With new strip resorts vying for the luxury market, the world's largest gaming company is facing a major decision to train middle-class gamblers who prefer frequent casino incentives to wealthy environments.
It's one of the big issues that 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 its Caesar Palace flagship while playing with regular gamblers. The property recently raised its table game limits to coat-high rollers and will undergo another casino upgrade to compete with the many luxury resorts to come.
Hara's properties, including the Flamingo, the Imperial Palace, Hara, and Rio, appear to be a haven for travelers on reasonable budgets, with billions of dollars of new resorts almost forced by expensive properties and construction costs to charge the top dollar. Is the company's investment in expensive renovations worthwhile only to compete in the already crowded luxury market? 바카라사이트
Before the acquisition was announced a year ago, Harra discussed a bold plan to remodel the Eaststrip property by creating a linked "resort destination" experience. Analysts speculated the project would cost billions of dollars while idling several lucrative casinos for several years during construction, but the budget was not disclosed.
Harrah, who has new owners but is like a basic management team, decides which route to take, while at least nine towers are under construction in Trip, making the race more intense for high-end customers.
Both private equity firms say they will not make decisions for Hara's executives. Instead, they will use Wall Street's contacts to help executives get more information and thus make more profitable decisions.
Born in the 1990s, Apollo and TPG have received enviable brain trusts that manage $70 billion from some of the wealthiest American funds, pensions, and charities. They can use sophisticated risk-reward scenarios to help companies like Hara secure affordable financing, reviewing acquisitions and other deals.
Buyout firms raise acquisition funds at a low cost and generate revenue by increasing enterprise efficiency. In many cases, cost savings and new business strategies can turn over large, inefficient, or outdated businesses.
Along with other investors, TPG has raised Burger King's market value by $700 million in less than four years by replacing senior management, reducing the loss of franchise owners, designing smaller, less expensive, more efficient restaurants, and creating new menu items.
Apollo's acquisition of Vale Resort, a failed ski resort company and a major employer in Vale, Colorado, is most similar to 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 "real regrets" when Apollo sold off the company a few years ago, Apollo co-founder Mark Lohan told the Nevada Gaming Commission last week. He said after 14 years of owning Apollo, Vale Resort blossomed into a profitable and diverse business with hotels in other resort areas.