for Andrew Yang’s plan, gaming is not a golden goose.

In 2021, there is enough data to make realistic projections on the potential revenue of any casino in any city. New York City would be the best location in the country. But it would not be better than Macau or Singapore. Nor could he expect to levy a tax more onerous than Macau, Singapore, or Pennsylvania and still attract investors and developers. Macau, after all, dangled exclusive access to 1.4 billion Chinese before prospective casino developers. New York City has eight million people. Andrew Yang might make a good mayor. However, it’s a long distance between a theoretical political philosopher and a day-to-day mayor of the nation’s largest city.

A casino in New York would attract the best of casino companies. They would be willing to invest billions. The casino would generate breathtaking revenues and pay lots of taxes. It would employ thousands of people. However, it would not rescue normal people from automation and it would not solve the city’s problems.

And who will wear the Crown’s crown?

Australian gaming company, Crown Resorts, has had a very difficult time of late. Its troubles probably began in 2016. In October of that year, 19 employees were arrested in China for illegally recruiting gamblers. The press coverage was unfavorable for Crown and James Packer, the company’s largest stockholder, and it probably had an impact on subsequent events. In March 2018, Packer resigned from the board of Crown, but still owned 47 percent of the shares. In April 2019, Wynn Resorts said it was no longer interest in acquiring Crown Resorts.  

In July 2019, Nine Entertainment’s TV program “60 Minutes” broadcast a segment called “Crown Unmasked.” It alleged that Crown engaged in “money laundering, breached gambling laws and partnered with junket operators with links to drug traffickers, human traffickers and organized-crime groups.” That report, and coverage by The Age and Sydney Morning Herald, pushed Crown into the limelight, a very harsh limelight. It forced regulators to openly question the policies, tactics and strategies of Crown, as well as the behavior of its board of directors and management. 

In August 2019, an investigation was announced. The investigation was chaired by a former New South Wales Supreme Court justice, Patricia Bergin. Chairman Bergin appears to have taken her job seriously. Formal hearings began in January 2020. Immediately, Crown replaced its chairman of the board and its CEO. The testimony by company executives was damaging, but none more so than Packer’s. In October, James Packer testified by video. He admitted to poor choices and even some inappropriate behavior in his leadership of Crown, but blamed his bipolar condition. Packer also said he was shocked and upset by the corporate culture that was revealed by the investigation. Packer does not want the blame and he apparently no longer wants anything to do with Crown. In December, Packer’s yacht floating in the Caribbean was parked next to the yacht of Sheldon Adelson. It is not known for certain what the two titans discussed, but it is thought Packer was trying to sell his stake in Crown to Adelson. 

Sheldon Adelson’s health prevented any further discussions and Adelson died a month later. Whether Las Vegas Sands, Wynn Resorts or any other company is interested in acquiring Packer’s stock or all of Crown Resorts is not known. At least in part, anyone interested in acquiring Crown or its assets probably wants to wait for the outcome of investigation. The report by NSW Independent Liquor & Gaming Authority (ILGA) was released February 9, 2021. It was not favorable for Crown. It held that Crown was not suitable to hold a gaming license for its newly constructed Barangaroo tower casino and listed 19 conditions that needed to be met before, in the ILGA’s opinion, it could be found suitable for a casino license. 

The Barangaroo project is expensive, 2.2 billion Australian dollars. But the casino may not be important to the project in the grand scheme of things. The hotel and restaurants do not require a casino license and have already opened. Besides those amenities, 82 “apartments” are for sale; the entry level units begin at A$9.5 million. Some financial analysts are already declaring the project a success and dismissing the casino license as irrelevant at this point. However, when Packer pitched to project to New South Wales’ Premier Barry O’Farrell in 2012, he made the argument that without a casino, it was not feasible to build a five-star hotel. Whichever is true, it will be several years before it can be pronounced a success or failure and the pandemic will only complicate the process. 

For Crown Resorts, the license is a very big deal. The Barangaroo tower was to be the crown jewel in Crown’s crown. It was built to attract international travelers, particularly wealthy Chinese gamblers, and it was meant to raise Crown to the level of 5-star resorts. Besides that, Crown is a casino company, not a property manager. And of course, the investigation in New South Wales is bound to have an impact on other Crown casinos in Australia and probably in England. Crown is certainly under pressure to comply with all the conditions of the report. Three board members have resigned, one of whom was named in the report. However, also named in the report were the company’s CEO and chairperson of the board of directors. Both have promised to cooperate and have endorsed the findings and recommendations, but they are resisting pressure to resign. 

