Analysts: Success likely for Venetian

Will the Venetian hotel-casino's "soft" opening this week be a meaningless aberration in the history of a successful megaresort or a significant misstep on a road to financial difficulty?

Most Wall Street gaming analysts say it's too early to tell. They note that there are better ways to open a huge, attention-grabbing megaresort than partially, but still predict the Venetian will be successful over the long run.

The Venetian opened its casino, four restaurants, a few shops, two floors of offices and recreational facilities and three floors of hotel rooms -- about 360 total -- early Tuesday. Inspections on fire safety systems are expected to resume today after a two-day delay. A Venetian spokesman said it is likely the hotel tower will be open through the 27th floor by noon Friday.

The remaining 300 suites on the tower's top eight floors will open over the next several weeks, the spokesman said.

Bob Leinbach, a spokesman for the Clark County Fire Department, declined to speculate when the remaining floors would open. All depends on the results of the fire safety systems tests, said Leinbach. County inspectors have taken the past two nights off from testing, but are expected to be working tonight, said Leinbach.

Partial openings are far from ideal, analysts say.

"The opening of a large mega-hotel casino is crucial to its early success," said Andrew Zarnett, analyst at Ladenburg Thalmann & Co., in New York. "And when you look at examples of casinos that opened partially, they fared poorly out of the gate."

The Stratosphere hotel-casino's opening was soft, and that property struggled from the start, eventually winding up in bankruptcy, observers note.

David Wolfe, analyst at CIBC Oppenheimer, thinks the Venetian's owners should have waited until the entire resort was ready to open -- even if that meant delays.

"You really wish everything was prepared and ready to go," said Wolfe. "Operations are difficult as it is without being partially open."

The Venetian's opening stands apart from other recent megaresort openings as particularly low-key, noted Wolfe.

"This one seemed a little more muted," said Wolfe, who toured the property shortly before its opening. "When the doors opened, there wasn't much to open to."

Jason Ader, analyst at Bear, Stearns & Co. Inc., was at the Venetian's opening ceremonies Monday.

"I think the parts that were completed were spectacular," said Ader.

But it's too early to tell whether the resort as a whole will be a success, he said.

"I still think we need a couple of months to let them finish," said Ader.

The Venetian is owned by Las Vegas Sands Inc., which is not a public company. However, Las Vegas Sands owner Sheldon Adelson financed the $1.5 billion project in part with $930.2 million in public debt, subjecting the resort to Securities and Exchange Commission financial reporting requirements.

Wall Street analysts who follow the public gaming companies the Venetian will compete against understandably are paying close attention to the Venetian.

Adelson has said he may take Las Vegas Sands public.

Despite their misgivings about the soft opening, there are many reasons to believe the Venetian will be successful, analysts say. The recent openings of the Bellagio and Mandalay Bay hotel-casinos have driven solid increases in Las Vegas visitation rates in recent months, demonstrating strong demand for new resorts. There's no reason to believe that trend will not continue with the Venetian, said Zarnett.

"They might have been able to stumble here and still do very well," said Zarnett.

"Three months from now, that won't matter," said Wolfe of the soft opening. "The Venetian adds to the must-see portfolio of properties."

Zarnett wonders if the Venetian will be able to achieve its projected average daily room rate of $167.

"It's very difficult to get the premium they want out of rooms in a market with that many hotel rooms," said Zarnett.

But because the Venetian is such a nice property and offers one of the best room products on the market, it will have no problem reaching its projected average room rate, said Wolfe.

"It's a tremendous room product," said Wolfe.

All Venetian rooms are suites, offering sunken living rooms, two televisions, plush furnishings, fax machines and dedicated computer data lines. The Venetian's business model calls for the resort to fill many of its rooms with conventioneers attending shows in the attached 1.65 million square feet of convention space.

Wolfe said the Venetian will also benefit from the recent trend toward upscale resorts evidenced in the Bellagio and the Four Seasons Hotel in Mandalay Bay.

"I do think the model is working for the 'upscaling of Vegas,"' said Wolfe. "It all blends together as an equation."

Ader agrees, noting the Venetian's room prices compare favorably to the other high-end resorts in town.

"They're not pricing themselves out of the market," said Ader.

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