The Eldorado-Caesars Deal: Changing Landscape of the US Casino Industry

Posted by: on Jul 8, 2019 | No Comments

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The US casino industry suffered serious setbacks during the 2008 financial crisis. Revenues plummeted almost 7% in the Las Vegas region and more than 16% in the Boulder strip between 2007 and 2014, according to a report by Centre for Gaming Research at the University of Nevada. However, within a short span of just four years, the commercial casino gaming revenue in the US reached an all-time high of $41.7 billion in 2018, according to a report by the American Gaming Association. Globally USA still leads the way in the gambling arena, with a liberal casino industry at the heartland of Nevada.

In June 2019, a seismic shift took place in the US casino industry, as one of biggest players in the sector – Caesars Entertainment Corp – got acquired by the Eldorado Resorts Inc in a whopping $8.58 billion acquisition deal. This will not only catapult a much smaller company, Eldorado, in league with the bigger names, but also bring changes to the US casino industry at large.

Eldorado Rescues an Ailing Caesars to Become a Powerhouse

Eldorado, found by the Carano family in 1973, is a much smaller company than Caesars Entertainment, both in terms of industry exposure and brand value. The fallout of a 2008 leveraged buyout had left Caesar’s Entertainment with a mountain of debt, and it managed to come out of bankruptcy only in 2017.

The combination of Eldorado and Caesars will lead to the creation of the largest owner and operator of US gaming assets, with significant market share and a menacing rival for competitor brands. Originally, the Eldorado brand operated 26 casinos in 12 states. After the merger, it will hold a total of 60 owned and well-operated casino resorts across 16 states. The brand image will remain intact, as the merged entity will keep the Caesar’s name.

The combined revenue of these two brands could significantly impact competitors like Las Vegas Sands, MGM Resorts and Wynn.  While Wynn and Las Vegas Sands mostly have their operations in Macau and will bear minimal impact, MGM Resorts generates 80% of its room revenues from properties in Las Vegas. This deal could cause MGM to face a headwind from stiff competition in the region.

Corporate consolidation is not a new thing in Las Vegas. But Caesars Entertainment has monopoly-like qualities. It has million-dollar marketing campaigns, impressive portfolios and prime locations on the Strip. For almost two decades, it has operated a huge number of casinos in the city. The merger with Eldorado will lead to a major transformation of the area. Rebranded casinos and newer constructions will create unique experiences for visitors.

Impact on Sports Bettors

In 2018, Eldorado made William Hill its sports-book operator at all its casinos where sports betting is legalized. In the coming times, sports betting could be legalized in places like Indiana, Iowa and Illinois, which will increase the number of Eldorado sports casinos. The deal with William Hill is for the next 25 years. What remains unclear is the controlling power over Caesars sports books for the future.

Cutting on expenses will be a priority for Eldorado, as it will inherit significant debt from Caesars. Perhaps the company will let William Hill operate all the sports books, to manage this feat.

What we can expect to see is a combining of a lot of sports and sports betting deals in the future. For instance, Caesars is among the first casino companies to partner with NFL. Now, the customers of Eldorado will have access to same NFL experiences and promotions, which were available to customers of Caesar’s during Super Bowl 2019.

There are several moving parts in this deal, which bring together two prominent players in the industry. In the coming months, the picture and the impact on the US casino industry will become clearer.

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