Predicting the fate of Crown at this point is near impossible. At a minimum, the company will probably need to replace the majority, if not all, of its board of directors and its CEO, CFO and any other executive directly involved in promoting the VIP segment of Crown’s business. There will be no more wombat hunts, suitcases full of cash or private jets that land and take off in the middle of the night. The new management team will have to wear a halo to go with their crowns. The easiest solution might be to grind up the crown and make something else out of the parts. Wynn, Las Vegas Sands, MGM and others looking for growth opportunities may find Crown’s assets attractive. However, the name has become tainted and whoever looks to pick up the company or some of its assets probably will not want to wear that crown. 

A Changing of the Guard at the Sands

Sheldon Adelson died and left the reins of Las Vegas Sands in the hands of his second-in-command, Rob Goldstein. Goldstein inherits the reins, but not the stock and ownership control of the company. Adelson’s wife, Miriam, gets the stock. In time, Miriam may be able to exercise some control over the company, but not until she is licensed in Nevada and receives approval from Macau and Singapore. Upon Adelson’s death, Goldstein reaffirmed his support of Adelson’s values, goals, and agenda. Adelson had big plans: He wanted to bring Macau-like strips to Spain, Texas, Miami and New York City; he also wanted to expand in Singapore and Macau. Goldstein is sure to pursue those plans. 

Although it is barely three weeks since Adelson died, the company has not been standing still. The first news of the company under Goldstein came from media reports in Texas. The Texas Tribune reported the Sands had added lobbyists in Texas; its team ballooned to 51 members. That sounds like a serious effort. A spokesperson for the Sands said the company looked forward to working with lawmakers to present the opportunities for long-term economic development in the Lone Star State. In the past, the Sands had called Texas a desirable plum. Texas does not have casinos, but it does have gamblers. Texas gamblers are famous, not only for their high rolling in Las Vegas, but also for the constant stream of regular players that feed casinos in Louisiana. 

For Rob Goldstein, the fourth-quarter earnings call was the first opportunity to present some of his own ideas. He may be loyal to Adelson’s memory, but Goldstein would be a rare person indeed if he did not want to put his own stamp on the company. As expected, revenue, EBITDA and operating profit/loss were all down significantly from the same quarter in 2019. The Sands has properties in Las Vegas, Macau and Singapore; all three jurisdictions have been heavily impacted by the pandemic and government restrictions on operations. Still, the company remains optimistic about the future, opining that Las Vegas, Macau and Singapore will bounce back — If not in 2021, then in 2022.

As interesting as the results of the first gaming company to report for the fourth quarter were, no one was terribly interested. The analysts wanted to know if there is a plan to sell the Las Vegas assets. An asset sale does not necessarily mean selling the operations. The Sands is one of the few gaming companies that has not taken advantage of the red-hot REIT market. Does the Sands intend to take advantage of the REITs to enhance its cash reserves and to have money for other projects? CEO Goldstein said if it made long-term sense, the company would consider the option. That comment was no more than Adelson had said. The Sands has never been particularly secretive, but it is playing its cards close to vest on its intentions in Las Vegas. 

The analysts also wanted to know if the Sands was still committed to Macau. Goldstein answered that question by saying that if the Sands’ license is renewed next year, it will invest between $5 billion and $10 billion. That answer was probably intended more for Macau gaming regulators than anyone else as a carrot, a sweetener for a license renewal. The license situation is far from clear in Macau. The criteria for renewal have not been published yet and the government has been coy when answering questions. In the meantime, the Londoner is set to begin opening on February 8. The Londoner is a $400 million remodel and rebranding of the former Sands Cotai Central. Goldstein also said the Sands was committed to Singapore; the Marina Bay Sands was the company’s most profitable casino in the fourth quarter. The Sands is undertaking a $3 billion expansion of the MBS. Goldstein said, “These are not small investments.” 

Goldstein updated the market on its New York plans. He said the company has been interested in New York for a hundred years. A slight exaggeration, but the Sands has been lobbying for a Sands New York City for at least five. “I think it’s close to $2 billion (net revenue) right now, just in the facilities that are there, without table games or decent rooms or really a decent product,” Goldstein said. “A good product there will be extraordinary.” 

