Today we have for you part one of a two-part interview with Mike Leven, President/COO of Las Vegas Sands. In his role at Las Vegas Sands, Leven has transformed the company from being on the brink of collapse to arguably the most powerful gaming company today because of its role in Asia – and possibly soon, Madrid.
But this incredible feat is just the encore to an iconic career. For you young folks out there, today is going to be a major history lesson. Leven’s 50+ year career cast is as a central figure in the development of the modern hotel industry, and his fingerprints are everywhere. From his days running brands such as Holiday Inn and Days Inn to creating his own hotel brands like Microtel, Leven has literally done it all. He even combated racism and discrimination throughout the 1960s, which culminated in his helping hand in creating AAHOA, which is now one of the most powerful industry associations.
I highly encourage you to listen to the audio of this broadcast as it’s an incredible hour worth hearing. Here’s an idea, download it and listen to this interview on your commute home. You won’t regret it.
So you know who is speaking today, we have both Editor-In-Chief Glenn Haussman and co-host Mark Viola taking part in this exciting conversation with Mike Leven. For context, we did the interview on February 9, 2013 in a bagel shop for a Saturday morning breakfast about 25 minutes off the Las Vegas Strip. So do not be confused by any conversation regarding omelets.
The Expansion of Las Vegas Sands into Europe
Mike Leven: Well, actually we’ve identified the site. The site has to be acquired by the government and then acquired by us from the government, so there is a process that’s gonna go on for about four months. There’s also another process. There’s a tender process that the government puts out so that anybody – any other company globally can apply for the concession to do what they – we intend to do.
Glenn Haussman: Yes. That opening bidding starts in March, correct?
Mike Leven: Yeah, I think that’s gonna come in March or April and the final decision’s gonna be July. I don’t think – well, I don’t think we have any great competitors for this because there aren’t a lot of companies out there ready to go for a $9 billion first phase of the project that will eventually be in the $30 billion, $35 billion, over a 15- to 18-year period. So we expect to win, and we are operating as if we’re winning, but there’s still some way to go, but I think we’re real excited about the fact that it’s coming to a point where it’s getting closer.
Glenn Haussman: Yeah, I’m very excited about it, too, and you guys have really been working on getting into Europe now for a good time in your tenure here for the last four years, I feel like. I feel like the first half was you getting everything in the financial house in order and now you guys are looking to really expand. Yes?
Mike Leven: I think it’s been Sheldon Adelson’s, [CEO, Las Vegas Sands] dream for many years, actually I think 10 or 11 years, that he felt that Europe was underserved for the kind of entertainment, conference and meeting, and gaming environment that we do, and so once the company turned around a little bit and we had the financial capability to do it – because this first phase is gonna take about $3.5 billion of our money before financing.
Well, when he built the Palazzo for like $1.7 billion or something like that, but now you have to have triple that.
It’s a very expensive situation, but it was one of the most thrilling moments I’ve ever had yesterday morning in Madrid. I must tell you that sitting across the table, as I am from you now, looking in the eyes of the regional president of Madrid, Ignacio Gonzalez, and exposing to him the presentation and the pictures, the architectural renderings of what we’re going to do and watching the people around the table – there were six or seven of his assistants there – the emotion, it was – it’s an incredibly emotional moment.
There were literally tears in the eyes of people because this is a project that it’ll be a last, last project Mr. Adelson probably ever does, and I’m sure it’ll be the last one I ever do, but this is really a gift to the people of Spain, the people of Madrid, and, to some extent, even the people of Europe. Things are so difficult there that the amount of activity economically and the job creation is just super, and to be a part of it is really – it’s really a thrill, I must say.
Glenn Haussman: And we’re talking 10,000 jobs, right? Or more?
Mike Leven: Oh, it’ll be much more. The opening phase is four resorts, so if you look at the Marina Bay Sands, which was one resort in Singapore, we created over – about 10,000 direct jobs and double indirect jobs, and this is four resorts all of the same size at one time.
