Harah's can chase a high roller or stay in the mid-market
With new strip resorts vying for the luxury market, the world's biggest gaming company is facing a major decision to train middle-class gamblers who prefer frequent casino incentives over affluent environments.
It's one of the big challenges new owners of Harrer Entertainment face as they wrap up their $30 billion acquisition early next year. A deal between Harrer and private equity firm Apollo Management and Texas Pacific Group received final regulatory approval in Nevada last week.
Today, Harrah's is spending $1 billion to expand Caesars Palace's flagship while playing alongside regular gamblers. The property recently raised table game limits to court high rollers and will undergo another casino upgrade to compete with many luxury resorts to come.
Properties in Hara, including Flamingo, the Imperial Palace, Hara, and Rio, appear to be a haven for travelers on a reasonable budget, while new multibillion-dollar resorts are almost being forced by expensive properties and construction costs to charge up to dollars. Is the company's investment in expensive renovations worth it only to compete in an already crowded luxury market?
Before the acquisition was announced a year ago, Harra had created a linked "resort destination" experience to discuss bold plans to remodel the East Strip property. Analysts had speculated that the project would cost billions of dollars idling several lucrative casinos for several years under construction, but the budget was not disclosed.
Harra, who has a new owner but is like the underlying management, decides which route to take, and Trip has at least nine towers under construction, making the race even fiercer for high-end customers.
Both private equity firms say they will not make decisions for Hara's executives. Instead, they will use Wall Street contacts to help executives get more information and thus make more profitable decisions.
Born in the 1990s, Apollo and TPG received an enviable brain trust from the wealthiest U.S. funds, pensions, and charities, managing $70 billion. They could use sophisticated risk-reward scenarios to help companies like Hara review affordable financing, acquisitions, and other deals.
Buyout companies finance acquisitions at low costs and increase corporate efficiency to generate revenue. In many cases, cost savings and new business strategies can upend large, inefficient, or outdated businesses.
TPG, along with other investors, replaced senior management, cut franchisee losses, designed smaller, less expensive and more efficient restaurants, and created new menu items to boost Burger King's market value by $700 million in less than four years. 파워볼사이트
Apollo's acquisition of Vale Resort, a failed ski resort company and a major employer in Vale, Colorado, most closely resembles Hara's deal because of its importance to the resort's business and community, executives said. Skepticism about whether Apollo's New York financiers would be sensitive to local jobs and company culture turned into a "real regret" when Apollo sold the company a few years ago, Apollo co-founder Mark Lohan told the Nevada Gaming Commission last week. Fourteen years after owning Apollo, Vale Resort blossomed into a profitable and diverse business with hotels in other resort areas, he said.