At the risk of pumping additional hydrogen into his already zeppelin-sized ego, allow me to suggest that Caesars Entertainment CEO Gary Loveman, PhD. is actually onto something. But first would somebody clue him in that there has been casino gambling in Cleveland‘s storied past. Just not the legal variety. Also, while $350 million might sound like a lot of money to Ohio TV anchors, it’s pocket change compared to what Las Vegas moguls have been spending until recently.
But I digress. Having now proposed Horseshoe-branded casinos in Cleveland, Cincinnati and (unsuccessfully) Philadelphia, Loveman’s actions are starting to jibe with his rhetoric at Global Gaming Expo. His vision of a ubiquitous casino industry (sort of like laundromats, but with slot machines instead of dryers) is coming into focus. Actually, Loveman’s preferred analogy is to fast food chains but we’ve already got that iteration of gambling: They’re called “slot routes” and, considering Caesars’ antipathy toward video-poker players, I strongly doubt that’s the course Loveman envisions himself charting for the rest of the industry.
The choice of a former department store for Caesars/Rock Ventures‘ temporary (perhaps) Cleveland casino may be coincidental but it’s emblematic of a larger overall pattern. It’s even been spoken of as “a model for the rest of the nation.” Loveman is proposing the equivalent of a series of mid- to high-end retailers, “branding” the casino experience as just one more respectable establishment on Main Street, U.S.A. That’s pretty much what he proposed in his G2E speech, although it got lost in a miasma of unrelated, nearly incoherent bloviation.
While this may strip away (pun unintended) much of the glamor or exoticism people associate with the casino experience, Loveman is onto something. Given the rapid spread of the casino industry across the U.S., a certain minimum standard of quality is desirable (and Jack Binion built a considerable Horseshoe fanbase before Harrah’s Entertainment took it over and hooked up the Total Rewards suction hose), lest the industry garner the kind of quick-and-dirty reputation associated with the early days of riverboat and tribal gambling in the Midwest. However, that increasing ubiquity also means a more realistic budgetary outlook.
Casino companies like Penn National Gaming need to stop making pie-in-the-sky revenue promises that later cause resentment when reality manifests itself. In Ohio, Rock Ventures is even worse offender than Penn when it comes to vowing one thing and delivering considerably less — over 50% less, in some categories.
The multi-billion-dollar casino is virtually extinct outside of Las Vegas and ailing considerably within Sin City. One can either build casinos as investment vehicles or $3 billion-plus vanity projects but not both (as Wall Street has been surprisingly slow to acknowledge). Were it not for a comparative dearth of Buckeye State competition, Caesars’ cumulative budget — for temporary and permanent casino alike — of $950 million would cause trepidation. Rivers Casino (left), in Pittsburgh, has been struggling mightily to make its $800 million cost worthwhile. Significantly, in the far more
competitive southern Ohio market, Caesars is only planning to invest an ROI-friendly $400 million. If Las Vegas Sands were to — as it proposed last year — build five $2 billion casinos in Florida, it would probably get a very rude shock when the EBITDA numbers startedcoming back. Sheldon Adelson‘s beached whale of a megaresort in Bethlehem, Pennsylvania (creeping toward 11% ROI but with most of the project still unbuilt), ought to give the industry pause. Ditto the early struggles of SugarHouse, in Philly, which demonstrate that the market there is considerably less elastic than previously thought.
Of course, Loveman and partner Gilbert are stressing how interactive their casinos would be with Cincy and Cleveland with good reason: If they attempted a “capture” business model, opposition in the bidness community would be stiff and strident. Still, by shaking up our notion of what an “anchor tenant” casino is, they’ve given industry and observers alike much fodder for debate.
In the meantime, Rock Ventures’ Steve Rosenthal needs to be told that when he proclaims, “There isn’t a casino in the U.S. that has tried to be welcoming to pedestrians,” he’s talking 125% out of his ass. Perhaps Dr. Loveman could take Rosenthal on a tour of Caesars’ Strip casinos sometimes and, former college prof that he is, give the man some education.
One of these things is not like the others. On the Colosseum-side entrance to Caesars Palace hang three massive portraits: Jerry Seinfeld, Céline Dion and … Cleopatra’s Barge crooner Matt Goss. I have no idea whether Goss’ presence was an outrageous Robin Antin demand to which Caesars submitted but it’s a great way of advertising the casino’s present dearth of headliners. (Unless, that is, you consider Goss a luminary of Seinfeld-like stature, which his cultists seem to do.)
Did someone mention G2E? Numbers from the American Gaming Association‘s fall trade show are in and they corroborate various anecdotal observations by attendees. No mention is made of the number of exhibitors in 2010, obliquely confirming reports that they were fewer in number, but the 2011 show is on track to improve upon last year’s in that respect. Attendance per se was up 4% from 2009 and, as numerous exhibitors testified at the time, the amount of key decision makers who were part of the mix was way up (17%). That’s particularly gratifying to companies displaying at G2E and proved that even the clouds of the Great Recession contain a silver lining.
Loveman may well be onto something here. See, these days, $350M is a lot of money for a casino (note what casinos in AC are going for these days). Also, the strategy of partnering with the community has worked very well in places like New Orleans.
With the opening of the Cleveland and Cinci casinos next year, Caesars becomes the dominant player in the Midwest, with casinos in the Detroit, Chicago, Cleveland, Cincinnati, Louisville and St Louis markets. I’ll be surprised if they can get some synergy out of all these casinos, it looks like market oversaturation to me.
Finally, what happens to places like Tunica, which draws from IL, IN and OH, and Windsor, which draws mainly these days from southern Ontario, but also has a loyal following in the Detroit and northern Ohio markets (in spite of dealing with the hated US Customs in Detroit).
Harrah’s (now Caesars) got into the puzzling habit of gobbling up as many casinos as possible, regardless of location and cannibalization be damned. This has resulted in the closing of Bill’s in Lake Tahoe and in Harrah’s Chester Downs having to use comps to send players back to Atlantic City, which patrons abandoned in favor of Chester.
One of the criticisms I heard of Gary Loveman’s G2E speech is that limited supply works in favor of companies like Harrah’s. (They’re likelier to get what few licenses are available and are better positioned to dictate prices, odds, etc. to the market.) Caesars Windsor has been struggling, so if Horseshoe Cleveland deals it a heavy blow — or if Horseshoe Cincinnati poaches play from its southern Indiana sibling — that would mar Loveman’s vision of a Starbucks-like casino omnipresence.