Glenn Haussman: Wow. I see this being modeled after what you guys are doing in Macao with building a whole complex with multiple properties and all of the properties that are going around the Venetian over there.
Mike Leven: Yeah, it’s similar to Macao. There’s difference, of course, in the demographics, difference in the culture, and we carefully have to do things in Europe that are different because the Europeans’ level of sophistication in terms of design and architecture and art, they’ll respond well, but if it’s not done right the Europeans won’t respond, and it can’t be an American project. It really has to be a European project.
Glenn Haussman: Well, if they respond in the way that people have responded to the Marina Bay Sands architecture, I mean that is one of – I think that might be the most iconic-looking casino resort I’ve ever seen. That is so spectacular.
Mike Leven: We’re gonna beat that in Spain.
Glenn Haussman: Well, I haven’t seen any of the renderings yet, so –
Mike Leven: They’re coming out in the Spanish papers today. I got an e mail early this morning. I was up about 5:00 and was reading e mails, and I got a note saying that the newspapers have them, and there’s gonna be a lot more distribution this week, so just have to see the drawings of the first four. Some of that will change or modify a little bit as time goes on, but the concepts are really – each one stands alone by itself, and it’ll appeal – there’ll be something there for everyone, every age, every – as we said, from old – from young to old to middle, and it’s gonna be a fabulous place.
Mark Viola: And when does that open? Do you know anything roughly?
Mike Leven: My target, if everything goes right with the acquisition, it’s about a 33-, 35-month building area. We’re gonna build a little faster there. It’s a good site, and I’d like to open it New Year’s Eve or December 31 of 2017, so it’ll be the biggest – it’ll be billed as the biggest New Year’s Eve party in history.
Why did Leven come out of retirement to do this job?
Mike Leven: I think there were a couple of things. Both my wife and my closest – one of closest, if not my closest, friend, Bernie Marcus, advised me to take the job. My wife thought I was getting bored, although I really loved the aquarium. (note: which he ran in Atlanta during his retirement) It was the first job – once that aquarium turned around like I liked it to be from a marketing and guest standpoint, it was getting a little old every day doing the same thing, but I loved the environment. And I was on the Sands board, and, as I said to the Atlanta Constitution when they asked me why I was leaving, I said, “Well, I ran the aquarium to help a friend – that was Bernie Marcus – to do it, and I’m going to Las Vegas to help a friend, Sheldon Adelson, to help him.” I never expected that it would be this long a job. I never expected that the turnaround would be this significant, and, frankly, when I took it I never expected I’d be doing this project in Spain.
Mark Viola: I mean to turn around a multimillion dollar company must make you feel so good to really turn around so drastically. You said the stock was so low and now it’s so high. That’s so impressive. I mean –
Mike Leven: Well, thank you, Mark. I don’t look at the turnaround in financial terms as much as I look at the turnaround in human terms. We employ about 50,000 people now, and although some of those employees doubtlessly would still be employed if the company didn’t turn around, the founder of the company and certain of the major executives of the company probably wouldn’t, and I think these projects are so large and so encompassing that they really are the perfect example of economic trickle-down. They affect so many people, and so it’s a lot there in just one hotel in one category, and I’ve opened thousands of hotels in my career, but these things are just like going – they’re cities.
Glenn Haussman: Right. Yeah, they absolutely are, and Venetian – Palazzo in itself with 7,000 rooms is like the world largest hotel complex.
Mike Leven: It’s the world’s largest complex, and of course it’ll be nothing compared to what we do when we eventually get Spain done.
Glenn Haussman: What was that like stepping into that knowing that your job was to try to pull it out?
Mike Leven: Well, I think first of all it was scary not being a gaming guy, and I was on the board for a number of years, so I knew a little bit but enough to be dangerous, and, frankly, I wasn’t sure I could do – I wasn’t sure I could turn it around. I mean it was such a difficult condition because although the company was generating some cash it was in danger of violating the debt covenants, and I have to tell you I was in business a long time, and I didn’t even hear the word “covenant” until a few years ago, and I – ’cause I always thought the covenant was the covenant in the Bible somewhere, and – but – ’cause I always thought that if you paid your mortgage and paid your interest that you’re fine. Well, we had the money to pay the interest, but we didn’t – we had – we didn’t have the cash flow to match up to the covenant, so we were in danger, and I guess I just attacked the business very quickly to reduce the costs, and then we had a three-stage plan: reduce the cost, do the IPO in Hong Kong, and open Singapore. Those were the really three major things we did, and then we could take care of the balance sheet and all that.
