Las Vegas Sands Paves Cotai Strip

Last year, Sheldon Adelson's Las Vegas Sands (NYSE: LVS  ) became the first foreign-based casino operator in the red-hot gaming market of Macau -- the former Portuguese colony located just 40 miles west of Hong Kong -- when it opened the $240 million Sands Macau. Last Friday, the company pushed forward Adelson's vision for a Las Vegas-style strip in Macau in a big way.

In a press conference in Macau, Las Vegas Sands -- accompanied by a dream team of international hotel operators -- announced that the first phase of the "Cotai Strip" would open in 2007, featuring at least seven resort hotel casinos and more than 10,000 guest rooms. Anchoring the Strip will be the company's $1.8 billion Venetian Macau, a supersized replica of the high-end Venetian property on the Las Vegas Strip.

Amazingly, all of the new hotels on the Cotai Strip -- situated on a 1.8-square-mile stretch of reclaimed land adjoining two of Macau's islands -- will be built and ready in less than three years. The key to the expedience is LVS's partners, including hotel operators Four Seasons (NYSE: FS  ) , Marriott (NYSE: MAR  ) , Hilton (NYSE: HLT  ) , InterContinental (NYSE: IHG  ) , Starwood (NYSE: HOT  ) , Dorsett, and Regal, as well as several other investors. The hotel groups and investors will finance the hotels; Las Vegas Sands will lease and operate the casinos and the showrooms in each of the hotels.

The Venetian Macau itself will feature a monstrous 546,000-square-foot casino with 5,000 slot machines and 585 table games. The property will house 3,000 suites, in addition to 1 million square feet of convention space, a 2,000-seat showroom, 850,000 square feet of retail space, and a 15,000-seat arena.

Macau -- handed back to China in 1999 -- is the hottest market in the industry. Revenues climbed about 50% to more than $5 billion in 2004. Meanwhile, visitors to Macau climbed 40% to 16.7 million last year, more than half of which came from mainland China. According to LVS rival Wynn Resorts (Nasdaq: WYNN  ) -- which plans to open Wynn Macau by September 2006 -- more than 80% of visitors in 1991 came from Hong Kong. And with 100 million people within a three-hour drive, 1 billion people within a five-hour flight of Macau, and a rapidly growing Chinese middle class, the foreign investment cannot come fast enough.

Whereas the average visitor to Las Vegas stays about three days, the average visit to Macau lasts about a day -- yet the Macau visitor manages to lose roughly twice as much in one-third of the time. Las Vegas Sands is hoping that influx of new high-end hotels will encourage gamblers to stay longer and lose more.

LVS shares have been a hot commodity since the company's IPO at $29 per share in December. The instant those shares hit the open market, Las Vegas Sands became the most highly valued casino operator and carries a $17 billion market cap at around $49 per share. But most of that value is in promise: In addition to its investments in Macau, LVS is planning to open a second property on the Las Vegas Strip in 2007 and is vying for a piece of the action in Singapore and the United Kingdom, as well as a license for one of the new slot operations in Pennsylvania.

Las Vegas Sands seems to possess relatively favorable prospects for the foreseeable future, and accordingly, the inherent question becomes the price at which it is attractive.

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Fool contributor Jeff Hwang owns none of the companies mentioned above.

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