In a year when Las Vegas Sands Corp. (NYSE:LVS) stock has fallen 24%, it may not seem like there are a lot of positive headlines. But there have been a few items that have stood out in a tumultuous year for the gaming industry.
Diversification pays off
2015 hasn't been a great year for Las Vegas Sands, but competitors Wynn Resorts (NASDAQ:WYNN) and Melco Crown (NASDAQ:MLCO) have fared even worse this year. Wynn's EBITDA -- a proxy for cash flow in gaming -- is down 37% so far this year, Melco Crown's EBITDA has fallen 31%, and Las Vegas Sands is down just 24%. So, on a relative basis, you could call the year a success and that's largely driven by the company's diversification.
Macau has seen gaming revenue plunge this year, which has led to a 37% decline in Venetian Macau's EBITDA, while Sands Cotai Central's EBITDA is down 34%. But Marina Bay Sands in Singapore has only seen a 13% decline, not a great figure but much better than Macau's.
In last Vegas, EBITDA is down just 12% and non-gaming revenue is holding up fairly well. Las Vegas Sands' smallest and oft-forgotten casino, Sands Bethlehem, is even seeing an increase in EBITDA of 21% so far this year.
Macau is still the driver of Las Vegas Sands, but its diversification has helped keep the company solidly profitable as Macau has struggled in 2015. That's what's allowed the stock to outperform competitors.
The Parisian is coming
Since Las Vegas Sands opened Sands Cotai Central in 2012, the company hasn't had any new projects to grow its resort base, until now. It is finishing construction on the Parisian in Macau, which is expected to open late in 2016, and it will complete Sheldon Adelson's vision of the Cotai Strip in Macau.
Located directly south of the Four Seasons Macau and across the street from Sands Cotai Central, the resort is well positioned in the heart of Macau's gaming market. It will benefit from the close proximity of other resorts to attract mass-market gamblers, which is what Las Vegas Sands does best.
This mass-market strategy has been a key for Las Vegas Sands as Macau's gaming revenue declines because the mass market hasn't declined nearly as much as VIP play has. Mass-market visitors also spend a lot of money on show tickets, hotel rooms, restaurants, and shopping. That's what the Cotai Strip is built for and the Parisian will benefit from that long-term strategy.
Lots of questions heading into 2016
There have certainly been some positives for Las Vegas Sands in 2015, but the overriding narrative is still the decline in Macau's gaming market. There's also the expansion of competition for investors to worry about. Melco Crown just opened Studio City south of The Parisian and Wynn Resorts is putting the finishing touches on Wynn Palace in Cotai. When both are completed, they could pull gamblers from Las Vegas Sands, which has dominated Cotai until now.
For 2016 to be a great year for the stock, we need to see the bottom of Macau's gaming revenue and maybe even a little growth. Until that happens, there will be questions surrounding Las Vegas Sands and all gaming stocks that depend on Macau for most of their revenue. And with additional supply hitting the market in 2016, there's an urgent need for growth in the region.