A new Caesars, made from the old Harrah’s, Caesars, and Eldorado By Ken Adams, CDC Gaming Reports October 25, 2020 at 9:30 pm In yet one more shuffle in the gaming world, the former Harrah’s now has a new owner, Eldorado Resorts. In the process, Eldorado acquired a new brand name – Caesars – a list of customers as large as the population of England, and a bundle of casinos. Eldorado is now the proud possessor of 55 casinos, but arguably the most important assets that Eldorado acquired in the mammoth merger were loyal customers. It is the legacy of Harrah’s strategy policies of the 1990s. But one should not ignore the new name, Caesars. For 60 years it has been a world leader and the most recognized name in the gaming industry. Harrah’s almost single-handedly created mega-slot clubs. There were many slot clubs at the time, but none matched Harrah’s for its marketing power. In 1997, it launched its Total Gold slot club. The company, quickly realizing it had a golden goose, changed its acquisition strategy as a result. For a decade, Harrah’s had been trying to expand into every legal gaming jurisdiction. When it was feasible, purchasing an existing casino was the quickest and cheapest path to take to do so. After 1997, though, the company was more interested in purchasing databases. The companies targeted for acquisition had significant loyalty programs that Harrah’s could integrate into its Total Rewards program. By 2014 Harrah’s had two things that were not totally unrelated: a debt of $20 billion, and 35 million customers in its database. Harrah’s Las Vegas via Shutterstock Harrah’s had the help of a Harvard Business School professor, Gary Loveman, in grasping the significance of the industry’s largest database. Harrah’s hired Loveman as a consultant in 1991. Working with Harrah’s led Loveman to concentrate on customer service and loyalty programs. In 1997, he offered to help Harrah’s grow revenues and profitability using loyalty programs and database marketing. Many industries were already using it extensively, but the game industry was behind the curve. Loveman changed that, making Harrah’s a leader in database marketing and the envy of the entire gaming industry. Harrah’s was impressed, too; the company elevated Loveman to COO in 1998. Gary Loveman changed the culture of Harrah’s. Under his leadership the casino company was not interested in high rolling blackjack or baccarat players. They were too uncertain, too risky. Slots, on the other hand, were stable and predictable, especially if you kept them filled with loyal players. In 2003, Gary Loveman became CEO of Harrah’s; in 2005 the company acquired Caesars Entertainment. In 2006, Harrah’s received an offer to buy the company and take it private, the deal closed in January 2008, just as the Great Recession was gaining traction. The private buyout was highly leveraged; the company entered the recession with $25 billion in debt. It also had declining revenues. The debt and the recession forced Harrah’s to change its culture even more. Previously, Harrah’s had been noted for its upkeep, regularly updating and reinvesting in its properties. The debt-laden Harrah’s cut its budget for maintaining and updating its properties from $250 million a year to $50 million. The company even considered spinning off its database into a separate company and selling it to reduce its debt load. Wisely, that did not happen. In November 2010, the company changed its name to Caesars. Caesars was, and still is, probably the best-known gaming brand in the world; Caesars and high rolling were synonymous in the world of wealthy gamblers. In the 1980s, Caesars had a network of junket offices in 50 cities around the world. Muhammad Ali toured Africa as a Caesars’ ambassador, hosting the richest people in each country and inviting them to Las Vegas and Caesars. Clifford Pearlman once said that even if every table and every slot machine was filled with eager gamblers, it was insignificant compared to the betting of one player betting millions of dollars on each hand. Renaming Harrah’s as Caesars, in theory, combined the legacy of two of the most successful gaming companies. Ironically, the new Caesars was neither the world leader in high roller play nor among the best-maintained properties in the United States. Gary Loveman left Caesars in 2017, and the company settled into an unremarkable existence. When Carl Icahn started buying the stock, he thought the company’s assets alone were worth more than the operating results indicated. Icahn thought Caesars should put itself up for sale. Eventually, he had his way. Three years after Loveman’s departure, Eldorado Resorts made an offer to buy Caesars. In June 2020, the acquisition of Caesars Entertainment by Eldorado Resorts was completed. With the acquisition of Caesars, nee Harrah’s, by Eldorado, the company called Caesars, post-merger, has an estimated 65 million loyal gamblers in its database along with its 55 casinos resorts. What kind of company will the new Caesars be? It remains to be seen, but there are hints floating around. Executive Chairman of the Board Gary Carano gave an interview to Nevada Newsmakers’ Sam Shad recently in which he said that the new company will have a much smaller corporate structure and will empower managers at the property level to make decisions. With the casinos at Lake Tahoe and the original Caesars on the Strip, that means letting the property set betting limits and encourage high-limit play. In regard to the Tahoe properties, Carano also said the company was catching up on the deferred maintain the characterized the old company. Gary said that, in the new corporate culture, the CEO and other corporate executives would meet with property management and employees to talk about issues. He said he realized that was not the way corporate gaming normally behaved, but it was their way, inherited from the Eldorado roots. Of course, it is too early to say what the company will do in the long term. It, too, has significant debt, just as Harrah’s did in 2008, and the country is in the middle of a recession caused by the pandemic, just as was the case in 2008 with the Great Recession. Those factors are going to apply significant pressures to the company’s operation. Stockholders and analysts will be pushing for lower expenses and increased revenue. That is never an easy proposition. However, the newly birthed Caesars has good genes. Don Carano, Bill Harrah, and Clifford Pearman have solid, successful, and profitable strategies. The new Caesars has 65 million loyal slot loyal players, well-nourished high rollers, and up-to-date, well-maintained properties to use in pursuit of profit and success. It will not, however, be easy.