Harrah’s Entertainment, Inc.
Company Profile
Reference Code: 754
Publication Date: Jan 2007
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Harrah’s Entertainment, Inc.
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HARRAH’S ENTERTAINMENT, INC.
TABLE OF CONTENTS
TABLE OF CONTENTS
Company Overview ....................................................... 4
Key Facts........................................................................ 4
Business Description .................................................... 5
History ............................................................................ 6
Key Employees .............................................................. 9
Major Products And Services..................................... 16
Products And Services Analysis................................ 18
SWOT Analysis ............................................................ 19
Top Competitors .......................................................... 23
Company View ............................................................. 24
Locations and Subsidiaries ........................................ 28
Harrah’s Entertainment, Inc.
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HARRAH’S ENTERTAINMENT, INC.
Company Overview
COMPANY OVERVIEW
Harrah’s Entertainment (Harrah’s) is a casino-entertainment provider, which conducts
its business through a wholly owned subsidiary, Harrah’s Operating Company. The
company owns or manages 39 casinos in the US, a combination greyhound-racing
facility and casino, and a combination of thoroughbred racetrack and casino. Its
facilities also include hotel and convention space, restaurants and non-gaming
entertainment facilities. The company is headquartered in Las Vegas, Nevada and
employs about 85,000 people.
The company recorded revenues of $7,111 million during the fiscal year ended
December 2005, an increase of 56.3% over 2004. The operating profit of the company
was $979.7 million during fiscal year 2005, an increase of 23.8% over 2004. The net
profit was $236.4 million in fiscal year 2005, a decrease of 35.7% over 2004.
KEY FACTS
Head Office
Harrah’s Entertainment, Inc.
1 Harrah’s Court
Las Vegas
NV 89119
United States
Phone
+1 702 407 6000
Fax
+1 702 407 6037
Web Address
http://www.harrahs.com
Revenues/turnover
7111
(US$ Mn)
Financial Year End
December
Employees
85000
SIC Codes
SIC 7011 Hotels and Motels
NAICS Codes
72111, 72112, 721191, 721199
New York Ticker
HET
Harrah’s Entertainment, Inc.
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HARRAH’S ENTERTAINMENT, INC.
Business Description
BUSINESS DESCRIPTION
Harrah’s Entertainment (Harrah’s) is one of America’s leading casino firms. It
conducts its business through its wholly owned subsidiary, Harrah’s Operating
Company and its subsidiaries. The company operates under the Harrah´s, Caesars,
Harveys, Rio, and Showboat brand names. Its operations are divided geographically
as Western US, Eastern US, North Central US, South Central US and other.
The company’s operations in Western US include Harrah’s Reno, Harrah’s/Harveys
Lake Tahoe, Bill’s, Harrah’s Las Vegas, Rio, Harrah’s Laughlin, Caesars Palace,
Paris, Bally’s Las Vegas, Flamingo Las Vegas, Reno Hilton, Flamingo Laughlin and
Imperial Palace.
In Eastern US, the company operates Harrah’s Atlantic City, Showboat Atlantic City,
Caesars Atlantic City and Bally’s Atlantic City.
In North Central US, the company operates the Harrah’s Joliet, Harrah’s North
Kansas City, Harrah’s Council Bluffs, Bluffs Run, Harrah’s St. Louis, Harrah’s
Metropolis, Horseshoe Hammond and Caesars Indiana properties.
In South Central US, the company operates the Harrah’s Lake Charles, Harrah’s New
Orleans, Harrah’s Louisiana Downs, Horseshoe Bossier City, Horseshoe Tunica,
Grand Tunica, Sheraton Tunica, Grand Biloxi and Grand Gulfport properties. Some of
these casinos were forced to close down temporarily due to the damage inflicted by
Hurricanes Katrina and Rita in September 2005.
The other properties that Harrah’s operate include Harrah’s Ak-Chin, Harrah’s
Cherokee, Harrah’s Prairie Brand, Harrah’s Rincon, Punta del Este in Uruguay and
Windsor. The company also operates casinos on board the cruise ships S.S. Crystal
Symphony and S.S. Crystal Serenity.
The company derives its revenues primarily from company owned casinos, other
casinos that are managed by the company, and racetracks including Turfway Park,
Bluegrass Downs, a racetrack located in Paducah, Kentucky, and Louisiana Downs, a
thoroughbred racetrack in Bossier City, Louisiana.
Altogether, Harrah’s Entertainment operates its business in a total of over 3.3 million
square feet of casino space, 2,971 table games, 74,050 slot machines and over
42,060 hotel rooms.
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HARRAH’S ENTERTAINMENT, INC.
History
HISTORY
The Harrah’s brand was established in Reno, Nevada in the late 1930s, and has since
grown to become the largest casino entertainment company in North America.
In 1937, Bill Harrah opened his first parlor in Reno, Nevada. Due to the success of the
first establishment, he then opened Harrah’s club at its present location in downtown
Reno in 1946. In the 1950s the company purchased several clubs at Lake Tahoe in
Stateline, Nevada.
The company began public trading in 1970 with an issue of 450,000 over-the-counter
shares and one year later Harrah’s got listed on the American Stock Exchange. By
1973 Harrah’s was the first casino to be listed on the New York Stock Exchange.
In 1978, the Board of Holiday Inns approved a proposal to build and operate a hotel/
casino in the marina area of Atlantic City, and in 1980, Holiday Inns acquired Harrah’s
hotel casino company. At that time, Holiday Inn had 1,600 hotels and interests in two
casinos.
