Building Sands' Castles

With an abundance of leisure and business travelers once again crowding into hotels, room rates have been steadily rising over the past year. Some markets, of course, have been hotter than others, but Las Vegas, in particular, has been on fire.

Last night, I began planning my first trip there in more than two years, fully aware that finding a reasonable room rate was going to be like hitting a keno jackpot -- not easy. A quick search at InterActiveCorp's (Nasdaq: IACI  ) Expedia confirmed my fears. The sum total I paid for a three-night package, including airfare, several years ago would barely cover a single night on the strip these days.

While the trend may cause travelers to grimace, it probably elicits a smile from investors. The explosive growth of the Las Vegas strip has allowed top-tier players, such as MGM Mirage (NYSE: MGG  ) and soon-to-be partner Mandalay Resort Group (NYSE: MBG  ) , to enjoy a prolonged winning streak. Without rehashing the latest quarterly numbers, suffice it to say that both have been on quite a roll, and the chips are starting to pile up.

Fresh off a December IPO, Las Vegas Sands (NYSE: LVS  ) is the newest player to join the table, and this morning reported its first quarterly results as a publicly traded company.

Net income spiked to $69.3 million for the fourth quarter, from $7.7 million a year ago, on net revenues that doubled to $347.6 million. Excluding a series of one-time items, adjusted earnings rose from $0.03 to $0.19, easily topping expectations. The Sands' new property in the Chinese gaming enclave of Macau helped deliver much of the growth.

During the quarter, the Sands Macau -- the first U.S.-based casino to enter that market -- generated adjusted EBITDAR (defined by the company as "operating income before depreciation, amortization, rent, pre-opening and developmental expenses, the gain or loss on the disposition of assets and corporate expenses") of $67.3 million on revenues of $171.5 million, with an attractive adjusted EBITDAR margin of nearly 40%. In just two complete quarters of operation, the casino has reported more than $136 million in adjusted EBITDAR.

Construction has already begun on the Sands Venetian Macau resort, a $1.8 billion, 3,000-room property slated to open in 2006 on the Cotai strip in Macau, China -- an entertainment district that may one day boast 20 casinos and up to 60,000 rooms, along with a full complement of retail shopping, dining, and other attractions. The Sands will soon have more company in the region, though, as both Wynn Resorts (Nasdaq: WYNN  ) and MGM Mirage have seen potential dollar signs in Asia.

At the flagship Venetian Resort in Las Vegas, revenues increased 7% to $164.6 million, with hotel, casino, and food and beverage revenues all solidly higher. Casino-related revenues rose to $72.4 million, despite Lady Luck partially siding with gamblers (the 16.1% table-win percentage was well below norms). As for those aforementioned room rates, they climbed to an average of $222 a night, lifting revenues per available room (RevPAR) by 10%. Higher prices haven't deterred many visitors though; occupancy rose to 97% last year. Earnings at the Venetian decreased, though, after the Grand Canal Shops -- a shopping mall in the heart of the property -- were sold last May.

With the Sands Expo center luring droves of business conventions, new developments in Macau (and possibly Singapore) in the works, and the upscale Palazzo Resort on the way, healthy future growth rates are likely in the cards.

Have you scored a big win lately, or have the tables turned against you? Share with other Fool's in the Gamblin' Foolsdiscussion board.

Fool contributor Nathan Slaughter may need a loan to book his next trip to Las Vegas, but he's excited nonetheless. He owns none of the companies mentioned.


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