Caesars Entertainment (CZR) – Get Caesars Entertainment Inc Report and MGM Resorts International (MGM) – Get MGM Resorts International Report dominate the south and central Las Vegas Strip. The two casino companies each own multiple properties, which gives them enormous flexibility when it comes to attracting guests or even offering gamblers free rooms.
MGM, for example, can funnel younger customers or more casual gamblers into its Excalibur, Luxor, and New York New York Strip properties. Higher-end visitors and big-time gamblers might opt for Mandalay Bay, MGM Grand, or Park MGM. Once the company finishes its acquisition of the Cosmopolitan, MGM will add a hip new property that it essentially swapped out for the Mirage (an older take on serving the same audience).
Caesars has a similar portfolio. It can serve the lower-end customer with its Bally’s casino, which might become a tad more hip when it’s transformed into the Horsehoe brand. Harrah’s and the Linq serve the mid-range and Caesars Palace can court the high end, with its embedded Nobu Hotel serving the highest-end customers.
That’s not the full list for either company, but it’s a representative offering that shows how dominant Caesars and MGM are across all types of Vegas visitors.
Now, Caesars Chief Executive Tom Reeg has made clear that his company intends to sell one of its Las Vegas Strip properties.
Caesars Looks to Sell a Las Vegas Strip Casino
Sometimes the sale of a major Las Vegas casino seems to come out of nowhere. In this case, Reeg has essentially hung out a for-sale sign.
“Well, we’re 23,000 rooms today. You’re taking out the Rio rooms and then you take out a property, depending on which property it is, let’s say 3,000 to 4,000 rooms,” he said during his company’s fourth-quarter earnings call, in response to a question about selling a Strip property. “So you’re going to be down to, call it, 16,000, 17,000 rooms in the market. That’s about 1/4 of our existing capacity.”
Reeg thinks having fewer rooms will enable Caesars to do a better job filling those rooms.
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“So that’s clearly going to have an impact in our ability to yield the remaining rooms,” he said, “Part of it’s where do those rooms come out of our system, and you should expect that’s going to be a factor in terms of how we decided which one that we would divest.”
The CEO wants to be able to fill his company’s rooms directly through its app, and one must assume, its loyalty program. He does not want to rely on online travel agencies, a situation where the company shares revenue and the customer has less of a connection to its brand.
“The less we need to rely on [online-travel-agency] business to fill our rooms, the better both from a customer quality perspective and an ultimate profitability perspective. And removing the 5,000 or 6,000 rooms from our system while introducing all of those customers that came in through Eldorado should have an extremely positive effect on rates once we’re — once all the deals are closed,” he added.
Which Las Vegas Strip Property Might Caesars Sell?
Reeg offered no hints as to which casino Caesars might sell. It seems logical that the flagship Caesars Palace would be the only property that’s simply not available, but it also makes sense to look where Caesars has been investing.
Bally’s would have been a logical contender, but Caesars has decided to make a major investment in revamping that property under the Horseshoe name.
Harrah’s and The Linq seem like possibilities, but both properties are, well, linked. Untangling their joint outside areas would be possible, but a more stand-alone property seems more likely to be sold.
That makes the Cromwell, Paris Las Vegas, and the Flamingo the most logical candidates. And again, while Reeg has not hinted at which property might be sold — and it likely will come down to what offers get made — the Flamingo seems like the most logical candidate, given that it’s an aged property ready for an update.
Reeg did not seem too concerned about which company might buy whatever property he sells. He made clear that he sees room for Caesars, MGM, and other companies to succeed.
“Our business does not depend on somebody else failing or somebody else running out of money,” he said.
“There is enough room in this space for multiple success stories. I would say at least three or four. We intend to be one of them, but we don’t need anybody else to fail in Vegas or outside Vegas for us to succeed.”