In 1985, Holiday Inns shareholders approved a new corporate name, Holiday
Corporation. The new Umbrella organization reflected the growing diversity of the
company’s products: Harrah’s casinos, Holiday Inn Hotels, Embassy Suite Hotels and
Hampton Inn Hotels. In 1989 Holiday’s Corporation approved the transfer of the
Holiday Inn hotel business to Bass, spinning-off Holiday Corporation’s remaining
brands and assets into the Promus Companies.
The Promus Companies spun-off its hotel brands into a new corporation in the middle
of 1995. The remaining company, which comprised Harrah’s brand, all of Harrah’s
assets and a majority of the Promus headquarters and people, was then renamed
Harrah’s Entertainment, returning Harrah’s to the NYSE for the first time in 15 years.
During 1999, the company grew further with the acquisition of Rio Hotel & Casino.
This complemented its Strip Casino. The company also opened Harrah’s New
Orleans in that year, the only land based casino in the city.
On the international front, the company sold its interests in the Star City Casino in
Sydney, in 2000, to Tabcorp Holdings. In the US, it also sold Showboat Hotel & Casino
to VSS Enterprises.
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HARRAH’S ENTERTAINMENT, INC.
History
The company continued to acquire new casinos in 2001 with the purchase of Harveys
Casino Resorts. This added the Harveys Resort & Casino in Lake Tahoe, Nevada, the
Harveys Casino Hotel and the Bluffs Run Casino to its portfolio.
Harrah’s Entertainment acquired Wagon Wheel in 2001 as part of its acquisition of
Harveys Casino Resorts. Located 40 miles west of Denver, the property has 118 hotel
rooms, 1,055 slot machines and 22 table games.
In 2003, the company signed an agreement to acquire Horseshoe Gaming Holding, a
leading operator of casino’s in Hammond, Indiana, Tunica, Mississippi, and
Shreveport-Bossier City, Louisiana, for $1.45 billion.
In 2004 the company signed a definitive agreement to purchase Binion’s Horseshoe
Hotel & Casino in downtown Las Vegas. Later in February 2004 the company
announced plans to jointly operate the property with MTR Gaming Group.
In March 2004, Harrah’s announced that Speakeasy Gaming of Fremont, a wholly
owned subsidiary of MTR Gaming Group, had completed the purchase of Binion’s
Horseshoe Hotel & Casino in downtown Las Vegas. In conjunction with the MTR
transaction, Harrah’s acquired rights to the Horseshoe brand in Nevada and to the
World Series of Poker.
Harrah’s announced in June 2004 that it had recently paid about $73 million to an
Iowa West Racing Association affiliate as an additional purchase price consideration
for the Bluffs Run Casino. The company acquired Bluffs Run Casino, a greyhound
racing facility in Council Bluffs, Iowa, as part of the 2001 Harveys Casino Resorts
acquisition.
Harrah’s announced in July 2004 that it had completed its acquisition of Horseshoe
Gaming Holding. With the acquisition, Harrah’s added to its portfolio Horseshoe
properties in Hammond, Indiana, Bossier City, Louisiana and Tunica, Mississippi.
Also, the company confirmed its intention to acquire Caesars Entertainment in a cash
and stock transaction that would be the largest in gaming-industry history. The total
transaction value, including assumption of Caesars debt, would be approximately
$9.44 billion. The transaction was completed in June 2005. In September 2004 the
company announced it was to sell four casinos: Harrah’s East Chicago, Harrah’s
Tunica, Atlantic City Hilton and Bally’s Tunica to an affiliate of Colony Capital.
During 2005, the company acquired the Imperial Palace, and parcels of land near the
company’s properties on the Las Vegas Strip. In April 2005, the company completed
the sale of Harrah’s East Chicago and Harrah’s Tunica for a sales price of
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HARRAH’S ENTERTAINMENT, INC.
History
approximately $627 million, and Caesars sold its Atlantic City Hilton and Bally’s
Tunica properties for a sales price of approximately $612 million. Caesars entered into
an agreement to sell the Reno Hilton for $150 million in May 2005. In November 2005,
the company agreed to sell the Flamingo Laughlin hotel and an undeveloped land
parcel in Atlantic City for $170 million. The company signed a definitive agreement
with El Reino de Don Quijote de La Mancha in November 2005 to develop a Caesars
casino resort in Ciudad Real, Spain.
In November 2005, the company signed a letter of intent to form a joint venture with
Baha Mar Resorts and Starwood Hotels and Resorts Worldwide to create a mixed-use
property in Nassau, Bahamas. The proposal includes a Caesars Resort Hotel and
Casino. In the same month, the company signed a memorandum of understanding
with the Hit Group to form a joint venture to develop a casino resort and hotel in Nova
Gorica, Slovenia on the border of Italy. The company completed the acquisition of the
Imperial Palace Hotel & Casino in Las Vegas for approximately $370 million in
December 2005. Also, the company entered into a memorandum of understanding to
form a joint venture with Keppel Land Investment for an integrated resort in the
Republic of Singapore.
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HARRAH’S ENTERTAINMENT, INC.
