The theater where Tony Bennett and Steely Dan once performed is still dark. Players at the blackjack tables are separated by plastic partitions. The gondoliers offering rides along faux canals wear face masks and aren’t allowed to sing.
The Venetian Las Vegas isn’t the resort it was a year ago. But that didn’t stop Apollo Global Management Inc. and its real estate partner, Vici Properties Inc., from plunking down $6.25 billion to purchase the property, the neighboring Palazzo and the adjacent Sands Expo Convention Center from Las Vegas Sands Corp. last week. The deal surprised observers such as Stephen Miller, director of the Center for Business and Economic Research at the University of Las Vegas, Nevada.
“Are they off their nut or are they on to something?” he asked.
Despite a long list of problems, Apollo partner Alex van Hoek sees opportunity—for soaring tourism and a return of convention travel that made the city one of the top destinations for business groups.
“We are very bullish on the recovery of Las Vegas,” said van Hoek, who led the investment firm’s purchase.
It’s no sure thing. A year after the coronavirus shut down its famous casinos, America’s gambling capital is trying to crawl back from one of its deepest slumps ever. The glittering palaces along the Strip began reopening last June, but business is still slow. Unemployment, at 10%, is the highest among big U.S. cities. Tourist traffic in January slumped almost two-thirds from last year. Gambling revenue on the Strip was off 44% and the convention business nonexistent.
The recently passed stimulus, along with a lot of pent-up demand, should spur consumers and businesses to begin spending again, van Hoek said in an interview. While large numbers of Americans have gotten used to working from home, they won’t always stay there. Business meetings at Sands averaged 1,500 people in 2019—too big a crowd for a Zoom call—and 2022 group bookings are already looking strong.
“Workforces are eager to gather and they understand the importance of getting together,” van Hoek said, arguing “large in-person meetings” will be even more relevant.
Apollo’s casino bets haven’t always paid off. The firm’s 2008 purchase of Harrah’s, now Caesars Entertainment Inc., for $30.7 billion with TPG led to years of restructuring, a bankruptcy and losses.
But this time, Apollo managers think they’re buying more at the bottom than the top, with a new Roaring ’20s set to dawn. The Las Vegas properties had adjusted earnings of $487 million on revenue of $1.82 billion in 2019. And as part of the deal, Sands provided $1.2 billion in seller financing. Apollo manages more than $450 billion in assets.
Meanwhile, the city is coming back to life. Last week, MGM Resorts International brought the last three of its resorts back to seven-day-a-week operations. Caesars Palace reopened its Omnia nightclub, with revelers out on the terrace rather than sweating inside in the disco. And Genting Group’s Resorts World, which plans to open a new $4.3 billion casino on the Strip this summer, said about 50,000 people applied for 6,000 spots.