Glenn Haussman: I like how you make that seem so easy, just a quick three-point plan.
Mark Viola: Open some casinos; get ourselves out of debt.
Mike Leven: Well, it’s sorta the way it worked though. I mean I think when the – somebody sent me a note the other day that says when – something – I think it said, “When you’re riding a dead horse, get off.”
And then the line underneath that says, “It’s a different strategy when the government is riding a dead horse. The government creates a study group to decide if the horse will be okay with a rider who’s less weight.” So I’m not that kinda guy. I’m the kinda guy that says, “What do I have to do to be successful?”
And we developed this program and plan. I put a team together. I brought some people in from all over the world who I knew who were guys that could reduce costs, and we pulled out over $600 million of annual operating cost in 90 days.
Glenn Haussman: In 90 days. Really?
Mike Leven: Yeah.
Glenn Haussman: Wow, that’s impressive.
Mike Leven: April, May, June it was done.
Glenn Haussman: Well, how much of that was debt restructuring as opposed to –?
Mike Leven: None.
Glenn Haussman: None.
Mike Leven: It was all extra expenses, extra people. We found things that were really quite incredible, but we got that out and what that did was allowed us to get our Hong Kong IPO ready. Then we raised $3.2 billion in the Hong Kong IPO in November, and we had the money then to open Singapore properly, and we opened half of it in April and half of it in June of ’10. So at that point the company was back in business, and there was a lot more work to do, but the company had no financial problems, and now the company is a company that generates about close to $4 billion of EBITDA on an annual basis.
We were doing about a half a billion then and lots of free cash, which is really the really great thing about the company. I have a maintenance cap-ex budget for this company of close to $500 million a year. I tell people I never had that much money in all the companies combined that I was running.
Glenn Haussman: Those numbers must just be astonishing to you to take a look at.
Mike Leven: They’re astonishing. I have to tell you I sit in my office sometimes and somebody says, “Well, I need $30 million to put this into Macao in a new club for VIP gamers.” And I said, “Gee, when I was at Microtel I could have built eight properties for that.” And so it’s really – it’s a little hard.
I guess it’s sort of been – it just – when the zeroes get this big I can imagine what it’s like sitting in Washington with the kinda numbers they have to deal with, so – but we try to run the company like it’s a small business, and we don’t have many units, so we know what’s going on every day. We’re in touch with the people every day and which you can’t do like when I was at Holiday and we had 2,000 properties. Just can’t do that, so it’s just – I say small company, big numbers.
Vegas Has Nothing On Asia!
Glenn Haussman: But the thing that amazes me most is how big and fantastic that place is and all the money it makes is – it’s nothing compared to what’s going on with Las Vegas Sands and Macao and Singapore, right?
Mike Leven: That is correct. Actually we – the Vegas market it’s still – we had 40 million people come to Vegas last year, really a record number of people, but we can’t make any – we can’t make enough money here, and the reason is that the spend is just way down. The demographic of Vegas has changed from an upper middle class and upper class and some part of the business was middle class, to a middle class/lower middle class and some upper middle class, and as that has changed the spends have changed, and the properties that have been built here over the last hundred years for billions of dollars can’t get an adequate return on their money. The volumes are okay but the spend of that volume is not okay.
Mark Viola: Yeah, especially table drop. People have gotten a lot more concerned with that. I mean the Whales now I heard – well, I read an article a couple of years ago where it used to be considered, I guess, a person that spends over a million dollars now I believe – and tell me if I’m wrong – now I heard it’s considered anybody that spends over a quarter-million dollars, so that’s a pretty drastic change. I read the article a few years ago, so my information may not be up to date, but –
Mike Leven: Yeah, you’re relatively close, but I’m gonna give you a couple of numbers that really define what Vegas is about. Vegas is a $6 billion gaming win market. Two billion of that is Asian.