Key Employees
KEY EMPLOYEES
Name
Gary W. Loveman
Job Title
Board
Chairman, Chief Executive
Executive Board
Compensation
Officer and President
Barbara T. Alexander
Director
Non Executive Board
Charles L. Atwood
Director
Non Executive Board
Frank J. Biondi
Director
Non Executive Board
Stephen F. Bollenbach
Director
Non Executive Board
Ralph Horn
Director
Non Executive Board
R. Brad Martin
Director
Non Executive Board
Gary G. Michael
Director
Non Executive Board
Robert G. Miller
Director
Non Executive Board
Boake A. Sells
Director
Non Executive Board
Christopher J. Williams
Director
Non Executive Board
Tim Wilmott
Chief Operating Officer
Senior Management
Tim Stanley
Senior Vice President and
Senior Management
Chief Information Officer
Anthony Sanfilippo
President, Central Division
Senior Management
Carlos Tolosa
President, Eastern Division
Senior Management
Tom Jenkin
President, Western Division
Senior Management
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HARRAH’S ENTERTAINMENT, INC.
Key Employee Biographies
KEY EMPLOYEE BIOGRAPHIES
Gary W. Loveman
Board: Executive Board
Job Title: Chairman, Chief Executive Officer and President
Since: 2003
Mr. Loveman has been a Director since 2000; Chief Executive Officer since January
2003, President since April 2001 and Chief Operating Officer from 1998 to 2003. he
has also been member of the Office of the President from May 1999 to April 2001,
Executive Vice President from May 1998 to May 1999, Associate Professor of
Business
Administration,
Harvard
University
Graduate
School
of
Business
Administration from 1994 to 1998 and Director of Coach, a designer and marketer of
handbags and accessories.
Barbara T. Alexander
Board: Non Executive Board
Job Title: Director
Since: 2002
Ms. Alexander, an independent consultant, was Senior Advisor for UBS Warburg, an
investment banking firm, from October 1999 to January 2004. She was a Managing
Director of Dillon Read & Co, an investment banking firm, and successor companies
from January 1992 until October 1999. She is also a Director of Centex Corporation, a
building and related services company, and of Burlington Resources, an independent
oil and gas company. Ms. Alexander has been a Director of the company since
February 2002. She is a member of the Audit Committee.
Charles L. Atwood
Board: Non Executive Board
Job Title: Director
Since: 2005
Mr. Atwood has served as Senior Vice President and Chief Financial Officer since
2001, Treasurer from October 1996 to November 2003 and Vice President from
October 1996 to April 2001. He has also served as Director of Equity Residential, an
owner and operator of multi-family properties since July 2003.
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HARRAH’S ENTERTAINMENT, INC.
Key Employee Biographies
Frank J. Biondi
Board: Non Executive Board
Job Title: Director
Since: 2002
Mr. Biondi is Senior Managing Director of WaterView Advisors, a private equity fund
specializing in media. He has held this position since June 1999. He was Chairman
and Chief Executive Officer of Universal Studios from April 1996 through November
1998 and President and Chief Executive Officer of Viacom from 1987 through 1996.
He is also a Director of The Bank of New York Company (a financial holding company
and provider of banking and financial services), Amgen (a biotechnology company),
Hasbro (a developer of children’s and family leisure time entertainment products) and
Vail Resorts, a mountain resort operator. He has been a Director of the company since
2002.
Stephen F. Bollenbach
Board: Non Executive Board
Job Title: Director
Mr. Bollenbach has been Co-Chairman of the Board and Chief Executive Officer of
Hilton Hotels Corporation, a hotel and hospitality company, since May 2004, and was
its Chief Executive Officer and President from February 1996 to May 2004. He was
also a Director and Chairman of Caesars Entertainment from 1998 until the effective
date of its merger with the company. He is also a Director of Time Warner, a media
and entertainment company. He is a member of the Audit Committee.
Ralph Horn
Board: Non Executive Board
Job Title: Director
Since: 1995
Mr. Horn, a private investor, was Chairman of First Tennessee National Corporation, a
banking corporation, from 1996 until 2003. He was a Director of that company from
1991 to 2003 and was its Chief Executive Officer from 1994 to 2002, its President
from 1991 to 2002, and its Chief Operating Officer from 1991 to 1994. He is also a
Director of Gaylord Entertainment Company, a hospitality and entertainment company,
and Mid-America Apartment Communities, an umbrella partnership real estate
investment trust. He has been a Director of the company since July 1995. He is a
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HARRAH’S ENTERTAINMENT, INC.
Key Employee Biographies
member
of the Human Resources
and Nominating/Corporate Governance
Committees.
R. Brad Martin
Board: Non Executive Board
Job Title: Director
Since: 1996
Mr. Martin has been Chairman and Chief Executive Officer of Saks Incorporated
(formerly Proffitt’s), a retail department store company, since 1989. He is also a
Director of First Tennessee National Corporation, a banking corporation. Mr. Martin
has been a Director of the company since 1996. He is a member of the Executive
Committee, and from 1996 to 2004, he was a member of the Human Resources
Committee.
Gary G. Michael
Board: Non Executive Board
Job Title: Director
Since: 2001
Mr. Michael, a private investor, has been serving as interim President of the University
of Idaho since 2003. He was Chairman and Chief Executive Officer of Albertsons, a
grocery supermarket company, from 1991 to 2001. He is also a Director of Questar
(an energy development company), Boise Cascade Corporation (a forest products
company), IDACORP (an energy company) and The Clorox Company (a household
products manufacturing company). Mr. Michael has been a Director of the company
since November 2001. He is a member of the Audit Committee.
