When internet travel site founders Timothy Poster and Thomas Breitling acquired the Golden Nugget Hotel & Casino in downtown Las Vegas from giant MGM Mirage (MGG) in January, they quickly put their own mark on the joint. They raised betting limits, built a new room for poker players, booked top-shelf headliners such as Tony Bennett, and nabbed a starring role in The Casino, a reality TV show on Fox (FOX). Poster says the casino's sales and profits have jumped by double-digit percentages so far this year. "Before, the casino wasn't allowed to compete with its sister properties," he says. "Those constraints are gone."
The Golden Nugget's new owners are rolling the dice in the face of the largest consolidation in the casino industry's history. On July 15, Harrah's Entertainment Inc. (HET) announced that it's buying rival Caesars Entertainment Inc. (CAR) for $9.4 billion. The deal comes just a month after MGM Mirage agreed to purchase Mandalay Resort Group (MBG) for $7.9 billion. Together the two companies could end up controlling over 70% of the hotel rooms and casino space on the Las Vegas Strip. Both deals are expected to come under close scrutiny by state regulators and the Federal Trade Commission.
So is it time for the city's remaining independents to fold their cards? Hardly. A bevy of well-heeled and creative Las Vegas casino bosses figure they can keep the odds in their favor with a bunch of new billion-dollar resorts. The flashiest is the Wynn Las Vegas, impresario Stephen A. Wynn's $2.5 billion palace, with a Ferrari dealership, golf course, and an eight-story mountain. The upscale resort, which opens next spring, is sure to draw crowds, as has just about everything the Vegas legend has ever put up. Says gaming expert and University of Nevada at Las Vegas professor William N. Thompson: "Consolidation doesn't hurt him. It helps him. It brings more attention to Vegas."
Also at the table: Sheldon G. Adelson, founder of the Comdex trade show and owner of Venetian Resort Hotel Casino. Adelson, who recently opened a casino on the island of Macau and is considering a public offering for his Las Vegas Sands Inc., hopes to build a $1.5 billion casino hotel, the Palazzo, on land between the Venetian and Wynn's new resort.
The big guys, though, have plenty of muscle. Harrah's CEO Gary W. Loveman, an ex-Harvard University business prof, says his latest deal will lure gamblers from other Harrah's properties, using a database of 27 million customers.
But bigger doesn't always mean better. The hottest joint in town is Palms Casino Hotel Las Vegas. Opened three years ago by New Mexico's Maloof family, the 455-room property cost just $260 million to build and is producing a 23% return on capital, says co-owner George Maloof. It distinguishes itself through clever events such as a weekly poolside party called Skinny Dip Tuesday Nights. "There will always be a market for a person who doesn't feel comfortable in a big casino setting," Maloof says. Mega-casinos, watch out. The little guys just might play you for a sucker.
By Christopher Palmeri in Los Angeles