The Casino Industry: Harrah's Entertainment - Assignment Example

Part I: Summary Harrah's Entertainment Chairman and CEO, Mr. Gary Loveman said that the casino industry is paralyzed by the overindulgence in moneyexpenses; the resorts with cheap credit and low investment return could be the causes. There is an obvious competition among the gamers to build new casinos; but in the environment of national economic crisis, a change is needed with no more landing of unsecured funding at low rates. Moody's Investors Service's downgrading (nearly $16 billion Company's debt from highly speculative to extremely speculative) came after Harrah's hope to issue $2.1 billion in 10 percent notes due in 2015 and 2018. He said that the industry will possibly have to accept that not every project is a good project. The letters-to-the-editor column may support this with expressions of disappointments by long-time Las Vegas visitors about their business losing importance to gamers.The bad economy may lead to new international jurisdictions, Mr. Loveman opined. To care for an established customer rather than to attract a new one is also one less expensive option. Mr. T.J. Matthews, International Game Technology Chairman and CEO, said that adapting new slot technology is a resultant option for his company after the failure of several casino projects. Part II: From firs-time reading of this article, it seems that the author has written it very hurriedly. The language is poor and with loaded sentences and word use. Though clear, the author's viewpoint remains obscure due to the poor quality of language. For instances, he write - "The faster it adapts to the new economic climate -- and the end of "who cares" easy credit -- the better" and "Looser credit in Bucharest We'll see." The text is full of rhetoric devices; and he has used much material spoken by other people, mainly Mr. Loveman. This is apparent with the word uses of "drunken sailors", "arms race"; along with his own word use like "state of the Industry" and "grass is greener." The use of quotations is widely seen, sometimes mixed with own style; Mr. Loveman and Mr. Matthew have been quoted largely. The overall strength of argument is not powerful. There are evidences of obstacles to critical thinking. The author talks about the emergence of new international jurisdiction opposed to the traditional values through the idiom "grass is greener." Sometimes, the use of taunting language is observed; for example "Old values -- including the avoidance of crippling debt loads -- now reassert themselves." The structure of the article is very weak with an abrupt conclusion with "Imagine that." Despite being in accordance with ideas of the quoted people, the central evidentiary claims by the authors seem imaginary. The thinking about new international jurisdiction seems plausible, and is, maybe, away from central reasoning of Mr. Loveman and Mr. Matthew. Part III: Another reason to worry and one more area detected by the current ongoing global economic crisis - the casino industry is on the target with the people worrying about its current status with future scenario. The world's largest casino company Harrah's EntertainmentInc. has come forward with the fact, stated by theChairman and CEO, Mr.Loveman, thatit is the "overindulgence" in money spending. Other executives of the top casino companies do seem agreeing with Mr. Loveman when they say this business is not goingto remain in a same manner for coming years; because casino owners are shifting the focus to other available properties. This is a natural human tendency needing no explanation. He opined that the industry requires a kind of acceptance to the notion that every project is not a good project keeping in mind a money figure such as $1 billion. As per him the competitors and other businesses along with Harrah's need to change the work style especially considering the financial matters with future professional perspective. He described the competition among the professionals as very tough which might have to deescalate. For financial matters he thinks about a significant change in the future in management of the balance sheets. There is an obvious revenue decline across the casino profession; and the reason is that the customers are putting less money on gambling and other attractions offered by casino companies. The closing of various Gulf Coast properties during Hurricane Ike is also considered to be one cause. Now, these professionals have to go for new project developments to make profit and growth. On the other hand, they have to face a new problem when they do not find lenders especially with cheap money to properly address their new ventures. Though he declined to comment further, Harrah's seems to be restructuring its debt with the withdrawal of proposed $535 million