Robert G. Miller
Board: Non Executive Board
Job Title: Director
Since: 1999
Mr. Miller is Chairman of Rite-Aid, a retail pharmacy chain, a position he has held
since 1999. He was Chief Executive Officer of that company from 1999 to 2003. He
was Vice Chairman and Chief Operating Officer of The Kroger Company, a grocery
supermarket company, from May 1999 until December 1999, Vice Chairman and
Chief Executive Officer of Fred Meyer, a grocery supermarket company, from 1998 to
1999, and Chairman and Chief Executive Officer of Fred Meyer from 1991 to 1998.
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HARRAH’S ENTERTAINMENT, INC.
Key Employee Biographies
He has been a Director of the company since 1999 and is a member of the Human
Resources and Nominating/Corporate Governance Committees.
Boake A. Sells
Board: Non Executive Board
Job Title: Director
Since: 1990
Mr. Sells, a private investor, was Chairman and Chief Executive Officer of Revco DS,
a retail pharmacy chain, from 1987 to 1992 and was President of that company from
1988 to 1992. He has been a Director of the company since 1990. He is a member of
the
Executive,
Human
Resources
and
Nominating/Corporate
Governance
Committees.
Christopher J. Williams
Board: Non Executive Board
Job Title: Director
Since: 2003
Mr. Williams has been Chairman and Chief Executive Officer of Williams Capital
Group, an investment bank, since 1994, and Chairman and Chief Executive Officer of
Williams Capital Management, an investment management firm, since 2002. He is
also a Director of The Partnership for New York City, the National Association of
Securities Professionals, and the Securities Industry Association. He has been a
Director of the Company since 2003 and in 2004, he became a member of the Audit
Committee.
Tim Wilmott
Board: Senior Management
Job Title: Chief Operating Officer
Since: 2003
Mr. Wilmott is Chief Operating Officer of Harrah’s Entertainment. In 1992, Mr. Wilmott
was named Vice President and General Manager of Harrah’s Joliet, the company’s
first riverboat casino operation. Three years later, he was appointed President and
General Manager of Harrah’s Atlantic City. His performance ultimately resulted in his
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HARRAH’S ENTERTAINMENT, INC.
Key Employee Biographies
being promoted to President of Harrah’s Eastern Division, a role he assumed in 1997.
He was subsequently appointed Chief Operating Officer in 2003.
Tim Stanley
Board: Senior Management
Job Title: Senior Vice President and Chief Information Officer
Mr. Stanley is Senior Vice President and Chief Information Officer of Harrah’s
Entertainment. He has been Vice President of Information Technology and Chief
Information Officer from 2003 to 2004, Vice President of Information Technology from
2001 to 2003 and Managing Partner of Las Vegas, for USWeb Corporation, an eBusiness consulting firm since acquired by marchFIRST from 1999 to 2001. He has
also served as Vice President of Information Technology, National Airlines, from
August 1998 to January 2000.
Anthony Sanfilippo
Board: Senior Management
Job Title: President, Central Division
Since: 1997
Mr. Sanfilippo is the President of the Central Division of Harrah’s Entertainment. Mr.
Sanfilippo joined the company in 1983 as an accountant. He moved into operations in
1984, and in 1994 he was promoted to serve as General Manager for the opening of
Harrah’s former property in Shreveport. Mr. Sanfilippo has been a division President
since 1997.
Carlos Tolosa
Board: Senior Management
Job Title: President, Eastern Division
Mr. Tolosa is President of the Eastern Division of Harrah’s Entertainment. Mr. Tolosa
began his career with the company in 1971 and held various management positions
with Holiday Inns, a former parent company of Harrah’s Entertainment. In 1993, Mr.
Tolosa rose to the position of Chief Operating Officer and Senior Vice President of
Operations for Embassy Suites Hotels, a division of Promus Hotels, also a former
parent company of Harrah’s Entertainment. A year later, he assumed the role of
Division President for Harrah’s Indian Gaming, overseeing properties in several US
states.
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HARRAH’S ENTERTAINMENT, INC.
Key Employee Biographies
Tom Jenkin
Board: Senior Management
Job Title: President, Western Division
Since: 2004
Mr. Jenkin is President of Harrah’s Entertainment’s Western Division. Mr. Jenkin
joined the company in 1975 as a fry cook at Harrah’s Las Vegas. In 1993, he was
promoted to Senior Vice President and General Manager of Harrah’s Laughlin, and
five years later, he was named Senior Vice President and General Manager of
Harrah’s Las Vegas. Mr. Jenkin assumed oversight of the Rio and Harrah’s Laughlin
in 2001 and 2002, respectively, before being named to his current position in January
2004.
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HARRAH’S ENTERTAINMENT, INC.