One could argue that with casinos in New York City, Texas, Macau and Singapore, Las Vegas Sands Corp. would be the most diverse and profitable casino company in the industry. A presence on the Las Vegas Strip is probably a necessary part of the strategy. Goldstein did not mince words when talking about Las Vegas. He said some were saying the boom days of Vegas had passed, though he thought them to be very wrong. He predicted that the Strip will be back, with its full complement of conventions, sports and shows; he said, “There is still plenty of gas left in the tank. We remain very bullish on the return of Las Vegas. This is a unique town.” 

One other area interested the analysts: online, mobile and sports betting. Sports betting, particularly mobile betting, is the hottest trend in the industry right now. Penn National, MGM, Caesars, Wynn, Boyd, Golden Nugget and Bally’s have been aggressively pursuing licenses, along with media, professional sports, betting company and social-media partnerships. Those companies have spent billions in the last year buying companies, merging, and forming partnerships. The Sands has been noticeably absent from the fray. In fact, Sheldon Adelson was a very vocal opponent of online gambling of any type. He used his money and political influence to oppose online gambling at every opportunity, including finding sponsors, like Arizona Senator John McCain, for federal legislation prohibiting any form of online gambling. It seems now that his opposition belonged to a bygone era. The new CEO and Chairman of the Las Vegas Sands is open to the possibility.

Goldstein said that even when Adelson was opposing online gambling, he never denied its potential. Goldstein appears to think the time is right for a change of strategies and to grab for the brass ring. “I have very strong thoughts about this. We just want to keep working toward our goals. It’s a very interesting business. The question is, can we bring something to the table that can make a lot of money.” 

This is Rob Goldstein’s chance; the other current growth possibilities were Sheldon’s ideas. If the company makes a success and “makes a lot of money” from online/mobile and sports betting, it will be Goldstein’s legacy, not Adelson’s. It took only three weeks, but clearly the guard has changed at the Las Vegas Sands. 

Where have all the gamblers gone, long time passing?

For December 2020, the three Massachusetts casinos reported less than $50 million in gross gaming revenue. It was a decline of 40 percent from December 2019. The casinos in Massachusetts, like those everywhere in the country, are suffering the impacts of government operating restrictions and a customer base leery of being in public. The nation and the gaming industry are approaching the one-year anniversary of the beginning of the COVID-19 crisis. Macau marked the one-year anniversary of its first case of COVID-19 on January 22, 2021; its casinos closed for two weeks beginning on February 4, 2020.

The U.S. gaming industry is trying to plan for a post-pandemic era. But it is still operating under the conditions created by the virus. The crisis is not over and gaming states are not out of the woods yet. For example, the casinos in Massachusetts were restricted to 25 percent capacity and a mandated 9:30 p.m. closing time in December. At least in part, those restrictions are the reason revenues fell 40 percent.  Not all jurisdictions have reported December. So the complete picture for 2020 cannot be drawn. But one thing we can say for certain: 2020 was the worst year in the history of the legal gaming industry in the United States.

The year probably ranks nearly as low in other industries, too, especially service industries. The crisis impacted every aspect of the economy and the lives of individuals. The year produced dramatic shifts in the societies and economies of the world and every state in the United States. It is highly likely that 2020 will be listed next to the years of the Civil War, World War I, World War II and the Great Depression. No person, business, or government entity remained unaffected by the pandemic. The closing of most, if not all, non-essential businesses and government agencies and the imposition of masks, social distancing, curfews and in some cases near-martial-law conditions produced some profound changes in behaviors and trends. Some trends were the direct result of the pandemic crisis. Others became stronger and more pronounced.

The most visible and significant trend in the broader society is the dramatically increased momentum toward living online. Online shopping, working, and socializing were not invented in 2020; each had been around for years, increasing year over year. Amazon was founded in 1994. Originally, it sold only books. Today, Amazon sells nearly everything and is the world’s largest retailer. It was perfectly positioned for the stay-at-home world of 2020. Working remotely on a computer connected to other employees and corporate culture on the internet has also been growing steadily since the 1990s. The coronavirus crisis made working online more than just an option; it made it essential for many. Probably as much as 25 percent of the workforce was compelled to work online from home at some point during the year.

