Caesars Fails to Pay Off Five Years After Biggest Casino Merger

A bellhop assists a guest outside Caesars Palace in Las Vegas. Photographer: Roger Kisby/Bloomberg Photo by Roger Kisby /Bloomberg

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(Bloomberg) — Investors are losing patience with Caesars Entertainment Inc., five years after the company was acquired in the biggest casino merger ever.

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The shares have lost almost half of their value since tiny Eldorado Resorts Inc. took over the much larger Caesars in July 2020 and installed its own management atop the combined company. Over that span, Caesars is the worst performer among the big four resort giants based in Las Vegas. 

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Eldorado long had a reputation for shrewd casino management. Chief Executive Officer Tom Reeg, a former high-yield bond analyst, was credited with squeezing profit out of Eldorado acquisitions like the Isle of Capri Casinos and Tropicana Entertainment. But things have not gone as well since Eldorado’s $17 billion merger with Caesars.

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Former Caesars executives and customers who spoke with Bloomberg said the company has lost its way under Reeg. Las Vegas resorts aren’t like the regional casinos that Eldorado primarily used to run: They require continuous reinvention and promotion. Caesars has cut costs and raised prices, angering some guests. 

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Sales, which peaked in 2023, are forecast to increase about 2% this year. Profit will be down. 

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“Caesars used to have an aura about it,” one person commented on a Reddit board earlier this year. “It was the Palace. In its heyday it was the most opulent resort on the Strip.”

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Jefferies LLC analyst David Katz downgraded Caesars shares to hold from buy on Nov. 4. He cited third-quarter results in Las Vegas that missed guidance, elevated rent levels at leased properties and the need for the company to invest more in room renovations and other improvements. 

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“The path to upside,” he wrote, “is getting more complex.”

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Other analysts share the frustration. “We have talked previously about CZR now being a ‘show me story,’” Stifel Financial Corp. analyst Steven Wieczynski wrote in an Oct. 28 note. “But we think it’s fair to say this has gone beyond that to something even more Draconian.”

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While he still has confidence in Caesars management over the long term, Wieczynski said the company’s recent performance in Las Vegas, online and in other markets leaves him uncertain as to when results will improve.

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Part of the problem is the tourist economy in Las Vegas, where Caesars does more than a third of its business. The number of people traveling to America’s gambling capital fell for the ninth straight month in September. Local officials blamed economic uncertainty and fewer foreign visitors, particularly from Canada.

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Others cite the rising cost of a Las Vegas vacation. At Caesars Palace, that can include $25 self parking, a $55 daily resort fee and $20 per person for seats that view the kitchen at a Gordon Ramsay restaurant.

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Longtime Caesars customers said the company has grown stingy under Reeg. He closed the Laurel Lounge at Caesars Palace in Las Vegas, where high rollers could get free food and drinks. Guests at Caesars’ premier property have to pay $25 for a four-pack of Keurig coffee pods if they want to make a cup of java in their room.