Voracious Appetites

Last year, the biggest high roller to step up to the gaming table was Wall Street, and it took away the biggest prize: Harrah's Entertainment, the world's largest casino operator, which was sold to private equity investors for $27.8 billion.

While its details are still being ironed out, the Harrah's sale—one of the largest leveraged buyouts in history—set in motion of flurry of similar deals. Early this year, Las Vegas-based Station Casinos Inc. accepted a revised deal worth about $5.4 billion from a private group comprising the company's founding family, led by Station Chairman and CEO Frank Fertitta III, and the real-estate firm, Colony Capital LLC. In March, Gordon Gaming, owner of the independent Sahara Hotel & Casino, announced it had agreed to sell the landmark property to California-based private investors. (The new owners of the Sahara confirm that the Navegante Group, which currently manages the property, will remain in place.)

What It Means to Meetings
"Given the amount of capital that is interested in the lodging and the gaming industry sectors," says Michael G. French, principal and global gaming leader for PricewaterhouseCoopers LLP, "I would not be surprised if more privatizations, management-type buyouts, or transactional events were to occur in the gaming sector." As far as meetings are concerned, however, "I don't think there's going to be much of a difference; I don't think meeting planners and convention bookers are going to notice it." The reason, he notes, is management stability, since acquisitions, unlike mergers, tend to leave management teams in place: "Hotels [have to be filled] every day. You need to have a lot of confidence in who's running them. In a large part, that's the reason for the investment. They see the strength of a Harrah's as an operator."

In fact, Michelle DeClerck, president of Clive, IA-based Conference Event Management, who recently held meetings in Las Vegas and Atlantic City, sees little post-buyout difference: "We have experienced higher rates at some of the gaming resorts where we have booked meetings, but the increases do not seem to be more than what we are seeing in any other major destination." DeClerck even benefited from the previous mergers of MGM Mirage and Mandalay Bay; and Harrah's and Caesars: "We now have several key contacts at the hotels. Some properties still match us up with our property-specific salesperson, but other times we find we are offered the option to utilize one salesperson who represents several properties."

French dismisses the recent revenue hiccups that lowered the stock of some casino operators last year as anomalies. "All businesses can be hurt by something unexpected, whether it be a tornado, an earthquake, or a terrorist attack. I don't think that's something that people in the capital markets really evaluate when they're looking at various deals."

Across the Board
In fact, when the casino operators bounced back, it was often with revenues derived from newer gaming destinations, such as the Mississippi Gulf Coast. In February, for example, MGM Mirage reported that its fourth-quarter '06 profit more than doubled as a result of the reopening of its Biloxi property, the Beau Rivage Resort.

Meanwhile, the proliferation of gaming destinations means that it's easier than ever to find one within driving distance of your meeting. Atlantic City, which drew much of its traffic from Pennsylvania, now faces a competitor in Philadelphia, which is in the process of setting up limited-play casino parlors.

Indiana's French Lick Casino & Resort, which debuted in November, has revitalized a historic resort property into a gaming destination with a Benchmark-managed conference center. According to Dyan Welch, spokesperson for the property, most of its visitors drive from within a 150-mile radius. "We have brand-new meeting space," she says, "that connects to the existing property that connects to the casino. Most casinos in the area don't have the amenities that we have, so we get the longer-stay traveler."

Who's Top of the Heap?
All agree that Las Vegas and Atlantic City have nothing to fear from the newer gaming markets—they have established themselves to the point that the revenue stream has branched out from the casino floor. "What's driving a lot of business at casinos these days," says Elaine Sahlins, senior VP of hospitality at consultancy HVS International, "are amenities like restaurants, shopping, and clubs. Nightlife is very important, because the casinos want to capture those young people who go to clubs—and who will hopefully stay and gamble."

French concurs, and cites a further advantage: "For most of the new gaming jurisdictions, the formula is much different in terms of taxation. The tax levels that gaming properties pay in the new jurisdictions is much higher than it is in Atlantic City or Las Vegas. For example, in Pennsylvania, it's 55 percent off the top, whereas in Las Vegas, it's seven; Atlantic City is about eight or 10." Atlantic City and Las Vegas, he concludes, have more capital to invest in improving the destination. "They've got a jump on everyone else because Atlantic City's been around for 30 years and Las Vegas has been around forever."

Even so, from the planner's point of view, the mindset at casino properties has yet to catch up with the diversification. "Casinos trump the convention groups," says one planner, "so it's hard to be number one. High rollers come first." Another cites as challenges "lack of response to RFPs and finding vendors to work with who aren't too busy to help you." While sales managers seem willing to negotiate, DeClerck admits, "We have found it harder to find space, and instead of just looking at one or two casino hotels, we have to send our RFPs to several properties in hopes of finding any property that might be able to offer space over our desired dates."

Lisa Meller of Irvine, CA-based Meeting Perspectives suggests that groups might continue to frequent gaming destinations but opt out of the casino resorts in favor of non-gaming properties—even for Vegas: "I believe more properties that minimize the casino option will be selected."