Glenn Haussman: In this market.
Mike Leven: In this market, people we bring over and the other big hotels, Wynn, Bellagio, whatever, bring over, $2 billion. It’s one-third of six. The total market here for the strip is $4 billion. Just to give an example, it’s lower than Pennsylvania, lower than Illinois, lower than California – $4 billion. Now let’s use the $6 billion for a minute, compare that to Macao. Macao is $39 billion. Singapore is $6 billion with only two casinos.
Glenn Haussman: Yeah, and thank God you have one of them.
The State of Vegas Economics
Mike Leven: So when you look at that you can see, but Vegas’ convention and meeting business and its tourist business, its entertainment business, is still the biggest in the world, so with that if you build a building like Cosmopolitan at $4 billion you can’t make enough money. You can’t get enough return on that building.
Glenn Haussman: Yeah, I mean, ’cause John Unwin over – the CEO at Cosmopolitan their biggest struggle is trying to get people to spend money at those tables. I mean they’re selling a lot of food. They’re selling a lot of drinks.
Mike Leven: John Unwin has done a phenomenal job in that property.
Glenn Haussman: Beautiful place.
Mike Leven: He has marketed that – I think he’s – I’d give him personally – I don’t – I have never met him, but I would give him credit for the best opening market I’ve seen of almost any place. He positioned it beautifully. He’s got all the club and restaurant traffic that he needs. The problem is those people don’t spend money in the casino. You can’t – not with $4 billion. If you built it for a billion, it’d be one of the most successful properties now.
Glenn Haussman: Right. And what I really love about that particular property is the whole style and essence of it is so well defined, even through their original ad campaign, “Just the Right Amount of Wrong.” I think it just really hits on all strides and we really love the idea of that whole property.
Mike Leven: They could probably use a little more wrong or whatever, but – yeah, but they did a very good with that, I think, and Vegas, I don’t think, managed very well in the ’09 period when things were really down. They dropped their rates way too far. What that did was they got a little bit more business than they would have, but it was all the wrong business.
Glenn Haussman: Right. Agreed. And I think one of the problems that you saw is that’s when that shift to that lower market of people coming in came, so not only did you lower the rooms, but I think with the lower price of the rooms you also – well, the city also gave people permission to bring their coolers in with all of their drinks and start eating at McDonald’s again, right?
Mike Leven: We have some of that, but I think the most important thing is that those – the people in that category who are buying rooms at $49.00, $50.00 they don’t spend anything, so what you get is a room. It’s okay if you’re a Microtel selling rooms for $50.00 because your entry cost is so low, but the entry cost in Vegas is so high, so it’s just the economics just don’t work.
Glenn Haussman: Yeah, and I would think a lot of it, you’re building into what you’re gonna price your room is with an amount of money that you think people are gonna be spending in the casino as well, right? ’Cause you want to get them in at the right rate and still leave them feeling wealthy enough that they can go play and do whatever.
Mike Leven: The actually staggering number – Vegas and Bethlehem represent about 10 percent percent of the company’s EBITDA. The rest is from Asia.
Just to finish the conversation on Vegas think about this. Twenty-eight billion dollars was invested in Vegas to open from 2008, 2009, whatever. No return.
Glenn Haussman: And Las Vegas Sands lucked out enough that you guys were already open before everything happened. You don’t have the same fate as Boyd Gaming’s Echelon project. You’re not like Fontainebleau. You’re not like any of those kind of things.
Mike Leven: Yeah, that’s right. So the interesting thing about that is that Echelon, Fontainebleau, Encore, Palazzo, CityCenter, Cosmopolitan, all those places – the ones that didn’t open of course didn’t know, but the ones that opened are great places, but most of them like Cosmo and CityCenter are dependent on condos on a market that I never believed existed at that level, that high level, so just a lotta mistakes were made, and it’s gonna take years to recover because the supply is there and that’s keeping the rates still down.
