Harrah’s Entertainment, the world’s largest casino operator, plans to enhance its position as a middle market leader as new high-end resorts appear on the Las Vegas Strip.
"There is a noticeable gap in premier tier and value tier properties," said Harrah’s Chief Financial Officer Jonathan Halkyard. "That’s historically been a very important market for us."
Speaking at a Bank of America conference last week, Halkyard was alluding to upscale projects under way by MGM Mirage (Project CityCenter), Las Vegas Sands (Palazzo), Wynn Resorts (Encore) and Boyd Gaming (Echelon Place planned for the Stardust site).
Those projects over the next four years will add more than 10,000 hotel rooms — mostly high-end accommodations — to the Strip inventory.
Halkyard said Harrah’s is in a great position to "fill the gap" for middle-level customers who still represent the majority of Strip customers.
"There are many customers who present high-spend levels, but don’t want to spend $350 on a room," Halkyard said.
Halkyard added that some hotels will be closed or demolished for the new projects, which in the short term will mean a downtown in room supply.
"In the near term — the next 18 months to two years — there will be some contraction as we see some supply, including ours, come out of the market," he said.
Harrah’s Strip portfolio of 18,000 hotel rooms includes Harrah’s, Caesars Palace, Bally’s, Flamingo and Imperial Palace.
Halkyard said Harrah’s has plans for "redeveloping" its Strip holdings — starting with the Imperial Palace — and possibly acquiring the Barbary Coast from Boyd Gaming, but would not elaborate what those plans entail.
He stressed, however, that redevelopment along the Strip wouldn’t disrupt the operation of Harrah’s-owned hotels.
"We will be very careful of taking out a lot of capacity at once," Halkyard said. "It is really a 10-year plan."
The CFO promised an announcement about Harrah’s redevelopment plans would be forthcoming within the next several months.
In addition to its Strip holdings, those plans include expansion in the Atlantic City market.
"The market needs new rooms," Halkyard said. "A lack of rooms, among other things, has constrained growth."