Next week the $2.4 billion Venetian Macau — a property expected to transform that market — opens its doors. And, on Dec. 20, the Palazzo, the 50-story, $1.85 billion accompaniment to the Strip's Venetian property, is due to open.

Both are under the purview of Brad Stone, executive vice president of Las Vegas Sands. Stone joined the company in 1995 after starting out in Atlantic City. Earlier he was a trainee at New York City's famed Plaza Hotel (which is being duplicated on the Strip by another company).

Stone is responsible for the operation, design and construction of Las Vegas Sands' Las Vegas and Macau developments and has a key role in the financing and development of other domestic and international properties.

That means he also has his hand in the development of six other Macau resorts on the Cotai Strip, three of which will open next year and three in 2009 and have a total price tag of between $9 billion and $11 billion, as well as Singapore's Marina Bay development, opening in 2009.

But first on the agenda is the 39-story Venetian Macau, the world's second-largest building with 1.2 million square feet of convention space and 1 million square feet of retail.

Stone talked to In Business Las Vegas about the Venetian Macau and the Palazzo in Las Vegas.

Question: Las Vegas Sands was the first Las Vegas company to open a casino in Macau. How important was it to be the first U.S. company in the market?

Answer: It was important from the sense of we took immediate advantage of a market that we felt was underserved and that was the mass market. Stanley Ho's business is centered around VIP business and while we recognize that there's a lot of opportunity in that VIP business, we saw the mass market as a growing market that was underserved with high margins relative to the VIP market, so we built a facility that originally was built for that and worked our way into the VIP business. But I think our track record speaks for itself. We do very well in what is now, roughly, a $400 million investment, we have 100-plus percent return each year on invested capital and that first-mover advantage is establishing yourself there. We certainly, in terms of work force, in terms of construction labor force and all, it's an advantage being there first.

Now, the company is on the verge of opening the Venetian Macau, basically opening up the Cotai Strip in Macau. How significant will that be for the company?

I think it's extremely significant for the company and extremely significant for Macau. It's the first step in changing Macau from a regional day-trip destination resort to basically an international overnight destination. We're bringing elements there that are part of a destination resort, certainly the number of hotel rooms, the entertainment component, the 15,000-seat arena, we'll be putting a Cirque du Soleil show there, the convention center will attract commerce. Some of the best shopping in the world will be located within the four walls of both the Venetian and the Four Seasons next door and we're bringing the world's greatest hotel brands to Macau. Five years ago, who would have thought of the Four Seasons Macau, the St. Regis Macau, the Raffles Macau, the Shangri La, the Intercontinental, Conrad, Hilton, Fairmont? What is happening in Cotai will change Macau forever, from, when we first got there, kind of a less-than-glamorous gaming Mecca to an international resort with international brands that support what it's all about.

Describe the differences and similarities of the Venetian Las Vegas and the Venetian Macau.

The biggest difference is scale. As big as this building (Venetian Las Vegas) is, I kiddingly say it looks like a motel compared to the Venetian Macau. We have a lot of the same icons: the lobby area and the colonnade from the lobby to the casino is almost identical to that in Las Vegas. We used a lot of the same iconic buildings, the Campanile Tower, the Doges Palace. In many ways, there's a lot of similarities. The Grand Canal Shoppes takes on a similar feeling with the sky ceiling and the gondoliers on the second floor, cascading through a shopping retail experience. Where it differs is just the sheer scale of it, not necessarily in the room size, but the fact that we have a 15,000-seat arena there, the fact that we have roughly 3 1/2 times the shopping that we have in our Grand Canal Shoppes in Las Vegas.

Three-and-a-half times?

Yeah, 3 1/2 times the shopping. We have three canals actually. The place is so big we had to put three different canals and three different gondola rides in it. So really, the difference is about scale. As hard as it is to believe, that building is significantly bigger than its Las Vegas counterpart.

How does competition differ on the Strip and in Macau?

The Venetian will be so completely unique in terms of its products offering, in size, presentation and amenities. Wynn Resorts has a very nice property in Macau, but it's certainly on a totally different scale than a Las Vegas property. Here, you have a property in Macau that's large by Las Vegas standards. So you go from no properties in Macau that even approach a Las Vegas-style resort at this point in time to the Venetian, which exceeds any Las Vegas resort in terms of its size. It's actually the second-biggest building in the world.

What, only the Pentagon is larger?

Actually, the Pentagon is half the size. The Pentagon is 6.9 million square feet. The Venetian Macau is about 10.5 million square feet. The building that's bigger is a tulip distribution warehouse in Amsterdam, and that's an industrial building. The Pentagon is about 60 percent of the size of the Venetian, and many people think the Pentagon is the biggest building in the world. Well, it's only about 4 million square feet smaller than the Venetian.

What has the company learned from its experience with the Sands Macau?