Major Products And Services
MAJOR PRODUCTS AND SERVICES
Harrah’s Entertainment (Harrah’s) is one of America’s leading casino firms. It
conducts its business through its wholly owned subsidiary, Harrah’s Operating
Company and its subsidiaries. The company’s services include:
Western US
Harrah’s Reno
Harrah’s/Harveys Lake Tahoe
Bill’s, Harrah’s Las Vegas
Rio, Harrah’s Laughlin
Caesars Palace
Paris, Bally’s Las Vegas
Flamingo Las Vegas
Reno Hilton
Flamingo Laughlin
Imperial Palace
Eastern US
Harrah’s Atlantic City
Showboat Atlantic City
Caesars Atlantic City
Bally’s Atlantic City
North Central US
Harrah’s Joliet
Harrah’s North Kansas City
Harrah’s Council Bluffs
Bluffs Run
Harrah’s St. Louis
Harrah’s Metropolis
Horseshoe Hammond
Caesars Indiana
South Central US
Harrah’s Lake Charles
Harrah’s New Orleans
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HARRAH’S ENTERTAINMENT, INC.
Major Products And Services
Harrah’s Louisiana Downs
Horseshoe Bossier City
Horseshoe Tunica
Grand Tunica
Sheraton Tunica
Grand Biloxi
Grand Gulfport
Managed Casinos
Ak-Chin
Cherokee
Topeka
Bluffs Run
Rincon
Racetracks:
Turfway Park
Bluegrass Downs
Louisiana Downs
Other businesses:
Casino hotels
Dockside casinos
Riverboat casinos
Indian gaming establishments
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HARRAH’S ENTERTAINMENT, INC.
Products And Services Analysis
PRODUCTS AND SERVICES ANALYSIS
The company recorded revenues of $7,111 million during the fiscal year ended
December 2005, an increase of 56.3% over 2004. The company generates most of its
revenues from the US.
Harrah’s Entertainment generates revenues through five revenue streams: casino
(71.7% of the total revenues during fiscal year 2005), food and beverage (13%),
rooms (9.4%), other (5) and management fees (0.9%).
Revenues by Division
During the fiscal year 2005, the casino division recorded revenues of $6,071.5 million,
an increase of 48.9% over 2004.
The food and beverage division recorded revenues of $1,097.5 million in fiscal year
2005, an increase of 64.9% over 2004.
The rooms division recorded revenues of $791.8 million in fiscal year 2005, an
increase of 103% over 2004.
The other division recorded revenues of $425.9 million in fiscal year 2005, an increase
of 96.1% over 2004.
The management fees division recorded revenues of $75.6 million in fiscal year 2005,
an increase of 24.8% over 2004.
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HARRAH’S ENTERTAINMENT, INC.
SWOT Analysis
SWOT ANALYSIS
Harrah’s Entertainment (Harrah’s) is a casino-entertainment provider, which through a
wholly owned subsidiary, Harrah’s Operating Company. The company is one of the
biggest gaming companies in the world. Harrah’s strong brand name have helped it
become one of the largest and most diversified casino networks in the US. Intense
competition, however, threatens to reduce the company’s market share and
profitability.
Strengths
Weaknesses
Strong revenue growth
Reduction in margins
Strong brand name
Presence restricted to North America
Successful distribution strategy
Overdependence on casino business
Opportunities
Threats
High entry barriers
Intense competition
Entry in to ’racino’ market
Legal and regulatory environment
Expansion plans
Online gaming
Strengths
Strong revenue growth
The company’s revenues have been increasing consistently in the last few years. Its
total revenues increased from $3,948.9 million in fiscal 2003 to $7,111 million in fiscal
2005. Revenues from the company’s casino, food and beverage, rooms, management
fees and other revenue streams increased by 48.9%, 64.9%, 103%, 24.8% and
96.1% respectively from fiscal 2004 to fiscal 2005. A steady increase in revenues
across all of the company’s business streams indicates that it has been able to
strengthen its market position.
Strong brand name
Harrah’s strong brand name has enabled it to become one of the largest and most
diversified casino networks in the US. Harrah’s Entertainment is one of the most
recognized names in the casino entertainment industry and it is the world’s third
largest gaming company. The company’s success is largely due to its focus on
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HARRAH’S ENTERTAINMENT, INC.
SWOT Analysis
enhancing financial strength, customer relationship management, and adaptability to
changing regulations. The company’s strong brand increases its bargaining leverage
and gives it a competitive advantage.
Successful distribution strategy
Harrah’s Entertainment derives strength from its well-distributed business operations
across markets. The company has 26 properties across 13 states in the US, which
has been shielding the company against any volatility in any single market. This has
also helped the company to create and profitably use its nationwide customer
database.
Weaknesses
Reduction in margins
Despite a strong revenue growth, the company’s operating margins have reduced
from 18.9% in fiscal 2002 to 13.8% in fiscal 2005. The company’s operating margin for
the period 2001-2005 was 16.1%, significantly lower than the industry average of
19.4% for the same period. Reducing operating margins indicate increasing costs and
can adversely affect the long term financial position of the company.
Presence restricted to North America
Harrah’s Entertainment has its presence highly centered on the US market. Apart
from the Conrad Resort and Casino located in Punta Del Este, Uruguay, most of the
company’s operations are within the US. Any volatility in the US market could have an
adverse impact on its business.
Overdependence on casino business
Though the company is into casino entertainment and an accompanying hotel
business, the contribution of the casino business has consistently generated more
than 70% of its total revenues. In 2005, 2004 and 2003, the casino business
generated 71.7%, 75.4% and 74.3% of the company’s total revenues respectively.
Dependence on the casino business, which in itself is highly regulated and
competitive, can prove to be a significant competitive disadvantage of the company.
Opportunities
High entry barriers
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HARRAH’S ENTERTAINMENT, INC.
