by Katie Kieffer
photo credit: http://www.workingworld.com/articles/Sheldon-Adelson-and-Las-Vegas-Sands
Sheldon Adelson, Chair of the Las Vegas Sands Corp., is the perfect posterboy for Las Vegas’ financial meltdown. The 76-year-old who was third on Forbes’ list of the 400 Richest Americans in both 2007 and 2008 has lost $36.5 billion dollars (91.25% of his net worth) – more than anyone else in the world has lost during this recession. While most retailers across the country are changing their tune, listening to their customers and providing products and services at lower prices while marketing their value, Adelson is staying the course.
He may have achieved success through a combination of hard work, luck and persistence, but his stubborn insistence on sticking with the same strategy is killing his bottom line. On Aug. 24, 2009, TIME magazine columnist, Joel Stein, shared his interviews with Adelson and other Vegas casino moguls: ‘he’s (Adelson’s) not changing his strategy of using high-end dining, giant suites and plush convention spaces to attract customers. He does not believe that America is going to fundamentally change its values from extravagance to thrift. “There’s no way this world will change. There’s no way people are going to stop doing things they want to do…,”’ he quotes Adelson.
Adelson borrowed as much as he could as fast as he could and built, built, built. He added a micro-version of the Vegas Strip to his successful hotel and casino in Macao, China and also added 100% more space to the Venetian with the Palazzo addition. This aggressive borrowing and building strategy helped him rack up massive amounts of debt, and as Stein reports: “…he has accumulated a debt-to-earnings ratio of 6.8 to 1 in the U.S. Then the loans stopped coming, and his stock price sank from $144 to $1.42 in March.”
I think Adelson is right in assuming that human nature isn’t going to change – people are always going to want certain pleasures. Las Vegas feeds and satisfies many basic pleasures and desires for: Attention, sex, the thrill of risk-taking and gambling, socializing and a euphoric sense of getting away from it all. Where I think Adelson goes wrong, is in assuming that Las Vegas is the only place where people can and will go to satisfy these pleasures.
Most of the aforementioned human desires can be fulfilled in much less expensive ways. With the exception of gambling, they can all be fulfilled for the attractive price tag of $0.00.
Gambling is exciting because it’s about taking risks and potentially reaping large rewards. There are other ways to satisfy this desire to take risks, which are less expensive than throwing hundred dollar bills at the craps table, such as cliff-jumping or sky-diving. Really, you could have your own Vegas-style party in your own basement for free if you wanted to. (I’m not necessarily recommending you do this, I’m just stating the obvious.) Adelson doesn’t think you will, so he’s going to keep furnishing his rooms with the biggest and the best for you to purchase, even though you and your friends may now be unemployed, thanks to the recession.
Adelson’s “build it and they will come” strategy is a great example of how to lose touch with your customer and build your own grave as an entrepreneur. Yes, success is about taking risks. But right now, Sands is acting like a child. He wants to play by his rules and refuses to adjust his business strategy to his market.
As David Kelley writes in The New Individualist’s Summer 2009 edition: ‘There can be no “rule” that one’s job – or even the company one works for – will exist forever. There can be no “rule” that a job or an investment, or the real estate market will continue to offer the opportunities and returns they have in the past. As every investment prospectus says, “Past performance is no guarantee of future returns.” If entrepreneurs and leaders in our country look to investors like Sands as their role models, we will be doomed to further economic stress.
Whether you are a business leader or a politician, you are only as successful as the people who got you there. President Obama can not assume that because 66 percent of young people elected him into office based on the hope that he would offer positive change and ideas for growth that he’s locked in. There are no rules other than the people’s rules. President Obama’s approval ratings have been falling on issues because, while he did an excellent job of marketing “change” and “hope,” he hasn’t provided us with reasons to jump on-board with his healthcare plan or economic stimulus proposals.
According to a Sept. 10, 2009 article by Beth Jinks on Bloomberg.com, “Las Vegas Strip gambling revenue fell 11 percent in July, the 19th straight decline, and Atlantic City’s dropped 16 percent in August as the two biggest U.S. gambling centers grapple with the worst slump on record.” Clearly, the people Adelson is counting on to support his flamboyant casinos are making a lifestyle change: They are finding other ways to have fun beyond throwing money at his luxurious table games and hotel rooms.
Meanwhile throngs of American people have gathered on Capital hill for protests, as Michelle Malkin exposed in her September 12th blog post, they are forming their own tea parties and participating in Town Hall meetings. All these citizen gatherings send a clear message to our elected officials: We want you to listen to us – we are the consumers, the constituents and the voters. And if I haven’t made it clear, we vote with our pocketbooks.
I’m sure our leaders in Washington don’t want to lose their constituents in the way Las Vegas is – by obstinately pushing forward with their own business model and ignoring the voice of the marketplace.
