Case Interview Question #00364: Your client Las Vegas Sands Corp. (NYSE: LVS) is a casino resort company based in Paradise, Nevada, USA. Las Vegas Sands has a chain of hotels with locations primarily in tourist cities where gambling has been legalized, e.g. Las Vegas (The Venetian Casino Hotel & Resort, formerly the Las Vegas Sands Hotel), Atlantic City (Sands Atlantic City), Macau (Sands Macao, The Venetian Macao Resort-Hotel), Singapore (Marina Bay Sands), San Juan (Sands San Juan), etc.
The year is 1996. The client has been in the casino and hotel business for a number of years and is particularly concerned with the performance of their hotel in Las Vegas. They have come to your consulting firm for advice on how to improve the overall business, but specifically the performance of the Las Vegas Sands Hotel. The LV Sands Hotel is old and requires modernization. Should the client invest money to knock down the Las Vegas Sands Hotel and start again, or renovate the old Sands Hotel whilst open for business? What factors would you consider in helping the client, and what recommendations would you give?
- Each of client’s hotels has a casino.
- Hotels are located in gambling centers and currently they are all profitable (assume equally).
- Approximately 90% of LVS stock is held by company insiders, and large shareholders are risk averse in nature.
- Sufficient funds are available for the hotel modernization project and any future investment can be funded through equity.
- The current state of the economy can be discussed here, e.g. lack of liquidity in the market is not a concern since the project can be funded using equity.
- However, equity may not be worth as much since the stock market is down.
- Competitive position – second tier of hotels behind the major hotels, e.g. Mirage, MGM Grand, Caesars, etc.
Focus on the Las Vegas hotel. This case is just a practical discussion of issues evaluating both the pros and cons of the two options and does not have any quantitative analysis.