state-owned casino in Kansas; the effect of bad economy becomes apparent.The loss of Harrah's this year is compared as being third quarter to the profit a previous year. Harrah's is going to cut in jobs and new novelties;it has lost $129.7 million in a quarter, and on the other hand, did profit of $244.4 million in a quarter, July to September, 2007. For Loveman, anything new in this industry will take place only after the financial recovery, may it be food and beverage, nightclub, or gaming. TheMGM Mirage Inc. has faced difficulties to secure the last chain of financing for its City Center project in Las Vegas Strip. The necessity for such City Center remains cloudy due to the decline in room rates, cut in flights by the airlines to the Las Vegas with decrease in visitors, etc. There has been a delay in various projects like Echelon of BoydGaming Corp., Donald Trump's Trump International Hotel and Tower, and condominium Tower for Las Vegas Sands Corp. The MGM Mirage's Dan D'Arrigo, chief financial officer, stated that he does not see any new development for next five to seven years. Another casino company Riviera Holdings has also announced a cut in all capital expenditures for next year with suspension of room renovations at Strip properties. Also, Moody's investor Service downgraded to negative ratings (nearly $2.5 billion) of debt funding the Fontainebleau project. Riskto thefinancial recovery for the financers increases with the declining casino revenues. The similar scene is also spotted for the manufacturers who are now trying to divert their strategy from selling new machines at the casinos to convincing the present casino owners that they need a replacement for their machines. T. J. Matthew, Chairman and CEO, International Game Technology, expressed his views to produce more entertainment friendly machines for the customers. The largest-in-world company of slot machines and casino systems has offered its 500 employees (about 8 percent of global work force) early retirement or severance packages. Though, on the other side, there are people who do feel that the casino industry has experienced such downfall in the past and will also manage to recover this time. It is true that layoffs and cutbacks in employee hours are there in Las Vegas casinos; but the ability to resilient in bad times is much greater than many other places, explained Mr. Feldman of MGM Mirage. The issue is all about people's thinking, who feel that the economy here is a recession proof. If the country is facing financial crisis, then, an obvious influence will be on this industry. But, such influence should not be taken as a permanent outcome. The UNLV Gaming analyst David Schwartzwas very hopeful about high-end and international gamblers coming in despite of the possible downturn in the overall economy. If people think in terms of "immunity" against any downturn of economy, then, it will be a mere exaggeration. As a result, there are also few good things emerged. For example, this has stopped unsecured landing and borrowing of funding at law rates with less possibilities of incurring debts. The old value of avoidance of crippling debt loads seems appealing now. These people are going to realize the value of money instead of wastage of money on every new project. They will have to think twice before planning for a new project. The tight competition has been pushed back in view of maintaining the balance sheet in a good position. We must remember that any competition is good till the point it remains within the framework of "healthy" competition; as soon as it loses the healthiness it becomes condemnable. Just like in context of other businesses, we must hope for the improvement and the economy recovery. But, if someone looks forward that this situation will lead to new international jurisdictions in regard to the casino industry, then, it is plausibility only. Because such alteration will oppose the traditional international jurisdiction; and if ensued, it should not be a welcoming step. We must remember that how much bigger the industry may be, the fact is that gambling or gaming is not a virtue morally. Reference: Knightly, Arnold M., Feb. 15, 2008. Layoffs, fewer hours: slowdown lands on gaming. Review journel.com. Retrieved Nov. 25, 2008, from http://owl.english.purdue.edu/owl/resource/560/10/ Drawhorn, Aaron. Fears Grow Economic Downturn Could Hit Gaming Industry. Lasvegasnow. Retrieved Nov. 25, 2008, from http://www.lasvegasnow.com/Global/story.aspS=7881456&nav=menu102_2 Garcia, Oskar. Harrah's CEO: Economy is changing casinos. Yahoo Finance. Retrieved Nov. 25, 2008, from http://biz.yahoo.com/ap/081119/casino_industry.html.v=4 Harrah's Entertainment Swings to 3Q Loss. Lasvegasnow. Retrieved Nov. 25, 2008, from http://www.lasvegasnow.com/Global/story.aspS=9313899 Read More