And while they were working and shopping online, people also began to socialize online; Zoom became a worldwide phenomenon. During the lockdown, people could not go out to eat, workout, or learn to dance. Those things too found an online existence. Gradually, over the course of the year, a stay-at-home culture began to blossom. It even became the preferred option for many. Those societal changes in behavior also impacted casino gaming.

In Nevada, casinos were ordered to close on March 17th and permitted to reopen on June 4th. Casinos in the Silver State, like those in other states, experienced a rush of business when they reopened, the so-called pent-up demand. One person in Vegas called the opening day the greatest day ever. The euphoria did not last. The virus crisis did not go away; in fact, it got worse. As a result, most jurisdictions, including Nevada, began to impose additional restrictions on top of the masking and social distancing required on the initial reopening. Three states ordered their casinos to close a second time. At the end of 2020, most jurisdictions still had restrictions in place. The restrictions have had a drastic impact on casino revenues. For the first 11 months of the year, gaming revenues were down more than 30 percent from 2019. Actually, the decline was in the March-November period. In January and February 2020, gaming revenues nationally were up more than 10 percent. There was one mitigating factor for gaming revenue during the year: the internet.

Just like socializing and shopping, online gambling skyrocketed in states where it was legal. In most states, the online activity was sports betting. In states with online sports betting, as much as 90 percent of the bets are taken online. New Jersey, Pennsylvania, Delaware, and West Virginia have online gambling on other casino games as well. Those games have done very, very well during the pandemic. However, the majority of the gaming industry does not have an online component. Without it, brick-and-mortar casinos are suffering, and not just from the restrictions, but also the changed social attitudes. The stay-at-home culture is making itself felt.

In Massachusetts, the Gaming Commission released a survey this month that it had conducted in December 2020. In the survey, Encore Boston Harbor, MGM Springfield, and Plainridge Park were open and operating under a 25 percent capacity restriction. But the actual usage was below 20 percent, even during the busy Christmas to New Year’s week. During the first weeks of casinos reopening around the country, pent-up demand was the narrative and casinos reported good crowds. But six months later, the narrative had changed, as more people opted to stay home.

The year ended quietly, without the usual celebratory crowds, fireworks, dancing, and kissing. People wanted to return to normal activities, but they had lost the habit. They were tired of being forced to stay home, but they felt more comfortable and safer there. Fear of the virus and mask fatigue has taken over the narrative. People want to go out and socialize, but don’t want to have to wear a mask and stay six feet away and they do not want to catch COVID-19. The gamblers, just like the workers, shoppers, and dancers are staying home waiting for a vaccination and the end of this pandemic nightmare.

Sheldon Adelson Changed the Sands, Las Vegas and Macau

Sheldon Adelson the CEO of Sands Las Vegas has died.  Forbes listed him as the 28th wealthiest person in the world with $33.5 billion.  Adelson had three claims to fame. First, besides being the Sands CEO, he owned more of the company’s stock than anyone else. It was his Sands stock that put him on the Forbes list. Second, he was the largest individual donor to the Republican Party and the presidential campaigns of Donald Trump. He donated at least $100 million in each of the last two presidential election cycles. And third, he was a supporter of the State of Israel and its current prime minister, Benjamin Netanyahu. Besides the Sands, he owned two newspapers, the Las Vegas Review-Journal and Israel Hayom, a free daily in Israel. 

Due to Sheldon Adelson’s wealth and influence, he was eulogized, characterized, praised and even demonized in newspapers around the world.  In Asia, he was called “the man who turned water into casinos and wealth in Macau,” by the publication Macau Business.  In the early days of the transition and integration of Macau into mainland China, Macau expanded its gaming laws to allow foreign investors.  Adelson went there to investigate its potential for a casino.  He saw Macau as more than a place of his company to make money, he saw a destination; Adelson envisioned a strip like that in Las Vegas with many multi-national, multi-billion-dollar casino-resorts.  The land he wanted to use was still partially under water.  His vision succeeded, and Wynn Resorts, Crown Resorts and MGM followed Adelson to Macau. Each built at least one-billion-dollar palace on the Cotai Strip.  At its peak in 2015, Macau generated $46 billion in casino revenue annually.  In obituaries in the region Adelson was ranked second to gambling legend Stanley Ho in importance and afforded the highest honor and praises. In Singapore, the LV Sands was as successful; the Straits Times described him as being: “unfazed by risks, rivals or the law.”  

