Hotel & Motel Management: Merger savings achieved through corporate reductions

LAS VEGAS -- If Harrah's Entertainment is allowed to purchase Caesars Entertainment [see story, page 1], the lion's share of savings will come from eliminating corporate staff redundancies.

"We do a lot of strategic sourcing work to leverage our purchasing scale," said Gary Thompson, a spokesman for Harrah's Entertainment. "I don't know if Caesars buys through corporate--as we do--or through the property."

In past acquisitions, Harrah's made some mistakes not realizing differences in cultures and the need to communicate adequately, he said.

"The initial challenge in the integration of cultures will be to explain how we believe the application of our core capabilities will help them improve the performance at their properties," he said. "We will learn from them and they will learn from us."

When Harrah's acquired the Rio All-Suite Casino Hotel in Las Vegas a few years ago, the company soon learned that high-end table-game play was a difficult business.

"We found it was not profitable because we had to discount to the players their losses," Thompson said. "We also comped their rooms and gave them airline flights. We got out of that business and now the Rio is more profitable than ever."

The change created a culture clash because many Rio managers thought their way was the best way to conduct business. Caesar's Palace, the centerpiece of the Caesars Entertainment portfolio, still is in the high-roller business.

"We don't have information on how they handle that business, so it may be profitable for them," he said.

Harrah's recently put a hotel revenue-management system into use that is tailored to its needs.

"We have about 28 million people in our Total Rewards program and about 15,600 hotels rooms, including about 5,000 in Las Vegas," he said. "It's a very limited inventory and we want to give our better customers our rooms. They may be comped in the room. We would rather have somebody comped in the room who spends $200 on the floor than sell a room for $100 to a non-gambler."

badams@advanstar.com