Impact of Eldorado-Caesars deal on Lake Tahoe gaming market remains unknown
It’s been more than four weeks since an announced merger that, if approved, would create the largest gaming owner and operator in the U.S., and potentially consolidate a majority of South Shore’s major casinos under one corporate umbrella.
However, it’s unclear how the purchase of Caesars Entertainment by Reno-based Eldorado Resorts will impact Tahoe’s gaming market — if at all.
So far the parties have been reluctant to share or speculate on finer-level details of the merger.
Currently Caesars owns Harrah’s and Harveys Lake Tahoe in Stateline. Eldorado acquired MontBleu Resort Casino and Spa in 2018 as part of a larger, $1.85 billion deal to purchase assets owned by Tropicana Entertainment.
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In late June, Eldorado announced it would be purchasing Caesars in a deal valued at $17.3 billion. Ownership of the merged companies will be split between Eldorado and Caesars shareholders, 51% to 49% respectively.
The new company would retain the Caesars brand, which is among the most iconic in the gaming industry, but the executive leadership will come from Eldorado. The corporate headquarters will be in Reno.
In detailing the strategic reasons for the merger, the companies said the new Caesars would be the largest U.S. gaming company, with roughly 60 owned, operated and managed casino-resorts located across 16 states.
According to a press release, Eldorado expects to achieve approximately $500 million of synergies in the first year after the deal closes, with additional revenue synergy opportunities in the future. It’s unclear if those “synergies” will translate to layoffs at individual properties.
However, as reported by the Las Vegas Sun, some in the industry are already ringing alarm bells over the projected cost savings.
“Eldorado announced cost-savings of $500 million in the first year of the combined company,” Culinary Workers Union President D. Taylor told the Las Vegas Sun in a statement. “Where are they going to cut?”
Anthony Carano, Eldorado’s president and chief operating officer, told the newspaper it was too early to discuss specifics but that he expected very little turnover among hourly employees and management.
Similarly, an Eldorado spokesperson told the Tribune that the company had no comment on whether the merger would result in staff reductions. An inquiry to a local spokesperson with Caesars’ Tahoe properties was directed to the corporate office.
Also seemingly unknown at the moment — at least publicly — is how the merger could impact the assets held by both companies.
Together, those three Tahoe properties constitute a powerful block in South Shore’s gaming and entertainment scene. If allowed to stay under the same ownership, the deal would leave Hard Rock Hotel and Casino, Lakeside Inn and Dotty’s Casino to battle it out with the new Caesars.
In a conference call on the day of the formal announcement, Eldorado CEO Tom Reeg said some assets likely will have to be spun off in order to appease regulators, including those with the U.S. Securities and Exchange Commission.
“We know there are assets that we intend to prune and in a couple of cases that likely helps the SEC argument,” Reeg said.
However, much of that conversation on the conference call focused on the Las Vegas Strip, where Reeg said the new company would likely have more properties “than we would need to accomplish our goals.”
Tahoe was not mentioned during the conference call.
Among Nevada’s gaming markets, Tahoe’s South Shore trails both of the state’s major cities — Reno and Las Vegas — as well as Washoe and Clark counties, where each city is located, when it comes to gaming win.
In response to a question asking if discussions have taken place on the Tahoe assets, Richard Broome, executive vice president of communications and government relations for Caesars, told the Tribune that question would need to be directed to Eldorado Resorts.
Caroline Coyle, Eldorado’s vice president for advertising and brand marketing, told the Tribune the company had no comment.
Ultimately, any decision to sell local assets comes down to the various regulatory agencies, David G. Schwartz, gaming historian at the University of Nevada-Las Vegas, told the Tribune.
While three casinos under the same ownership might seem like a lot, it depends on the region and how the market is defined.
He said there are potential negatives and positives with owning a heavy concentration of properties in one area.
In this deal in particular, Eldorado takes ownership of Caesars’ rewards program, which is viewed as the leader in the industry. It also could help in booking entertainment talent.
On the negative side, saturated ownership in one market would likely mean less competition, which would be bad for customers.
“Any time you have less competition, customers have one fewer place to go,” Schwartz said.
History of changing hands
In Tahoe’s history, casinos changing ownership can seem as casual as putting a $20 in a slot machine.
The South Shore gaming scene underwent a titanic shift in 2001 when Harrah’s announced it was buying Harveys. As the Tribune reported at the time, the two casinos located across the street from one another were started as competing roadside gambling parlors — one owned by Harvey Gross and the other by Bill Harrah.
In 2005 Harrah’s acquired Caesars Entertainment Inc., which had sold its Caesars Tahoe property — now known as MontBleu — to Columbia Sussex. Columbia created a subsidiary, Tropicana Entertainment LLC, which owned MontBleu until it was sold to Eldorado Resorts in 2018.
At the time of the transition from Caesars Tahoe to MontBleu, Columbia Sussex owned the Horizon Casino across the street.
The Horizon, which has since changed ownership, is now Hard Rock Hotel and Casino.
Harrah’s changed its corporate name back to Caesars in 2010, but the two Tahoe properties’ names — Harrah’s and Harveys — remained unchanged.
While the deal is being finalized, it is not expected to have an impact on the Tahoe properties owned by Caesars and Eldorado.
“It’s business as usual for us now (until the deal closes),” Broome said.
That means Caesars’ paid parking policy, which was instituted at Harrah’s and Harveys Lake Tahoe in 2018, will not be changing in the immediate future.
According to a presentation, the transaction is expected to close in the first half of 2020.
Once the deal is complete Reeg said the biggest change will be in management style. Caesars structure is much more corporate-down, while Eldorado generally gives management at the local level more decision-making power.
“The further you get from the fundamental interaction between your employees and your customers where you make your money … the more people you put in the middle of that the worse you do,” Reeg said on the conference call.
In terms of the magnitude of the deal, gaming historian Schwartz noted that it takes Eldorado — which started with one casino in Reno — from a regional operator into and industry powerhouse.
“It’s a big deal,” he said.
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