In the Middle East, his image was bifurcated; in the Arab world and Arab press, he was seen as the enemy of Palestine, Islam and of pan-Arab causes.  Aljazeera said this about him: “Sheldon Adelson’s support for ‘extreme anti-Palestinian positions’ will be felt for many years to come, Palestinian political analysts said.”  On the other hand, in Israel Adelson was an honored and respected man  – at least most of the time. Israeli politics can be as divisive and polarized as any in the world, so even in Israel he had is critics.  Still even among his detractors, it was felt that Adelson more than any other person pushed Israel into being a major priority of the Trump administration.  The Times of Israel opined; “With money to back up his views, Adelson has been credited with helping foster the GOP’s adoption of hardline pro-Israel policies, though it would take until Trump’s term in office beginning in 2017 for many of the top items on his agenda to come to fruition. ‘It is impossible to overstate the significance that Sheldon Adelson along with his wife Miriam had on shaping US policy with regard to Israel,’ Republican Jewish Committee executive director Matt Brooks said.”

In the United States, Sheldon Adelson also has had two storylines and two characters; at times it seemed he was two different people.  Depending on your politics, Adelson was either a demon trying to buy a presidency and then dictate the policies of the president and the Republican Party or a true conservative, striving to support and assist legitimate conservative values; while he very publicly supported Trump and the Republican Party, he also fought tooth and nail against online gambling and the legalization of marijuana.  Adelson was as generous with charities as he was with political candidates.  He followed a Jewish tradition that he learned from his father of helping others less fortunate than himself; his generosity was not situational, it was systemic, a part of his character.

In Las Vegas, except for his acquisition of the Las Vegas Review-Journal and his battles with unions, Adelson had a good reputation.  After the Venetian was open and operating successfully, Adelson was seen as the person that taught the city about the value of conventions and group travel.  With a background in conventions and mass travel, he set out to build a billion-dollar resort around those concepts.  The rest of the operators on the Strip may not have laughed out loud, but they did trip over themselves praising his business foresight and acumen either.  However, over time with the help of the stellar financial results of the Sands in Vegas and later in Asia, the industry came to see the validity of his approach.  From a very small and weak beginning with the old Las Vegas Sands, the playground of Frank Sinatra and his friends, Sheldon Adelson built a company that is worth $40 billion; and a year ago before the pandemic it was worth $70 billion.  He did it around the concept of an integrated resort; in an Adelson resort the mass market is as important as the premium.  Even in Macau, the Sands does better at catering to both premium and mass markets than its competitors.

Adelson’s death will create a hole in his company and the industry.  The management of the Sands is more that qualified to operate the businesses he created, but they will not have his foresight and vision, nor the willingness to invest their own money to save the company or pursue a dream.   That willingness, more than anything else characterizes Sheldon Adelson. Whatever the cause or issue, he was always willing to invest his own money.  Whether you agree with his principles or not, it is hard to argue that he was not driven by principle and just following trends and reacting with a knee-jerk to a crisis.  It has been true in Macau during the current crisis, it was true in Israel when he established Hayom, it was true in Pennsylvania when he fought against online gaming, even thought, as we can now see, it was very profitable, it was true in politics and it was true in his private life.  Whatever else he may have or not have done, Adelson certainly changed Las Vegas, Macau and Frank Sinatra’s Sands.

VIP Gamblers in China: a bait and switch?

China is changing, being changed. President Xi Jinping is engineering a stronger central government and decreasing the importance of a free capitalist economy. Although a semi-capitalistic economy exists, it is coming more and more under the central control of the Communist Party. The changes will be important to any company wishing to do business in China, but none more so than casinos in Macau. The National People’s Congress has just passed an amendment to its criminal code; the new code criminalizes organizing or recruiting Chinese citizens to gamble in other countries or to cross a border to gamble. The cross-border concept is much like America’s interstate-commerce regulation by the federal government. The concept is critical to Macau, as there is a border between China and Macau; Macau is designated as a Special Administrative Region of China and part of China. But for the purposes of this law, Macau is across the border.

