Wednesday, February 24, 2010

Harrah's CEO: Las Vegas still weak - 22nd February 2010

Harrah's Entertainment Inc sees few signs that Las Vegas is recovering from the slump that began with the financial crash of 2008, the company's chief executive said on Monday at the Reuters Travel and Leisure Summit in New York.

Citywide gambling revenue in Las Vegas has begun to stabilize, but room rates are still heavily discounted as casino operators compete to attract visitors.

"We are the cheapest date in the world ... That generates lots and lots of visitors," said Gary Loveman, CEO of Harrah's, the world's largest gambling company. "Las Vegas remains weak and will remain weak for the foreseeable future."

He also said Las Vegas group business bookings for 2011 are "encouraging," but 2010 remains soft.

Loveman attributed the prolonged downturn to customers' lack of cash amid the economic downturn and increased competition from new Las Vegas Strip resorts like MGM Mirage's $8.5 billion 6,000-room CityCenter.

Harrah's last week acquired the Strip's troubled Planet Hollywood resort by spending about $70 million to buy its discounted debt and agreeing to take over a $554 million mortgage.

"We got a building for a fraction of replacement cost," Loveman said.

Planet Hollywood gives the company seven contiguous resorts on the east side of the Las Vegas Strip -- it also owns Caesars Palace on the west side of the Strip.


Harrah's, which was acquired by private equity firms Apollo Management APOLO.UL and TPG Capital TPG.UL in 2008, relies on Las Vegas and Atlantic City, New Jersey, for about 40 percent of its earnings.

The company, which has more than 50 casinos in six countries, also operates in regional U.S. gambling markets like Tunica, Mississippi, New Orleans and southern Indiana.

Loveman said Harrah's remains interested in a presence in China's Macau -- the world's largest gambling center -- but is not actively discussing such a deal.

"We do have an interest in Macau. We think Caesars is the best brand for that market," Loveman said.

The Chinese government has issued six gambling licenses in Macau, and U.S. companies MGM, Las Vegas Sands Corp and Wynn Resorts Ltd have casinos there.

The Harrah's CEO declined to comment on whether the company would consider a deal involving Australia's Crown Ltd, which owns a stake in Macau operator Melco Crown Entertainment.

During the recession, Harrah's has managed to avoid defaulting on its debt by renegotiating with its banks and buying bonds back at discounted prices.

The company, which now has a total debt load of about $19 billion, faces no major maturities before 2013, when nearly $6 billion comes due.

"It is possible that may be extended," Loveman said.

Meanwhile, Harrah's will focus on its massive customer database to continue driving business at its casinos.

Loveman said the company is in the process of rolling out the next iteration of its loyalty program -- called Total Rewards -- to include much more individualized, real-time targeting of customers.

"We think it enhances margins ... but mainly it makes for a much more satisfied customer," he said.

The CEO expects the new system to be up and running in about a year in Las Vegas, pending regulatory approvals.

Loveman said it will allow Harrah's to offer frequent gamblers things like a free hotel night if occupancy is low or a special cocktail before they even think of it.

It's like "Medicare comes to casino beverages," he said.

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