We learned a lot of things. As much as we've learned at the Sands and as many of those lessons that we can take over to the Venetian, it's going to be a different customer. It's going to be probably a little different demographic at the Venetian because of the room component. While the Sands has 51 guest rooms, as amazing as that is, the Venetian has roughly 3,000 and it's just a completely different experience. So I think that while we learn things from a human-resource standpoint and we certainly learned some customer things, I think there are a lot of new questions about whole new markets that are going to be coming from farther destinations, from other countries, from farther-away cities in China and I think there will be many things we learn from the Venetian that will help us as we move forward with the rest of the Cotai development. There are going to be a lot of dissimilarities between what the Sands is and the market it serves today vs. what the Venetian will be. So I think there are many more answers to come about what a Venetian is and how that affects Cotai and certainly some of those things that we learn at the Sands will apply, but there's going to be a whole unique set of variables the Venetian creates — rooms, convention center, shopping, arenas, entertainment — things that really just don't exist in any scale in Macau today.

We've been told there's considerably more retail at the Macau Venetian than the Las Vegas version. What makes the Chinese version so electric?

I think, first of all, the Chinese consumer, per capita, is the best consumer in the world right now, even above the Japanese. What you find is that Macau has a much lower tax on luxury goods than in mainland China, so for that reason, luxury goods are very important in terms of the prestige to the growing economy in the upper and middle class and wealthy class that's developing in China. Because of that, you attract great tenants. The retailers get it. They understand what Hong Kong is about. You look at Wynn Macau and the numbers at his stores at the Wynn are very stunning compared with almost anywhere else. So the retailers get it, and because of that, you're able to attract some of the best retailers in the world to Macau. You set them in the unique environment — in the streets of Venice with the gondolas and opera singers and everything else — and you've got a combination of tremendous retail in an interesting and unique setting, the likes of which have never been seen in that part of the world before.

In Macau, Las Vegas Sands Chairman Sheldon Adelson's bid to attract conventions and generating revenue with hotel stays, food service, retail and gaming will be put to the test once again. What are the challenges of doing this in Asia compared with in the United States?

As far as conventions are concerned, it's a much more mature market here, in terms of the types of shows we do. China has a lot of trade-show business, but in the past it's been called provincial. You go to a trade show and there's many different industries in that trade show because it's centered around the manufacturing capacity of a province, whereas in our country, trade shows are industry specific. You have a jewelry show, you have a flooring show, you have a bath and hardware show. It's a different model than what has traditionally been in China so we think it's going to be much more efficient. So if you're a buyer of bathroom or kitchen goods, you'll have a show just for that. You won't have to wander among many different items that have no interest to you. It's a little different model, and we think it's going to be a successful one. Hong Kong has employed that model and has done very well with it. The Hong Kong Convention Center does extremely well. You're also going to have a very desirable location. You just need to look to Las Vegas to see how successful this destination is in our country because it marries business along with good entertainment. What's unique about Las Vegas and will be similar to Macau is that most of the activities in Macau and Las Vegas happen in the evening, so people are free to go to the trade show during the day and they can still have fun in the evening, unlike other cities. Orlando is much more of a daytime town. There's not a whole lot going on at 11 o'clock at night in Orlando. All the parks are closed and there's limited entertainment venues. Both Macau and Las Vegas share a similarity in that you can go to your show during the day and still have a great time, so it's a popular spot and we think it will be a major attraction to the Chinese customer.

Because the government of Macau requires that a portion of the casino workers be Macau residents has the company had any trouble hiring enough qualified workers to man the massive casino?

No. One thing, and this goes back to being here first, we are in Macau in a big way. If you're a worker in Macau who's interested in a career, you can work for someone who has one casino or you can work for someone who's going to have eight or nine casinos. That company that has eight or nine casinos is obviously going to offer more upward mobility opportunities. I think as employers, we and Wynn Resorts have had a higher standard. We're bringing the standard of the rest of Macau up in terms of how they treat employees.

Do you plan to make room rates a loss leader in the early going or is there enough demand to charge the maximum amount right off? Compare the rates to the Venetian Las Vegas.

A room is an asset that if it goes unsold, obviously you lose the revenue and you also lose the opportunity of generating gaming revenue. Probably the most interesting challenge for us initially is to figure out the whole room equation. How much should we dedicate to group business vs. FIT (free and independent traveler) business vs. the casino itself. Our goal always is to maximize utilization of the rooms. I wouldn't call them a loss leader as much as I would say we want to maximize the revenue opportunity out of each room, and sometimes that's going to come in the form of giving that room away as a comp versus trying to charge a rate, because the demand may not be there on a certain night.

What types of arrangements do you have with the junketeers to bring quality players to the property?

