Sixteen years, in gaming industry terms, could almost qualify as ancient history, but with Galaxy Entertainment boss, Francis Lui Yiu Tung, raising the possibility of borderless travel between Macau and Hengqin and thus the potential for further growth in the Macau market, how will odd-man-out Caesars Entertainment redefine itself asks Casino Review.
Caesars Entertainment’s newly minted CEO Mark Frissora focused on the positives during the company’s Q1 2017 earnings call this May, keeping his cards close to his chest and emphasising the firm’s “cornerstone initiatives”.
As analyst Howard Jay Klein summed it up: “Make happy talk, cut costs, don’t you dare breathe a word about a Caesars that could emerge on the other side of bankruptcy late this summer two and a half years after the original filing.”
In economics, opportunity cost refers to a benefit that a person could have received, but gave up, to take another course of action. For Caesars, the crux point in its road to reorganisational bankruptcy was its decision not to enter Macau.
In 2001, Macau caused a stir in the worldwide gaming market as the government launched a tender for six gaming licenses, ending Stanley Ho’s 40 year monopoly on Chinese gambling.
Yet Caesars – then Harrah’s Entertainment – never submitted an application to bid. As the company’s COO at the time, it’s likely that Gary Loveman, later Caesars’ CEO from 2003-2015, would have played a significant role in this decision.
Caesars was left on the sidelines as Sands, Wynn, and MGM all got in on the act, instead focusing its efforts on domestic markets, such as Atlantic City.
Compounding the fiasco, just a few years later, in 2006, a Loveman-steered Caesars, turned down a deal to buy Wynn’s Macau sub-licence.
The decisions to pass on Macau in 2001 and 2006 see Loveman and Caesars Entertainment credited with having twice made among the biggest mistakes in the history of casino management.
“You had to have a kind of intuitive courage and I am not well suited to those kinds of decisions,”
said Loveman in 2010. “Big mistake. I was wrong, I was really wrong.”
Reflecting on the magnitude of the twice-missed opportunity while speaking at Stanford in 2013, Loveman added: “We missed the Macau licenses. There were six of them that became available. There was really only one I had a shot at. I blew it.”
The company tried to pull it back from the brink, purchasing a 175 acre Macau golf course, in the hope of convincing the government to issue them a licence.
But after it was made clear there would be no more gaming licenses on the cards, Loveman, who had purchased the land for $578m sold it for $438m in 2013.
Perhaps Steve Gibbons summed it up best in his 1978 apocalyptic golfing ballad, “please don’t lose your balls down in the bunker.”
So, what is the moral of this lesson from casino history? A post-bankruptcy Caesar’s Entertainment faces a choice: management could take the line that the Caesars of 2017 is merely a pre-bankruptcy Caesars shorn of $10bn in debt with no prospects of portfolio reduction in many of the weaker markets it currently operates in.
However, a massive chain of US regional casinos setting up shop in every jurisdiction in which gaming was legal is a concept whose time has passed.
Loveman was the architect of this, he envisioned Caesars as a vast system linked by the highly successful Total Rewards program database which would incentivise customers to visit a Caesars property wherever they lived or travelled because they could generate points.
Alternately, we could see the emergence of a sleeker Caesar’s, bringing to the table one of the world’s iconic gaming brands, as well as a fistful of strong properties reduced to fit its financial capacities and of a scale lending itself to better management controls of the type that Frissora is looking to implement.
As Julius Caesar once said, at least according to Suetonius, “iacta alea est” – “the die is cast”.
