GLOBAL GAMING EXPO 2008: Casino 'arms race' declared over - Business

PRINT THIS Popular

Nov. 20, 2008
Copyright © Las Vegas Review-Journal

GLOBAL GAMING EXPO 2008: Casino 'arms race' declared over

Harrah's boss says fiscal crunch forcing companies to rethink, refocus

By ARNOLD M. KNIGHTLY
LAS VEGAS REVIEW-JOURNAL

Harrah's Entertainment Chairman Gary Loveman speaks Wednesday at the Global Gaming Expo at the Las Vegas Convention Center. He said the downturn is forcing casino companies to change tactics.
Photo by Craig L. Moran

A billion bucks really is a lot of money after all.

And the days of casino companies chasing after one another to build more and more expensive new resorts are probably over for a long time, a top gaming executive said Wednesday at the Global Gaming Expo.

Most Popular Stories

Mayor calls Lady Luck casino 'carcass'

CASINOS IN COURT: Testimony heard in Wynn case

Consolidated Resorts files for Chapter 7 bankruptcy

Players turned away at WSOP

Area economy hits 'pause' period, economist says

Fontainebleau files motion to leave offices

NEVADAN AT WORK: Local gaming veteran sees opportunity in small Henderson casino

FOURTH OF JULY TOURISM: Las Vegas is the place for bargain seekers

ONLINE GUY: Palm Pre promising but not ready to replace Apple iPhone in pocket

Job hunt is brutal for older workers

Harrah's Entertainment Chairman and Chief Executive Officer Gary Loveman told people attending the convention's "State of the Industry" roundtable that the financial crunch has put an end to the days when casino companies could land unsecured funding for projects at low rates -- at least for as long as the head of the world's largest gaming company expects to be in the business.

Gaming companies have been in what he called an "arms race" to build new casinos to grow their revenues, but the economic problems facing the nation are forcing them to undergo a "significant sea change in the way in which the balance sheets of these businesses are structured."

Casino companies were caught spending money "like drunken sailors" when the downturn hit, Loveman said. And many of the regional and destination resorts the companies were building with cheap credit were bringing in very low investment returns.

"I think the industry is going to have to get accustomed to the notion that not every project is a good project -- and $1 billion is a lot of money, after all."

The current liquidity crisis, which Loveman said poses a bigger threat to the gaming industry than the short-term decline in consumer spending that has cut revenues at gaming companies, will force the industry to change the way it finances new development.

"The industry is going to have to get accustomed to negotiating this," Loveman said, noting that the liquidity crisis has put an "acute stranglehold" on gaming companies that racked up large debt during the boom times.

The economic slowdown has also changed the way the world's largest slot technology maker approaches its business.

International Game Technology Chairman and CEO TJ Matthews said the cancellation and suspension of several casino projects has forced the company to focus on ways to adapt new slot technology to existing casinos.

"The only way can grow is if we make the (casino) business better," Matthews explained.

IGT now plans to concentrate on creating games that can reduce labor costs for casinos while being more entertaining and efficient for gamblers.

The company is trying to develop slot machines that appeal to a shared experience among players, what Matthews described as providing "high-five" moments.

Asian players and younger American players prefer games such as baccarat and poker, that are played in groups and provide "a public acknowledgement on winning and playing," Matthews said.

Loveman said gaming manufacturers face a more immediate challenge, though.

For heavily indebted casinos faced with having to choose between spending $1 million to purchase new slot technology with tremendous potential, or spending the money to buy back bonds trading below value, Loveman said the decision will be easy. They'll buy back the debt.

Despite the current economic challenges, Loveman described the industry as "remarkably resilient" and said it will be profitable again once the current crisis is over.

The bad economy could also open up new international jurisdictions traditionally opposed to gaming -- Vietnam, Japan, Taiwan and parts of Europe, for instance -- as those areas start searching for new sources of income, Loveman said.

But the time between now and the turnaround will drastically change the industry's books.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893. The Associated Press contributed to this report.

Share & Save

Leave Your Comment	8 Reader Comments
Terms & Conditions The following comments are provided by readers and are the sole responsiblity of the authors. The reviewjournal.com does not review comments before publication nor guarantee their accuracy. By publishing a comment here you agree to abide by the comment policy. If you see a comment that violates the policy, please notify the web editor. Some comments may not display immediately due to an automatic filter. These comments will be reviewed within 48 hours. Please do not submit a comment more than once.
Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background. Johnny Angel wrote on November 20, 2008 06:08 PM: Did Gary Loveman/Harrah's fly in for the Global Gaming Expo 2008 on a company jet, as he doesn't live in any of the states where Harrah's has casinos. The deal he made with Apollo & Texas Pacific group regarding the buyout & his pay should should be looked into. Elvis has left the building...but he'll be back..Viva LV John wrote on November 20, 2008 01:36 PM: MB: as they say the difference between a recession/ depression is: its a recession when your heighbor loses his or her job, its a depression when you and yours loses it." it will happen to you and in case you dont read up, people are smart shopping now. walmart beat their numbers while kohls and the likes are not making their numbers. but who wants all that cheap unsafe crap from china? Steve T wrote on November 20, 2008 01:27 PM: As a proud drunken sailor, I am deeply offended by this man's slanderous comments. casinocon wrote on November 20, 2008 12:12 PM: The depression is here. Cutting back is fine, but when you are unemployed things are pretty grim. And yes, Loveman needs to diet himself and set an example. Of course he won't, and his company will continue to sink like a stone. Gaming companies were in essence spending like "drunken gamblers" chasing their losses. Now they get a taste of their own medicine. Of course their employees, soon to be ex employees will suffer as they drag the economy down further. It's a vicious cycle. We're in for years of pain. Bobby wrote on November 20, 2008 11:15 AM: Oh please MB An idiots saw this coming and you think someone like Loveman is this clueless? And there is no shame in shopping at stores who sell cheap chinese junk for way more than what they are getting the same junk for. And on top of that these stores are the people who have cut millions upon millions of American jobs so they can sell us this cheap junk. The stores are American traitors and you think it's O.K. to support them? Are you serious? ex gambler wrote on November 20, 2008 11:15 AM: IGT now plans to concentrate on creating games that can reduce labor costs for casinos while being more entertaining and efficient for gamblers. Thes idiots just don't get it. I hope the entire gaming industry collapses. MB wrote on November 20, 2008 10:39 AM: Oh please John. "Great depression 2" in 6 months. Things are bad no question and they are as bad as things have been since the GD1. BUT the unemployment rate and poverty levels are wont be comparable...you can hide in your bomb shelter or start lining up in the soup kitchen line early if you want...Here's some tips though just cut your budget in half, slash BOGUS spending and get your family back down to the basics. Stop eating out. Theirs no shame in shopping @ value stores such as Wal-mart, K-mart, Big-lots or even the dollar store. Cut spending on entertainment. Stop driving all over town unless its to work.....most importantly if you couldn’t afford that house in the first place then get the hell out! There’s no shame in renting. Life goes on As far as Loveman, at least the guy is honest about the industry being caught spending like drunken sailors! John wrote on November 20, 2008 02:34 AM: Man that boy needs to go on a crash diet. he must be eating at Wynn or Bellagio because the food quality at Harrah's properties from Las vegas, AC and even Laughlin have become very poor. I love it! Despite the current economic challenges, Loveman described the industry as "remarkably resilient" and said it will be profitable again once the current crisis is over. No kidding? most industries will become profitable once things improve!!! but this crisis is far from over folks. I hate to be a dooms-dayer and usually I loathe them, but get ready in six months for the "great depression 2".