We have a competitive commission structure but what we're going to be able to offer them now is one of the greatest properties in the world and, as I said earlier, we're a little short on rooms with only 51 at the Sands. Certainly we're going to be able to offer them a much broader product and room accommodations that were in short supply at the Sands property. The Sands also is coming on with 240 suites in September, so that'll help that property out as well. So a broader range of accommodations, more rooms to conduct their business and an unbelievable Paiza Club as far as the infrastructure built around the club itself. I think we'll do extremely well in that segment. Of course, we've been doing well with a less-than-adequate rooms product at the Sands.

What kinds of challenges are there to lure players away from the peninsula and into the Cotai area?

I don't know if there are challenges. It's so unique, it's going to be a property where people will want to be at. It's a little farther away, but that's the beauty of it — longer term, it's going to be its own district. It's kind of akin to old Las Vegas and the Strip. When you look back at Macau, you can almost look at a time machine to Vegas and see what happened here and see that mirroring itself in Macau. Certainly as more critical mass of product comes on board, meaning shopping, entertainment, dining, recreational activities, gaming opportunities, I think you're going to see a significant shift away from the peninsula to the Cotai Strip, and I think the Venetian is so unique, it'll happen instantly with the opening of that property.

What's the status of the company developing new ferry transportation to bring guests from Hong Kong directly to Taipa Island?

Well, we've gone out and purchased our own ferries, and we take the first delivery in October and we keep getting them. I think we currently have 12 on order. They have 450 seats and are beautiful crafts. I saw a picture of the first one just the other day. We'll be using a third-party Chinese ferry company to operate them for us and they're putting some of their own product into our fleet, so we'll actually have more than the 12. Those will come right into the Taipa ferry terminal which is virtually a half-mile from the Venetian site.

Is the ferry terminal done?

The ferry terminal is under construction. They're going to have part of it open by this fall, a temporary portion of it, and we're still working on the date for the final completion of the project itself.

Will the company try to take some kind of advantage to being closer to Macau's airport than your rivals?

Certainly we're going to take advantage of that. We recently purchased two (Boeing) 737s and reconfigured them into a first-class type of configuration to bring junkets in from Japan, Taiwan, Thailand, Korea, Jakarta (Indonesia), Singapore, itself, right into the Macau airport. Of course, the Macau airport is about a 1½-minute drive from the Venetian. It makes sense to take advantage of that underutilized asset. We'll also have Gulfstreams over there for very-high-end customers. We expect to have a very large air presence at our Macau operation as our room product comes on board.

Many analysts predicted a hiccup in gaming numbers because of the slowdown of processing visa applications from the Chinese mainland. Have you experienced any of that at the Sands Macau?

Our visitations actually have been up at the Sands Macau and you find that visitations usually are shorter, because there's more to do in Macau. That's a good thing. For the longer term, a rising tide carries all boats. What we're seeing is more visitation to the town. It will be interesting to see how the visa application issue pans out. Nobody knows for sure exactly what the end game is. But part of it is, we believe, to unclog the border somewhat with people who, perhaps, shouldn't be going to Macau as often. Perhaps there are some social issues for the Chinese government, that some of the wrong people are going there too often. At the same time, they want to attract a new class of customer, particularly business or destination tourists and they don't want that experience to be one that the border is clogged with people they don't care as much to be there. I think they're looking at tweaking the formula of the (visitation) scheme, and in the long run, that may wind up being a good thing for all of us.

Is Macau gaming regulated well enough?

As far as the regulation of Macau, we sense it is, in terms of the government and the taxation. Certainly, we self-regulate to a large degree. I can't speak of how well the other casinos are operated because I haven't been in them. Our standards are as high as they are here in Las Vegas. We find that there's a huge presence of Macau authorities on the property. They're in the count rooms, they're very active in the tax collection of revenues. So, as far as we're concerned, it's certainly adequately regulated, or we wouldn't be there, and investors wouldn't be pouring the billions of dollars into our assets.

Switching gears, can you give us an update on the Palazzo resort, due to open Dec. 20?

Palazzo's opening day has been set for Dec. 20. That'll give us kind of a slow week before we hit the busy Christmas week and then New Year's and then Chinese New Year's. The mall is actually opening in mid-January, a month behind, because you can't open a mall in midseason of a line, so the January timeline is when the spring lines come out, and we have so many fashion tenants that it only makes sense for us not to open (with the hotel) because the first day after Christmas is when the winter line goes on sale. So we'll be opening it in mid-January.

There were reports of a fire at the job site earlier this summer. How has that affected construction?

It hasn't affected it at all. If you were to ask me to articulate even what it was at this point ¦ they were telling me a little about it the other day and it was just minor.

Can you give us a preview of what people are going to see when Palazzo opens?

