Caesars ready to seize chances

Nearly six years ago, Caesars Entertainment Corp. (then known as Harrah's Entertainment) rejected an opportunity to acquire the Macau gaming subconcession controlled by Wynn Resorts Ltd.

Company leaders deemed Wynn's $900 million asking price a bit excessive.

They regretted the decision almost immediately.

"Big mistake," Caesars Chairman Gary Loveman told Bloomberg Businessweek in August 2010. "I was wrong, I was really wrong."

Last year, Macau's casino industry generated gaming revenues of $23.5 billion, three-and-half times what they were in 2006 and more than five times what the Strip produced in 2010. Through November, the revenue figure is up 44 percent.

Rivals Las Vegas Sands Corp. and Wynn Resorts Ltd. generate more than half of their companies' quarterly revenues from Macau.

Loveman told Bloomberg Businessweek that his numbers "quantification" on Macau took him out of his comfort zone.

"You had to have a kind of intuitive courage," said the former Harvard Business School professor. "I'm not well-suited to those kinds of decisions."

Based on recent company moves, Caesars Entertainment is determined not to be left behind again. In that effort, Loveman is laying down some hefty wagers.

Caesars, which has 52 casinos in 12 states -- including 10 on and near the Strip -- is focused on U.S. expansion.

Through a joint venture, the company will operate two of the four casinos opening next year in Ohio. Caesars is the leading bidder for a downtown Baltimore casino project and is expected to earn the license for a casino in the Boston area in partnership the Suffolk Downs racetrack.

The company is looking at Miami, the next potential casino expansion market. Caesars and a partner could bid head-to-head with rivals Wynn, MGM Resorts International, and Las Vegas Sands Corp.

After missing out on Macau, Loveman is determined Caesars won't be runner-up in new international markets.

Last month, he made a presentation on integrated resorts to Japanese officials. Tourism has declined dramatically in Japan following this year's earthquake and tsunami. During the company's third-quarter conference call, he told analysts that several Asian countries might expedite gaming developments, basing plans on successful models used in Macau and Singapore.

Caesars is willing to place its brand -- minus a casino -- in China, India and other countries. The company launched Caesars Global Life in August and announced plans a month later for the $470 million Caesars Palace Longmu Bay on the southern Chinese island of Hainan. The goal is to develop 25 hotels and resorts in China over the next five years.

"Gary has candidly said the company missed out on a huge opportunity in Macau," Union Gaming Group Principal Bill Lerner said. "That's why they're focusing on so many other markets, such as the Internet."

Loveman and Caesars haven't given up on Macau.

In September 2007, Caesars spent $577.7 million to acquire a 175-acre golf course on Macau's Cotai Strip region on the hopes of transforming the land into a hotel-casino destination. But it doesn't appear likely that the government will grant new gaming concessions.

China took over Macau in 1999 and did away with the casino monopoly of controversial Hong Kong billionaire Stanley Ho. Three concessions were awarded to Hong Kong-based Galaxy Entertainment, Ho, and Wynn Resorts.

Galaxy and potential partner Las Vegas Sands, however, couldn't reach an agreement. The government then split the license and awarded Sands a subconcession. Ho and Wynn were also granted subconcessions.

Ho gave his subconcession to his daughter, Pansy Ho, who formed a partnership with MGM Resorts. After the Caesars rejection, Wynn Resorts sold its subconcession to Melco-PBL for $900 million.

Macau has just six gaming licenses and the government won't add more casino operators. Macau has taken steps to slow gaming growth. Additional development along the Cotai Strip is somewhat at a standstill. This leaves Caesars on the outside looking in.

Last year, the company reportedly talked with Melco-PBL about a joint venture in Macau. But New Jersey gaming regulators, who forced MGM out of Atlantic City because of its partnership with Pansy Ho and her relationship with her controversial father, would have had similar concerns about her brother, Melco-PBL CEO Lawrence Ho.

With Caesars planning an initial public offering and Loveman seemingly willing to step outside his comfort zone, don't count anything out of the picture.

Howard Stutz's Inside Gaming column appears Sundays. He can be reached at hstutz@reviewjournal.com or 702-477-3871.
He blogs at lvrj.com/blogs/stutz.
Follow @howardstutz on Twitter.