Glenn Haussman: Well, and I think what’s interesting about what we’re seeing now in Las Vegas is everybody is looking at smaller projects go build. Caesars is involved in a lot of those, and I think that they’re trying to push the – push people to spend a few more dollars on a trip as opposed to building a giant casino resort and try to get business that way, right?
Glenn Haussman: So what would you do in this market if you could do anything?
Mike Leven: Well, I’d probably – if I – first of all I wouldn’t build new. I mean what’s been the cost of entry you couldn’t recover it. People ask me about Vegas and I say, “Look, I just make sure that I can – I have enough capital to keep my product up, which we do, and eventually the U.S. economy is gonna get better. There’ll be more to spend of disposable income, and you’re gonna have a moderate amount of inflation which will push the spend button.
“On that basis as long as the key products like Wynn and us and Bellagio are maintained physically that Vegas will keep some of that market that can afford to pay $200.00 to $300.00 a night. If you don’t do that the future of Vegas is gonna continue to go down-market and there’ll be no significant profitability because the hotels that – will deteriorate like most – a lotta hotels around where there’s no money to fix them, so then it just gets worse.”
So we hope with us and Wynn and Bellagio that – even to some extent Caesars, that we can hold the good hotels to keep the good – the better spending people, and without that it’s not gonna happen.
On the Venetian Macao
Glenn Haussman: Right. I’d like to switch over to Macao and just tell people about how massive the Venetian Macao is. You’ve got like three football fields’ worth of table games.
Mike Leven: It’s the biggest casino in the world in terms of square footage, and – but it – I can’t tell you the exact amount of games, but it’s a lotta games and a lotta slots and a lot of electronic games ’cause we have the biggest casino floor that you’ll find anywhere, and there are a lotta – there was a lotta concern about that floor being too big, but it really isn’t. In fact in Hotel Central we have two casinos. We think the floor is now too small, but if we were building again we would have built one big one. There’s a lot of human synergy on a casino floor. There’s a lot of activity, lot of – I wanna say breathing and excitement. The smaller you get, the more boutique you get, there’s not that excitement. Now at the VIP level, the VIPs who are really playing up to a million dollars a hand –
It’s a lotta money. That’s private and quiet. It’s a different situation, but in the mass market slot and table floor, people like noise and that, so we have all those combinations in Macao, and the Venetian is a really spectacular place. It’s –
Mark Viola: I wanna go check it out one day.
Glenn Haussman: I know. We’ve got to get over to Macao.
Mike Leven: It’s amazing. Well, you really should if you really wanna see what Asian gaming is about. You go to the Cotai Strip. You ought to meet our competitors as well as us and see what’s going on. When I saw it for the first time my eyes were just popping. You just – make it look like Atlantic City the first day that Atlantic City opened. It was never that good again.
Mark Viola: No, it wasn’t. You’re right about that.
On the Downward Spiral of Atlantic City:
Glenn Haussman: All I wanna say about Atlantic City is poor Atlantic City.
Mike Leven: Well, Atlantic City is an interesting example of what could have happened to Vegas without convention and meeting business.
Glenn Haussman: Yeah, that’s exactly right.
Mark Viola: That’s a good point because –
Mike Leven: Atlantic City got greedy in the early going because they were the only gaming place, but they kept building so they had to lower the demographic of the player, bring in the buses at the low end, and so they never got enough of the others, and then they never fixed it physically to be able to attract enough of the better people with better spend, so they’re – it’s destined for the – it’s really destined for the dustbin at some point.
Mark Viola: I was gonna say it just amazes me how I live two hours from Atlantic City. The last time I was in Atlanta City was probably three years ago. I’ve been in Vegas about on average ten times a year, so that just tells you something about how Atlantic City is.
Mike Leven: Well, Mark, I was – last time I was in Atlantic City I went to a convention there that was in the Caesars. It was embarrassing. I mean it was just embarrassing.