SWOT Analysis
Legal gambling is permitted only in certain states of the US. Furthermore, only a
limited number of licenses are issued. This makes it difficult for any new player to
meet the requirements to get a license. Also, any entry into this market would require
high capital investment. This opens up significant possibilities for major players like
Harrah’s Entertainment who are well positioned to take advantage of any further
legalization of casino gaming.
Entry in to ’racino’ market
Harrah’s entry into the ’racino’ market (combination of horse racing tracks and
traditional casinos) is likely to offer high growth prospects for the company. In this
regard, it has purchased Louisiana Downs, a racetrack located outside Shreveport,
and is set to acquire more such properties. The combination will enable Harrah’s to
earn additional revenues and expand its brand recognition.
Expansion plans
Harrah’s has made plans for geographical expansion. Its expansion plans involve joint
ventures with different companies to open a Caesars casino resort in Ciudad Real,
Spain; a mixed-use property in Nassau, Bahamas which would include a Caesars
Resort Hotel and Casino and a casino resort and hotel in Nova Gorica, Slovenia on
the border of Italy. The company has also planned to open an integrated resort in the
Republic of Singapore. These expansion plans, if successful, would provide Harrah’s
with considerable opportunities to expand outside the US, where it currently has
limited presence.
Threats
Intense competition
Given the restricted number of markets, major players in the casino industry are
constantly reinvesting in their existing markets in order to strengthen their market
position. Consequently, supply has surpassed demand leading to increased
competition. Competition in the industry is also driven by the growth of other
entertainment options (substitutes) such as racing and non-gaming resorts.
Legal and regulatory environment
Harrah Entertainment’s primary threat is the legal and regulatory environment. Any
change in regulations, laws, and procedure with regard to casino operations can have
adverse effects on the company’s business. The casino industry represents a
significant source of tax income for the various jurisdictions in which casinos operate.
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HARRAH’S ENTERTAINMENT, INC.
SWOT Analysis
Any changes in tax laws or tax rates can significantly affect the company’s financial
position.
Online gaming
The market for online gaming is growing rapidly. With the increasing popularity and
penetration of the internet, this market, which accounted for $15 billion in fiscal 2001,
nearly doubled to reach more than $30 billion in fiscal 2005. The US is the biggest
market for online gaming. In the US, online gaming has grown at a CAGR of 21% from
2001 to 2005. The popularity and growth in demand for online gaming can be a
significant threat to the company going forward.
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HARRAH’S ENTERTAINMENT, INC.
Top Competitors
TOP COMPETITORS
The following companies are the major competitors of Harrah’s Entertainment, Inc.:
American Skiing Company
Bally Technologies, Inc
MGM MIRAGE
Trump Entertainment Resorts, Inc.
Aztar Corporation
Pinnacle Entertainment, Inc.
Six Flags Inc.
Churchill Downs Incorporated
Isle of Capri Casinos, Inc.
Berjaya Sports Toto Berhad
Ameristar Casinos, Inc.
MTR Gaming Group
Lakes Entertainment, Inc
Penn National Gaming, Inc.
TABCORP HOLDINGS LTD
President Casinos, Inc.
Magnum Corporation Bhd
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HARRAH’S ENTERTAINMENT, INC.
Company View
COMPANY VIEW
An excerpt of a statement by Gary W. Loveman, Chairman, Chief Executive Officer
and President of Harrah’s Entertainment is given below. The statement has been
taken from the company’s 2005 annual report.
Harrah’s Entertainment’s $9.3 billion acquisition of Caesars Entertainment, Inc. on
June 13, 2005, capped our transformation into the world’s largest gamingentertainment company.
It was a significant milestone, to be sure, but as you might expect from an
organization in constant forward motion, Harrah’s was focused far less on the
transaction’s historic aspect than on its implications for the future.
For us, the Caesars acquisition marked the outset of a new era, one in which we will
harness the power of several unique assets to redefine the nature and scope of what
a gaming-entertainment company can be. Those assets include peerless brand and
property portfolios, financial strength built through consistently high-performing
operations, a growing network of international relationships, and the estimable talents
of more than 85,000 employees, who deserve credit for all of the foregoing.
The new era began auspiciously. Between June and December, our company made
substantial progress toward fusing two corporate cultures and extending Harrah’s
internationally recognized business-intelligence systems to former Caesars locations.
At the same time, we were able to sustain healthy revenue and earnings growth,
initiate master-planning efforts for our concentration of properties in both Las Vegas
and Atlantic City, and begin establishing Harrah’s as a truly global entertainment
concern through a series of major international-development announcements.
The year’s operating results offered solid proof of our ability to manage these many
undertakings for investors’ benefit. For fiscal 2005, revenues climbed to $7.1 billion, a
56.3 percent increase over the previous year’s total, while adjusted income from
continuing operations grew 50.6 percent, to $516.6 million, from $343.1 million a year
earlier. For the full year, property earnings before interest, taxes, depreciation and
amortization, or EBITDA a common performance gauge in our industry, though not a
Generally Accepted Accounting Principles measurement increased to $1.9 billion, up
59.7 percent from $1.2 billion in 2004. It should be noted that our results for 2005
included contributions from the Caesars business only after the June 13, 2005,
acquisition date.
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HARRAH’S ENTERTAINMENT, INC.
