Caesars hit by losses – should there be concern?
A must see destination for all those who visit Las Vegas, Caesars palace is a world renowned resort with shops, hotels and one of the world’s most grand casinos.
While the palace has achieved international fame for its opulent architecture and luxurious feel over the last 50 years, it has recently hit the headlines for more concerning reasons. Declining visitor numbers and spending at its casino in recent years have caused the business significant financial hardship.
Caesars Palace is not the only land based casino to have suffered this fate, many others have seen similar losses, while the revenue and number of online casinos has soared. As online gambling grows in popularity, could the demand to visit an iconic land based venues such as Caesars palace be at risk?
Where it all began…
In the 1960’s Las Vegas hotelier Jay Sorno began Caesars palace’s construction. Inspired by the Roman Empire, he spared no expense in creating a venue that screamed indulgence and excess. It’s opening party cost over $1 million dollars alone.
Caesars quickly gained popularity and became host to many high profile celebrity events and appearances. Most notably, in 1987, motorcycle stunt daredevil Evil Knievel attempted a 43 metre jump over the palace’s fountain. The likes of Frank Sinatra, Madonna and Elton John have also held performances there, with its colosseum space having the capacity to seat up to 4,300 people.
Caesars Forum was the first of the venue’s original gambling facilities. Based in the hotel, the casino housed 250 slot machines and 30 games tables. In contrast, Caesars casino now has over 1,300 gaming machines and more than 180 tables.
While Caesars palace has been featured in many films and attracts wealthy visitors from across the world, the luxury venue has faced some financial difficulties in recent years.
Bankruptcies, buyouts and lawsuits
After being acquired by Harrah’s Entertainment in 2005, Caesars palace was doing well, with revenues increasing year on year. This was until 2008 when Harrah’s was then taken over with a $31 billion buyout from equity managers Apollo Global Management and TPG.
Source: Financial Times
Soon after this the financial crisis hit, with Caesars facing a decline in revenue by around a fifth between 2007 and 2009. They were then faced with a $250 million fine by the Nevada Gambling Commission after a player in the casino was permitted to dance of a card table during game play. It’s management then began to sell off intellectual properties in order to generate cash.
A battle with creditors broke out in 2014, with lawsuits being filed on both sides. By 2015 Caesars was put into bankruptcy. With $18 billion worth of debt, the company faced court battles and difficult negotiations before emerging with a debt management plan and restructuring agreement in 2016. They recovered from bankruptcy with a new estimated worth of $25 billion, which was around its original sale price in its 2008 buyout.
The battle of land based versus online casinos
The US financial crisis and management of its assets were significant contributors to Caesars palace’s financial losses. However, many in the industry have also questioned the impact of the growing online casino market on established land based casinos such as Caesars palace.
There has been an explosion in interest in online gambling in recent years, in both the US and the UK. The overall gambling market is worth an estimated £14.5 billion in the UK, with 39% of the market share being possessed by the online betting, bingo and casino sector. This equates to around £5.4 billion last year.
The development of smartphone technology as made accessing online casinos more appealing and convenient than ever. There are an estimated 2 billion users of smartphones globally, with research suggesting that at least 4.3% of users have downloaded a sports betting or online casino mobile application at some point. Players can now access games in the comfort of their own home or even during their daily commute. With this in mind, it is perhaps not surprising that the land based casino sector saw a £110.4m decrease in revenue last year.
Mobile gambling has also become a popular alternative to visiting land based casinos because of the sheer number and variety of games available to play on the internet. In response to demand, affiliate sites such as Bingoport have been developed to assist users in finding the best online promotions and games on offer. These sites offer comparisons for different games and often have rewards programmes that increase value for the user and provide access to exclusive deals.
Does online gambling spell the end of all land based casinos?
Traditional casino venues are still loved and visited by many. Casinos such as Caesars Palace form part of social occasions and celebrations that cannot be replicated online. Grand casinos like Caesars will continue to attract visitors from around the world because they offer much more than the games tables and slot machines. Decadent interior design and smart dress codes create a buzz and atmosphere is exciting and creates immersive experience for players to enjoy.
That is not to say that online casinos go not create a fun experience, rather online and land based casinos offer different kinds of entertainment. An online game can fill a short period of free time, they can be played anywhere and do not require planning or time to get ready and travel to a venue. Whereas, a visit to a land based casino is a much more social event and can form part of celebrations such as birthdays and weddings, with additional facilities like bars and restaurants being part of their appeal.
Caesars palace is one of the world’s most well known entertainment venues and while their recent financial downturn caused fear in the wider land based gambling sector, as the overall gambling continues to thrive, it seems that online and offline casinos can exist in harmony with one another.