The Palazzo is a themed resort, but it's what I call a soft theme. Whereas the Venetian is very "hard," meaning, when you walk in it, it's to replicate Venice and has the attributes of that. The theme of Palazzo is more just about luxury. It's very dramatic spaces. It has a lot of what we call wild spaces. It's very beautifully done, very complementary of the Venetian. The room product is exactly the same, an all-suite room. It's just in a different environment. It's kind of reminiscent of Beverly Hills-Rodeo Drive and kind of has an art-deco style to it, but it's pretty non-descript. I think it's really the next generation of resort here in Las Vegas. Bellagio and Venetian were kind of luxury-themed places, then you had Wynn, which is much more abstract. It's not really a theme, it's about luxury. I'd say Palazzo is a similar type of facility as Wynn is in terms of a nondescript theme of luxury vs. a Paris or a Venetian or a New York-New York.

With the addition of more than 3,000 rooms with the Palazzo, the Venetian would become, by far, the largest hotel complex in the world. Will it be marketed as such or do you consider them separate entities?

We consider them separate. We look at it by market segment. Certainly through the trade show and group business, we look to market them as one, where it's an advantage. There are large corporate pieces of business, like IBM or General Motors that need 5,000 or 6,000 rooms, so it's to our advantage at that point to market them as an integrated facility. The flip side is, to the typical consumer, they are two totally different experiences and while they're interconnected, what the customer gets is the advantage of 30-plus restaurants, over a half-million square feet of shopping, four showrooms, 15 pools, two Canyon Ranch spas. They get all that advantage, but as I kiddingly say, they get it in an intimate 3,000-room setting. The consumer gets the best of both worlds. We know 3,000-room hotels can work here fairly effectively in Vegas, yet they get the critical mass of a 7,000-plus-room resort of experiences.

You have a new employee parking garage east of Harrah's, but parking still seems to be at a premium at the Venetian. Will there always be sufficient parking for Venetian, Palazzo, the Sands Expo Center and all the retail customers?

I guess I disagree on that point. Certainly prior to the opening of that garage, parking was a challenge. But many times I drive through that garage now and there's plenty of parking for the consumer. There's another 4,500 spaces that are opening at the Palazzo as well, right underneath the property, which is the most convenient parking, probably, in the history of gaming. You can take an escalator up from the parking garage and you're right in the middle of the casino floor. No walk-over bridges or this or that or whatever. I would say my suspicion is that we're going to be overspaced vs. underspaced. As busy as this property gets, we'll end up with 12,000-odd parking spaces, which is a lot of parking for shifts and everything like that, so we feel very comfortable. My guess is that we'll have more parking than we need.

What do you think is the biggest problem facing Las Vegas in the next five to 10 years?

Just making sure the infrastructure keeps up with the growth. Certainly, there's a lot of concern about I-15 and its capacity out of Southern California, not that that necessarily affects us as much. With our customer paying 500 bucks a night for a room out of L.A., is probably flying here, not necessarily driving from L.A., but it certainly is somewhat of a macro-issue for the town. Transportation on the Strip, the usual suspects of water and all those kinds of things. This is a wonderful town that people always bet against. There's an article we have in our office that we took on our first road show when we were raising money, and that was in '97. Everybody back then was saying, "Is Las Vegas overbuilt?" So we had this article from Life magazine that says exactly that, "Is the bloom off the rose, is Las Vegas overbuilt?" and that was from 1955. "There's over 4,000 rooms in Las Vegas. How can they possibly handle all that room capacity?" That's a hotel today. Somehow this town has always found a way to continue to reinvent itself and meet the challenges. But it's just becoming so big that I think infrastructure is probably the single biggest challenge for us. We seem to be able to attract workers here. Construction has been a challenge in terms of finding an adequate workforce. That's another potential challenge today, but whether that exists in four or five years is anyone's guess, but that is a challenge for this town.

What do you think should be done to solve some of the traffic gridlock problems experienced on the Strip?

I'd be guessing if I told you I would understand how we would approach that.

What competition should Las Vegas be most worried about?

You know, I've got to tell you that I don't think Las Vegas has any real competition. The critical mass of what we have here makes us so unique. People ask me, "Is Macau going to be competition that you develop all this for Las Vegas?" I don't think so. Las Vegas has always benefited when new jurisdictions brought in gaming, it interests people and they want to go to the Mecca and Las Vegas will always be the Mecca of gaming. It's the place where you not only have gaming, but all those amenities which surround gaming. Years ago, when Illinois, Missouri and Indiana and all these states were passing riverboat gaming, instead of hurting Vegas, they helped Vegas. Those were the largest growth markets to Las Vegas where people learn to gamble. I'm a skier. Once you learn to ski at the local ski area, and you kind of like it, you want to go once a year to Vail or Aspen (Colo.). Vegas is the Vail and Aspen of gaming. I think it's just going to continue to grow and I just don't think it has any rival.