Company View
The strong stockholder returns Harrah’s has delivered since 1998 are largely
attributable to our customer loyalty strategy, whose success is apparent in our
performance on two key measures: same-store sales growth and cross-market play,
which rose 8.8 percent and 18.0 percent in 2005, respectively.
RISING TO THE OCCASION
Though their impact on our overall financial picture was manageable, the losses
Harrah’s has sustained as a result of Hurricanes Katrina and Rita were not merely
monetary. And while the results reported above are the ones investors rightly focus on
when assessing our value, the measure of Harrah’s worth as a company was more
fully illustrated by the massive relief and recovery effort spearheaded by our
employees after the storms left thousands of their coworkers homeless.
Even before the hurricanes made landfall, our organization had vaulted headlong into
recovery mode. We quickly established makeshift emergency shelters at several of
our properties and launched regional aid centers delivering everything from primary
health-care services to housing and transportation assistance. Employees were
immediately informed that their pay and benefits would continue for 90 days, and that
Harrah’s would offer priority processing status and relocation assistance to those who
wished to transfer to other company properties.
More than 700 of our nearly 9,000 displaced employees took advantage of the
opportunity to remain within the Harrah’s system. The Harrah’s Employee Recovery
Fund, meanwhile, seeded with a $1 million grant from the Harrah’s Foundation in
September, had amassed more than $4 million in donations within four months thanks
to the overwhelming generosity of our employees, vendors, business partners,
customers and an additional $500,000 gift from the Foundation. And on Feb. 20,
2006, three legendary performers we are proud to call members of our extended
Harrah’s family Celine Dion, Elton John and Jerry Seinfeld magnanimously staged a
benefit concert at the Colosseum at Caesars Palace that added $2.1 million to the
pool of aid available to employees hardest-hit by the storms.
FORGING AHEAD IN THE GULF COAST
In the weeks and months following the hurricanes, our company was repeatedly
asked whether Harrah’s would maintain its presence in New Orleans and Mississippi.
But our commitment was never in doubt. We believe the Gulf Coast’s viability as a
tourist destination is beyond dispute, and we are determined to be part of its economic
revival. To that end, following several months of rehabilitation,
Harrah’s New Orleans reopened with 1,500 employees on Feb. 17, 2006, and both
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HARRAH’S ENTERTAINMENT, INC.
Company View
the local show of support and initial customer traffic gave us every reason to anticipate
that the city will ultimately regain its status as one of the nation’s most unique and
dynamic tourism centers. The massive destruction at our Gulfport and Biloxi
properties, however, left Harrah’s with a more difficult choice to make. In the end, we
elected to sell our remaining assets in Gulfport and concentrate our efforts in Biloxi,
where the Mississippi state legislature’s decision to permit shore-based gaming has
given us the opportunity to build an entertainment showplace whose amenities will
surpass anything currently offered on the Gulf Coast. We intend to share details about
our plans for the Biloxi development by mid-2006.
MORE PLACES TO PLAY; MORE (AND BETTER) REASONS TO PLAY THERE
Choosing to rebuild selectively along the Gulf Coast is consistent with one of Harrah’s
defining business strategies: maintaining and expanding our industry’s most
geographically diverse distribution network, which today comprises nearly 40 casino
properties in three countries. The wisdom of that strategy was never more evident
than in the aftermath of the hurricanes, when we were able to continue posting strong
operating results companywide, even with an entire region’s properties out of
commission. While offering customers more places to play lends Harrah’s a decisive
advantage over our competition, giving those customers more and better reasons to
consolidate their play with us is what set the stage for the remarkable growth we have
undergone since the late 1990s. By establishing our core Harrah’s, Caesars
and Horseshoe casino brands among the industry’s best-recognized and mostrespected, and by supporting that branding effort with peerless customer service, we
have created powerful incentives for customers to patronize our casinos rather than
others’, and to spend a greater percentage of their allotted gaming-entertainment
budget at Harrah’s when they visit. The fourth quarter of 2005, incidentally, was the
20th straight in which Harrah’s posted year-over-year improvements in customer
satisfaction survey scores, a measurement that correlates positively with customer
revenue growth.
The foundation of our loyalty-building efforts is Total Rewards, the pioneering tieredcard program Harrah’s developed in the 1990s, which today boasts nearly 40 million
members, and nearly 8 million active members. The relationship-marketing and other
business-intelligence capabilities fueled by Total Rewards are constantly bringing us
closer to our customers so we better understand their preferences, and from that
understanding we are able to improve the entertainment experiences we offer
accordingly. At about the time this report reaches your mailbox, Harrah’s will be rolling
out the next generation of Total Rewards, which will extend the program to all former
Caesars Entertainment properties. We expect this initiative to play a pivotal role in
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HARRAH’S ENTERTAINMENT, INC.
Company View
enabling Harrah’s to reach the first-year synergy target we had projected prior to the
acquisition’s close. But that figure pales next to the long-term revenue-building
implications of making Total Rewards a mainstay at all our properties. With this move,
we will be able to provide our customers with an unprecedented degree of freedom to
visit Harrah’s-owned casinos anywhere in the country, to collect and use their Reward
Credits wherever and whenever they choose, and to enjoy the same personal, highquality service they customarily receive at their hometown casino. For gaming
enthusiasts, this amounts to an embarrassment of riches. For Harrah’s, the
possibilities are no less promising.
