Loveman: Economy hurts Caesars’ results

The Octavius tower at Caesars Palace is the newest addition to the hotel-casino, located on the southwest part of the property, seen on Thursday, Jan. 14, 2010.

Caesars Octavius Tower

A deluxe room inside the new Octavius Tower at Caesars Palace in Las Vegas Thursday, Dec. 15, 2011. Launch slideshow »

Emperors Suite at Caesars Palace

The Caesars Palace suite that inspired the set for the movie Launch slideshow »

Caesars Entertainment Corp. Chairman and CEO Gary Loveman was notably downbeat Monday in assessing how economic problems and uncertainties have reduced spending by gamblers at Caesars' resorts.

"My outlook on the world has changed," Loveman told analysts after the company reported a higher second-quarter loss.

Loveman said companies in assorted industries have recently been discussing outlooks that are "more foreboding about the future" and that the world since April and May ''has gotten more difficult.''

"That’s reflected both in my tone and our results," he said.

One obvious factor affecting consumer spending at casinos and other outlets is continued high unemployment.

The U.S. economy, while creating more jobs than expected in July, remains troubled with an unemployment rate at 8.3 percent. In fact, July was the 42nd consecutive month unemployment has exceeded 8 percent.

While high-end Las Vegas Strip casino operators Wynn Resorts Ltd., Las Vegas Sands Corp. and the Cosmopolitan all reported steady or improved business in the second quarter, Caesars as both a high-level and mid-level operator appeared to be hard hit during the quarter by consumers gambling less at its Las Vegas casinos.

"There is a trepidation on the part of consumers to spend at the rate they have historically," Loveman said. "Our customers can still visit and have a very entertaining experience and spend substantially less simply by reducing their average wager.

"They can still be in a nice hotel and eat well and go to the show and sit at the pool and do all the things they enjoy, but restrict their expenditures through their gaming decisions," he said.

With nine resorts on and near the Las Vegas Strip, Caesars in the second quarter was able to boost average room rates from $93 to $97 as trips to those resorts increased 2.3 percent from 2011’s second quarter.

But overall net revenue in Las Vegas fell 0.7 percent to $780.7 million because of a decline in casino revenue.

Caesars officials said there wasn’t a significant change in the percentage won by its table games — a factor often cited in casino revenue reports.

Rather, lower casino revenue resulted from spend-per-trip declines, particularly in the VIP segment, of 3.3 percent.

Loveman also said Caesars will continue lobbying for online poker to be legalized by Congress.

But with uncertainties about when or if Congress will act, Caesars is becoming more active in talking with individual states that are either on the verge of allowing intrastate online poker or are considering it, he said, naming Nevada, Delaware and California.

"We are much more active on the state-by-state process than we had been historically," he said.

Overall, Caesars lost $241.7 million or $1.93 per share in the second quarter vs. the $155.5 million or $1.24 per share lost in the year-ago quarter. Net revenue increased 0.2 percent to $2.166 billion thanks to strength in the company's online and international businesses.

The Las Vegas results were affected by the opening of the 668-room Octavius Tower at Caesars Palace as well as construction activity at the Linq retail, dining and entertainment district behind the Imperial Palace and the Flamingo.

Work on the Linq reduced net revenue by $10 million to $15 million, Caesars said.

Net revenue in Atlantic City slid 8.6 percent on a year-to-year basis to $436.5 million as Caesars' properties there were hurt by new competition in the Northeast and Mid-Atlantic regions.

Despite the difficult quarter, Caesars noted it's been investing for growth with the newly-opened Horseshoe Cleveland, a proposed Boston casino, the development of properties in Cincinnati and Baltimore, development of the Nobu hotel in Caesars Palace in Las Vegas as well as the $550 million Linq with its giant observation wheel.

"While the economy may continue to pose challenges, we remain focused on controlling costs, investing in growth opportunities and our core brands and strengthening our capital structure," said Loveman, whose company has one of the heftiest long-term debt loads in the industry of $19.9 billion.



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