With the company’s recent acquisition of Caesar’s Entertainment and Imperial Palace, Harrah’s Entertainment is organically growing the company through strategic acquisition of brand assets and market share. Its acquisition of Caesar’s Entertainment and Imperial Palace have further consolidated the main competitors in the industry and made Harrah’s Entertainment as the industry leader. On the other hand, its close rival MGM Mirage had also acquired Mandalay Resort creating a close rivalry between Harrah’s Entertainment and MGM Mirage.
In 2005, Harrah’s Entertainment recorded revenues reaching $ 7. 11 billion, up by 56 percent from last year, and its operating income reached $ 979. 7 million, up by 24 percent. Harrah’s net income fell by 36 percent, amounting to $ 236. 40 largely due to increase interest expense on higher debt levels. Currently, casino segment accounts for 67 percent of total revenues. Hotel segment and food and beverage segments contribute 15 percent and 11 percent of total revenues respectively.
The largest direct expense is the casino segment, accounting for 50 percent of operating expense. Property maintenance expenses is the second highest with 24 percent, while hotel segment and food and beverage accounts only 2 and 8 percent of total operating expense. With the industry currently expanding because of easing regulatory environment in Europe, Asia-Pacific, and the United States, many hotel and casino companies are opening up in new markets to expand its current operations.
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While growth is expected to be capped with the passage of new online gambling law, growth in other areas of the market such as “racinos” (race track casinos) will support the overall expansion of the industry. In terms of market size, Harrah is currently the market leader, followed closely by rival MGM Mirage. Both companies are intensely competing in the gaming industry for market share.
However, because of the lucrative casino business, hospitality industry leaders such as Marriott International and Hilton Group are also entering into the gaming entertainment space to have a share of the market. Strategically, Harrah has invested a total of $ 11. 28 billion in the past two years to further strengthen its brand portfolio of casino businesses. With Harrah’s brand developing close customer relationship and increasing customer loyalty, Harrah’s strategic acquisition is aimed at increasing its current market share and growing the business.
With the political risk of expanding overseas and strong cash position, Harrah’s strategic initiative offers a way to further cement the firm’s market leadership in the gaming industry. Nature of Business Incorporated on November 2, 1989 at Delaware, Ohio, Harrah’s Entertainment is in an enviable position in the global hospitality entertainment industry. The current casino portfolio includes well-known casino brands such as Harrah’s, Caesars, and Horseshoe brands.
Currently the company has 39 subsidiary casinos operating primarily in Las Vagas and New York City. Its wide range of casino entertainment facilities include 20 land-based casinos, 11 riverboat or dockside casinos, four casinos on Indian reservations, two casinos on cruise ships and a combination greyhound racing facility and casino and a combination thoroughbred racetrack and casino. In addition, four casinos located in Mississippi and Louisiana are temporarily closed due to damages suffered from recent Hurricanes that struck United States.
Typically, its facilities include hotel and convention pace, restaurants and non-gaming entertainment facilities in addition to its gaming space. Well-known for its high-level of hospitality services, Harrah’s Entertainment maintains a number of trademark brands which include the following: Harrah’s®, Caesars®, Grand CasinoSM, Bally’s®, Flamingo®, Paris®, Caesars Palace at Sea®, LuckyMesm, Fast Cash®, Rio®, Showboat®, Bill’s®, Harveys®, Total Rewards®, Bluffs Run®, Louisiana Downs®, Reward Credits®, Horseshoe®, Seven Stars Club®, Connection CardSM, Winners Circle®, and World Series of Poker®.
These trademarks have been a symbol of Harrah’s Entertainment broad portfolio of brand assets and are critical in the marketing strategy of developing customer loyalty and strong brand recognition. For the fiscal year of 2005, Harrah’s Entertainment had a banner with revenues reaching to $ 7. 1 billion, 56. 3 percent increase from last year. Operating Income also increased by 24 percent to $ 979. 70 million, while consolidated net income is currently at $ 236. 4 million, down by 36 percent due to higher interest expense due to higher debt level with the recent acquisition of Caesar’s Entertainment (Exhibit 1).