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The Beat of a Different Drummer

When everyone goes one way, go the other. That is the idea behind much of what Harrah’s does to keep themselves afloat in the world of big casinos and lots of slot machines.

Harrah’s owns about 40 casinos in the United States – under various names like Bally’s, Showboat, Caesar’s Palace, etc. At the time of a recent takeover bid, it was trading about 15 times its expected 2007 earnings. This is lower than say Wynn Resorts, which is looking at roughly 32 times its forward earnings.

But Harrah’s has a way of doing things that other casinos don’t. When everyone started competing to see who could bring in the biggest casino into Las Vegas, and started building mega casinos like The Venetian – with lots of slot machines, and all the bells and whistles to keep gamblers playing. Harrah’s however, decided to ask for advice from a different source. Gary Loveman, a Harvard Business School professor, told the casino that they should use a “new yield management program” that he had developed. He ended up joining the company in 1998 and it worked out very well for the company.

Harrah’s has a way of rewarding those that stick with the company through a very sophisticated tracking software and their guests get rewarded from their playing styles. As slot machines are the biggest money maker for the hotel, those that play them get better rooms or lower rates – just because they play the slot machines. It may not be business as usual for the other casinos, but they could learn a thing or two from Harrah’s.

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