Speaking of great promise, the World Series of Poker, another of the jewels in our
brand portfolio, continued to gather steam in 2005. The WSOP is the world’s richest
and most prestigious poker event, and media coverage, number of entrants and prize
money all have doubled since Harrah’s acquired the brand in 2004. Moreover, the
2005-2006 circuit schedule now comprises 12 events, up from five in 2004-05. At the
same time, the World Series of Poker has spawned numerous merchandising tie-ins,
from an exclusive alliance with AOL to Activision’s WSOP-branded video game, which
racked up sales of nearly 500,000 units during this past holiday season. Retailers
have already placed orders for 1.5 million units of the second-generation edition,
which is due to arrive later in 2006. Given the brand’s high visibility and rampant
popularity, we believe the WSOP holds the potential to make significant contributions
to the company’s bottom-line in the not-too distant future.
A FINAL WORD OF THANKS
If the range and volume of activity I have described here sounds like a heavy load for
any company to shoulder, then you have some sense of exactly how hard Harrah’s
employees were charging throughout
2005. My 85,000 colleagues greeted both the best and worst of times with the same
unflagging determination to triumph, and I am profoundly grateful for their efforts.
Their performance this past year gives me great confidence in our ability to chart bold
new territory in the gaming entertainment business. Ultimately, I believe that 2005’s
successes, resounding though they were, offer just a taste of what our company will
accomplish during this new phase in our evolution. Because for all the changes
Harrah’s has undergone over the course of the past year, we have never lost sight of
what truly matters: bringing innovative, high quality gaming entertainment to millions
of guests around the world while maintaining our company’s longstanding reputation
for responsibility and integrity. I believe that the combination of focus, talent and great
assets will prove to be powerful and sustainable for many years to come.
Harrah’s Entertainment, Inc.
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HARRAH’S ENTERTAINMENT, INC.
Locations and Subsidiaries
LOCATIONS AND SUBSIDIARIES
Head Office
Harrah’s Entertainment, Inc.
1 Harrah’s Court
Las Vegas
NV 89119
United States
P: 1 702 407 6000
F: 1 702 407 6037
www.harrahs.com
Other Locations and Subsidiaries
Rio Hotel & Casino, Inc.
Harrah´s Tunica
3700 W. Flamingo Road
1100 Casino Strip Blvd
Las Vegas
Robersonville
NV 89103
MS 38664
United States
United States
P: 1 702-252-7777
P: 1 662 363 7777
F: 1 702-252-7633
www.playrio.com
Harrah´s Joliet
Harrah´s Prairie Band
151 N. Joliet Street
12305 150th Road
Joliet
Mayetta
IL 60432
KS 66509
United States
United States
P: 1 815 740 7800
P: 1 785 966 7777
Harrah´s Laughlin
Bill’s Lake Tahoe
2900 South Casino Drive
P.O. Box 8
Laughlin
Stateline
NV 89029
NV 89449
United States
United States
P: 1 702 298 4600
P: 1 775 588 2455
Showboat The Mardi Gras Casino
Harrah´s Metropolis
801 Boardwalk
203 Ferry Street
Atlantic City
Metropolis
NJ 08401
IL 62960
United States
United States
P: 1 609 343 4000
P: 1 618 524 2628
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HARRAH’S ENTERTAINMENT, INC.
Locations and Subsidiaries
Harrahs´ Louisiana Downs
Rio All Suite Casino Hotel
8000 East Texas Street
3700 W. Flamingo Road
Bossier City
Las Vegas
LA 71111
NV 89103
United States
United States
P: 1 318 742 5555
P: 1 702 252 7777
Harrah´s Vicksburg
Harveys Lake Tahoe
1310 Mulbery Street
P.O. Box 128
Vicksburg
Stateline
MS 39180
NV 89449
United States
United States
P: 1 601 636 3423
P: 1 775 588 2411
Harrah´s Las Vegas
Harrah´s Reno
3475 Las Vegas Blvd South
219 North Center Street
Las Vegas
Reno
NV 89109
NV 89501
United States
United States
P: 1 702 369 5000
P: 1 775 786 3232
Harrah´s Ak Chin
Harrah´s Shreveport
15406 Maricopa Road
401 Market Street
Maricopa
Shreveport
AZ 85239
LA 71101
United States
United States
P: 1 480 802 5000
P: 1 318 424 7777
Harrah´s Atlantic City
Bluffs Run Casino
777 Harrah´s Blvd
2701 23rd Avenue
Atlantic City
Council Bluffs
NJ 08401
Iowa 51501
United States
United States
P: 1 609 441 5000
P: 1 712 323 2500
Harrah´s Lake Charles
Harrah´s Rincon Casino & Resort
505 N. Lakeshore Drive
777 Harrah´s Rincon Way
Lake Charles
Valley Center
LA 70601
CA 92082
United States
United States
P: 1 337 437 1500
Harrah´s East Chicago
Harrah´s Council Bluffs
777 Harrah´s Blvd
One Harveys Blvd
East Chicago
Council Bluffs
IN 46312
IA 51501
United States
United States
P: 1 219 378 3000
P: 1 712 329 6000
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HARRAH’S ENTERTAINMENT, INC.
Locations and Subsidiaries
Harrah´s Lake Tahoe
P.O. Box 8
Highway 50
Stateline
NV 89449
United States
P: 1 775 588 6611
Harrah’s Entertainment, Inc.
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