Changing times

Casino companies were caught spending money “like drunken sailors” when the economic downturn hit, Harrah’s Entertainment Chairman and Chief Executive Officer Gary Loveman told attendees at the Global Gaming Expo here Wednesday. And many of the regional and destination resorts those companies were building with cheap credit were bringing in very low investment returns, Mr. Loveman told those attending the convention’s “State of the Industry” roundtable.

Gamers have been in an “arms race” to build new casinos, but the economic problems facing the nation are forcing them to undergo a “significant sea change in the way in which the balance sheets of these businesses are structured,” added the head of the world’s largest gaming company. The days of casino companies chasing after one another to land unsecured funding at low rates to build more and more expensive new resorts are probably over for a long time, Mr. Loveman added.

Not entirely by choice. After Harrah’s Entertainment announced Friday that it hopes to issue $2.1 billion in 10 percent notes due in 2015 and 2018, pushing current maturity dates back at least five years, Moody’s Investors Service responded by downgrading nearly $16 billion worth of the company’s debt from B3 — highly speculative — to Ca: extremely speculative.

“I think the industry is going to have to get accustomed to the notion that not every project is a good project — and $1 billion is a lot of money, after all,” Mr. Loveman said.

Good. The gaming industry has shown itself to be resilient and adaptable in the past. The faster it adapts to the new economic climate — and the end of “who cares” easy credit — the better.

Old values — including the avoidance of crippling debt loads — now reassert themselves.

Meantime, a perusal of any letters-to-the-editor column from recent years will show long-time Las Vegas visitors expressing disappointment that their repeat business no longer seemed important to gamers who had written off the “middle market” in their zealous pursuit of younger nightclub-goers with seemingly limitless credit lines.

In parallel to that, many Nevadans have worried that these companies seemed more enamored of the unproven promise of exotic locales than interested in maintaining their local base.

Indeed, Mr. Loveman indicated the “grass is greener” stars in their eyes have not entirely faded, pointing out the bad economy could also open up new international jurisdictions traditionally opposed to gaming — Vietnam, Japan, Taiwan and parts of Europe — as those areas start searching for new sources of income.

Looser credit in Bucharest? We’ll see.

But if the largest industry in Nevada instead decides to reappraise the importance of pleasing its established clientele, so much the better. It costs a lot less to keep an established customer than it does to attract a new one, whose loyalty may prove fickle at best.

Also at the gaming expo, International Game Technology Chairman and CEO T.J. Matthews said the cancellation and suspension of several casino projects has forced the company to focus on ways to adapt new slot technology to existing casinos.

“The only way can grow is if we make the business better,” Mr. Matthews explained.

Imagine that.

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