The new law has implications for other countries as well, including Vietnam, Korea, Cambodia, the Philippines, Malaysia, and Australia. For example, Crown Resorts has just opened a new resort in Sydney. Currently, the casino is not open, due to regulatory concerns that arose from Crown’s junket activities in China and questionable money-handling procedures; Crown is awaiting licensure for its casino. The resort was conceived before the issues with China surfaced and designed specifically to cater to rich Asian gamblers — that is, Chinese VIPs. It is already being argued in the Australian press that the property is destined to fail because the Chinese high-roller business model is now fatally flawed. The majority of casinos in Asia were built to attract the same gamblers.

Unfortunately, the Chinese VIP junket world will probably be disabled by the Chinese legislation; there is a high probability that high-rolling Chinese gamblers will become an endangered species. The new law will probably affect two separate categories of participants in the VIP gambling world: the junketeer and the individual gambler. The junket organizers are the immediate target and anyone caught soliciting Chinese citizens for the purpose of gambling is subject to a minimum of five years in prison. Anyone, whether Chinese, Australian, or from Macau, in China organizing junkets or recruiting Chinese gamblers is automatically guilty of a crime. However, there is an even bigger implication for the individual gambler. Gamblers who go to other countries or cross borders to gamble are probably taking the same risk as the junket representatives.

China has instituted a system of social credit scoring much like our financial credit scores. Officially, China is striving for social harmony, a land where every person acts in socially appropriate and harmonious ways. Citizens have been given a baseline score; good and government approved behavior is rewarded by points, while bad unapproved behavior receives a penalty in the form of negative points. The scores are grouped into four categories, A, B, C, and D. A is the privileged class, given preferences for healthcare, jobs, schooling, and other societal rewards. B and C are remedial categories in which people are encouraged to avoid improper behavior and engage more often in good social citizenship, such as volunteering for public works, reporting misbehavior by others, and donating organs. D is a near-criminal category that can result in job loss and denial of access to educational services and travel facilities. There are no figures on job loss, loans denied, or schools not attended. However, as of June 2019, as a result of social credit scores, more than 30 million people had been denied travel privileges in China.

The list of anti-social or irresponsible behavior covers a wide range of activities: jaywalking, googling questionable terms, saying the wrong thing in a text to a friend and gossiping, dishonest and fraudulent financial behavior, playing loud music, eating in rapid transits, violating traffic rules, making reservations at restaurants and not showing up, disposing of trash incorrectly, and, most probably, gambling. Except for approved lotteries, gambling in China is illegal; in that context, it may be construed under the new law as being antisocial and subject to punishment.

In a country with 1.4 billion people, a system of rewards and punishments based on personal behavior might be difficult to administer. However, this is the 21st century, the century of extremely sophisticated technical know-how. With current technology, including sophisticated artificial intelligence software, the Chinese government can track anyone. It is estimated that China has installed as many as 600 million video cameras. The government can identify any single individual of the 1.4 billion citizens within seconds. Additionally, nearly every person in China has WeChat on their phones. With WeChat, everything they do or say is monitored by the central system. Gamblers are warned: You cannot sneak across the borders any more to gamble. And when you’re caught, you can expect to spend at least five years in prison. If the government does apply the law to both gamblers and junketeers, it is a game-changer for Macau.

In 2016, President Xi started a campaign against corruption in business and the Communist Party. In two months, that campaign had stopped the flow of VIP gamblers to Macau in its tracks. Revenues dropped by over 50 percent. Within a couple of years, that campaign had played itself out and things were returning to normal in Macau in 2019. But the pandemic has been even worse for the city than the crackdown. Gaming revenues for 2020 were down 80 percent from 2019. Analysts differ on the potential post-pandemic recovery period for Macau, but estimates range from 2 to 5 or more years. Those estimates were made before the new law was published. A pessimist might update those estimates — from a century to never.

Interestingly, in 2022, the casino licenses in Macau come up for review and renewal. For the last three years, casinos have been investing billions in the city. The investments were of course meant to capture more revenue, but also to prove the worth of the licensee to the governments of Macau and China. It is too soon to speculate, but that money might have been wasted. One major investor in MGM has published a letter urging the company to sell part of its stake in Macau.

As the implications of the new law play out over the course of 2021, there are certain to be many reassessments of the value of a casino license in Macau. The casino companies were lured into Macau with the promise of the world’s largest gambling customer base, Mainland China. A casino license in Macau appeared to be a license to print money. It now seems that China may have withdrawn the bait and switched it. China wants international travelers in Macau, not gambling Chinese. They were just the bait to get the billions of dollars in investment.


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March 2021