Call it gamings version of the Yankees vs.
the Red Sox, the Celtics vs. the Lakers, Godzilla vs. Megalon.
In one corner is
Harrahs Entertainment, with a mind-numbing customer database,
unmatched rewards program and midmarket dominance that gaming
expert Bill Thompson equates to Wal-Marts vice grip on bargain
In the opposite
corner is aristocratic MGM Mirage, majority controller of the
Strips high-end gaming market and owner of top-shelf properties
(Bellagio, Mirage) with fantastical but pricey Cirque du Soleil
productions (O, Mystere), pricey but fantastical celebrity chef-run
restaurants (Emeril Lagasses Emerils Fish House, Tom Colicchios
Craftsteak) and ogle-inducing but free outdoor shows (Mirages
exploding volcano, T.I.s musical pirate battle, Bellagios dancing
niches meant the companies rarely engaged in direct
with recent mega-mergers -- Harrahs swallowing of Caesars
Entertainment for $9.4 billion; MGM Mirage digesting Mandalay
Resort Group for $7.9 billion.
For the first
time, regionally diverse, 44-property Harrahs and Strip-centric,
28-property MGM Mirage are on the same playing field. Will there be
The answer to
this multibillion-dollar question, at least in the short term, is
As Harrahs and
MGM Mirage settle into their biggerness -- pre-mergers, they were
the worlds first- and third-largest casino concerns -- expect each
to rely on core strengths, experts say.
If Las Vegas
continues to do well, both companies will do well, said Brian
McGill, a research analyst with Susquehanna Financial Group. MGM
Mirage is really Las Vegas-focused. This was enhanced when it
bought Mandalay, because it now has a higher concentration of its
product there [eight megaresorts on the southern end of the Strip
Harrahs has more
diversified cash flows. Its in more regional markets like the Gulf
Coast and Atlantic City, but it, too, has increased its presence in
Thompson, a professor
administration at the University of Nevada-Las Vegas and perennial
go-to guy on all things gaming, says Harrahs and MGM are more
similar than not.
luxurious casinos, offerings for the bargain-seeking
visitor/gambler and loyalty programs. Harrahs Total Rewards program
is recognized universally as the industry standard.
Thompson said the
merger with Mandalay Resort Group infused MGM Mirages database with
millions of additional customers.
Still, this is a
competition, and there are opportunities to encroach on each others
controls Caesars Palace, a venerable property blessed with
luxurious accouterments -- the $95 million, 4,100-seat Colosseum
built for Celine Dion; the recently opened, $365 million luxury
tower; and the wildly successful Forum Shops.
But Deustche Bank
gaming analyst Marc Falcone said Caesars wont necessarily siphon
high-end market share from MGM Mirage.
If it can mimic
Harrahs DNA, like its Total Rewards program, for instance, Falcone
said MGM Mirage is better positioned to step on Harrahs
deftly mining customer information -- offering free rooms, shows,
flat-screen televisions and other perks to loyal patrons -- helped
boost its annual profit by 76% between 2001 and 2004, from $209
million to $368 million. Revenue jumped 23% to $4.55 billion from
$3.7 billion during the same period.
will be able to learn more about their patrons spending habits,
Falcone said. This will help them as they try to capture a greater
share of patrons wallets across their portfolio [of
Harrahs has a better mix of entertainment.
The Colosseum can
double as a concert venue for visiting celebrities.
Wallace and Grammy-winning singer Gladys Knight routinely perform
to packed houses at the Flamingo.
Jubilee at Ballys continues to draw raves.
And theres hope
that Caesars can regain its prominence as the premier venue for
boxings megafights (the 1987 middleweight showdown between Sugar
Ray Leonard and Marvin Hagler is one example).
craze engulfing poker could pay dividends for Harrahs, which owns
the rights to the World Series of Poker, the granddaddy of
Even with the
expanded arsenal, Harrahs might be hard-pressed to dethrone MGM
alone, the legendary performers U2 and the Rolling Stones and Jimmy
Buffett are coming [to the MGM Grand Garden Arena], McGill
In terms of
entertainment, he said, MGM doesnt take a back seat to
A confluence of
factors -- limited U.S. growth possibilities, state lawmakers
looking to tax their way out of deficits by targeting casinos,
anti-gaming sentiment in some regions -- has led Harrahs and MGM
Mirage to pursue the fertile Asian and European gaming
The Big Two are
among 12 companies competing for two Singapore gaming licenses.
(Las Vegas Sands Corp., owner of the Venetian and the
under-construction Palazzo, has sweetened the pot by promising to
build a casino housing a Guggenheim Hermitage Museum as well as a
monorail system and a cruise-ship terminal).
In Macau, three
hours away by plane, the Las Vegas Sands, which plans to replicate
the Las Vegas Strip on the Cotai Strip, just over a bridge from
central Macau, joins MGM Mirage (its $975 million MGM Grand Macau
is expected to open in 2007) and casino mogul Steve Wynn (his $700
million Wynn Macau will follow in 2008) in a fast-growing market
expected to generate $5 billion this year. Guess whos also
interested in the handful, or less, of casino licenses available in
the U.K.s $4 billion deregulated market? The Las Vegas
buy a U.K. dog track saw the first real direct engagement between
Harrahs and MGM Mirage; neither consummated their bids. Both
companies also bought and then shut down money-losing gambling Web
sites dedicated to U.K. and Continental European
Harrahs is better positioned to grow. Tapping the high-growth
tribal gaming market -- $16.7 billion in revenues in 2003,
according to federal figures -- has generated additional millions
in cash flow.
like to be in most major markets, McGill said, and this is a way to
So whats in store
for gamings Big Two?
Outside of what
the companies release in statements, investor conference calls and
quarterly reports, its anyones guess.
Thompson said MGM
Mirage could go fully high-end, selling properties like Circus
Circus as well as holdings in Laughlin and elsewhere. Harrahs could
embrace luxury but would probably have to ditch its
Caesars is a
better-known brand, Thompson said. Harrahs is like the Wal-Mart or
Kmart of casino companies.
MGM Mirages $5
billion Project CityCenter ups the competitive ante, experts agree.
Set to rise on 66 acres between Bellagio and Monte Carlo and
opening in 2009 or 2010, the $5 billion condo-boutique
hotel-anchored project is essentially a metropolis within a
Harrahs has made
a Stripfront move, too. The August purchase of the 2,640-room
Imperial Palace for $370 million essentially turns the
Flamingo-Strip intersection into Harrahs Avenue.
controls half of the intersection, with Caesars and Ballys and
Paris on the northwest and southeast corners. MGM Mirages Bellagio
is in the southwest corner and Coast Casinos Barbary Coast in the
have enough land now to do something like Project CityCenter, but
it really has improved its Strip holdings, Falcone said.
the reporter who wrote this article, send e-mail to [email protected].
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