Mark Viola: It’s horrible. Yeah, it’s really old. It needs renovation.
Glenn Haussman: Right. That’s why ACH, the former Atlantic City Hilton which became ACH which is now the Atlantic Club – they keep changing the names – they’re doing gambling at like 25 cents a hand. I mean the really straight 25 cents a hand is some of the minimums in some of their tables.
Mark Viola: You’re kidding.
On How to Excel In The Hotel Business
Glenn Haussman: I want you – I would like really, Mike, for you to inspire the people that are listening to the audience in our audience here. You started off in sales and you’ve worked your way up to one of the top possible positions you can have in this industry. How did you do it and what lessons can you share with us?
Mike Leven: Glenn, I actually get that question all the time.
Glenn Haussman: I’m sure. I have to ask it. I’m sorry to be cliché.
Mike Leven: And sometimes – and first of all it’s very flattering. I just did a [chat] the other day internally in the company. We have one blog for our employees and a similar question came up. I never thought when I started in the Roosevelt Hotel in 1961, never in the wildest dream that I’d ever have that I’d be where I am now. I don’t mean where I am financially. I mean I never dreamed that either. I mean my family was – we were a middle class family. We never owned a stock. My mother never was on an airplane.
It was a one-cow family. We never had a private home. We lived in an apartment all the time. I wasn’t poor, but I wasn’t affluent in any way, shape, or form. I was probably affluent with an education and that’s about what it was, and my dreams were basically get a job, get married, have kids, educate them, retire and die. I mean that was – I mean which was a very middle class kind of dream.
Glenn Haussman: So did you feel that you were limited at first by your middle class? Like you didn’t even perceive that you could achieve that way. I know you never shackled by that.
Mike Leven: I never thought of that, and then once I got to work I treated every job like it was an exam ’cause the only thing I really knew was my education, and I had to get the best mark. I had to study for it, and I wanted to achieve, and my athletic skill was I wanted to win, so although I’m a lousy loser, I don’t mind it as badly if I play well, so it’s just a matter of just my own style. So I combined that and one time when I first started I was competing with another salesman to keep my job at the Roosevelt, and I just said – I said, “I just – I’m gonna do better.”
And I just worked hard. I studied it and made more calls than anybody else and closed more deals than anybody else, and I just kept doing that in whatever job I did, and then I think, although that’s maybe one of the things that led to it, I began to see what I – that I wanted to get higher up so I could make the right decisions, so I could make decisions. I didn’t wanna always be asking what to do. If you’re not in your own business and you’re in a corporate business you have to sort of convince everybody.
So – and then the big turn for me was when I demanded to go into operations. I wanted to get outta sales. I was stereotypically a marketing and sales guy and everybody wanted me to stay that ’cause I was doing well, but I wanted to go in operations, and then in 1974 a guy named Pat Ford gave me a chance – he was my boss – to be a regional vice president for the Dunphy Company and supervise six properties, and he taught me a lot about operations, and from then on I actually went back to marketing after that and then back to operations, and I was gleaning my knowledge all the way through, and I always wanted to learn stuff, read stuff. I read every trade magazine ’cause I had no hotel background, no – I was a political science major. What did I – I didn’t know what eggs over-easy was, and so I learned the banquet business. I learned the food business.
I learned – and I can really sound like I know the balance sheet, and I could tell you I really don’t, but I can sound like that. I got to be an expert on payroll and cost management and combined that with my ferocious desire to please the customer, which has always been my standard, and every day I’m talking about what can you do better for them, for the buyer, for the user, for whatever. So I think there isn’t one single thing you can say except that I never looked at myself as being president of a company this size or my own company. I always felt that if you just do your best and if you have some talent things are gonna happen.
Glenn Haussman: And I think that’s a very valuable lesson. Don’t be like Atlantic City and rest on your laurels. Be like Mike Leven and always work hard and innovate and push.
Mike Leven: I tell people status quo is a prescription for failure no matter what.
Mark Viola: Very interesting advice. I like that though. It’s very interesting.
