Analysts forget to crunch No.’s

Oct 26, 2004 5:15 AM

The evidence is there for those inclined to examine it closely. Harrah’s Entertainment knows how to adjust to different cultures, despite what the Wall Street experts say.

The company’s making believers out of analysts who wondered if it could do anything more than drop its proposed Caesars Entertainment acquisition on the floor.

As in drop it and watch the deal shatter. There’s plenty of evidence in the third quarter results that suggests Harrah’s does indeed know how to learn new tricks, to go places the company has never gone before.

Much of the pessimism and analysis ad nauseum has been aimed at the flagship Caesars brand, and in particular at Caesars Palace on the Las Vegas Strip.

After all, how could a company like Harrah’s possibly be expected to treat Caesars’ high-rollers with the kind of velvet glove style they have been accustomed to receiving?

Harrah’s reaches middleclass slot players with unsurpassed efficiency using a combination of high-tech tools that have been widely imitated. Harrah’s knows how to turn a profit in this market niche.

But as for Caesars Palace . . . isn’t this an entirely different world, an example of a marketing culture years removed from the Harrah’s approach to business?

Perhaps. But the big thinkers at Harrah’s are a quick study, as they have proven with their integration of the three Horseshoe Gaming properties acquired from Jack Binion.

Third quarter performance at the Horseshoe casinos in Hammond, Ind., Bossier City, La., and Tunica, Miss., showed satisfying increases compared to the same three months a year ago when they were still operated by Binion. The increases in revenue and EBITDA (earnings before interest, taxes, depreciation and amortization — so-called cash flow) added nine cents to the earnings per share at Harrah’s.

Harrah’s CEO Gary Loveman boasts, "From a customer perspective, the combination of the companies has been seamless."

In terms of management styles, Horseshoe was as different from Harrah’s as Caesars Palace is. The Palace and Horseshoe gambling halls were both renowned for their big table game action. High-rollers have always felt comfortable at both Caesars and the Binion operations.

Whereas, Harrah’s has this thing about computers, number crunching and analyses as measured by constant surveying.

Would Caesars players feel comfortable once the Harrah’s approach to management was in place? More than a few analysts were doubtful, they may still be, for that matter. Different brands bring different expectations. It’s the difference between a Chevrolet and a Cadillac.

But come to think of it, didn’t Harrah’s also do a decent job of turning the Rio around, increasing profits without inciting customers to riot?

That means a lot of customers feeling pretty good, thank you, about whatever it is they are experiencing.

Which brings me to this conclusion: the people who analyze gaming companies and write about them should get out and sample the experience from time to time.

experience from time to time.

Poker pros
lay down the gauntlet

Poker legend Doyle Brunson says, "Nope," he hasn’t heard anything from Dallas banker and high-stakes Texas hold ”˜em player, Andy Beal, since Beal challenged a group of Las Vegas pros to a game in Texas with $100,000 and $200,000 limits.

Brunson countered with a challenge that would have the Vegas pros putting up $40 million with Beal matching that figure. They would play heads-up (two players at a time) beginning with limits of about $30,000 and $60,000.

Will Beal come back to Las Vegas?

"He will if he wants to play," says Las Vegan "Chip" Reese, one of the high stakes pros who has previously played Beal.

Reese adds, "He’s not gonna be a favorite, but, hey, he can get lucky. He plays good enough that over a short period of time he can beat anybody. What he’s probably trying to do because he has the money . . . he’s probably trying to raise the stakes to where if he can make one good score he can come out of it calling himself a winner."

Brunson says he has "about 30 people" willing to participate in a $40 million challenge. Who would do the playing for the Brunson "team" if such a game develops?

"Oh, we’ve got plenty of players," the laconic Brunson says, not taking it any further than this for the moment.

Poker pro Howard Lederer imagines he might be one of the "hired guns." He says Beal would be welcomed to pick his own turf.

"But the one thing," he says, "that is not going to happen is we are not going to play the biggest poker game ever in someone’s private house or a hotel room in Texas. It would have to be in a licensed, regulated facility in front of cameras with licensed dealers."