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Harrah's Eyes Local Las Vegas Market

LAS VEGAS -- The country's most geographically diverse casino operator is casting its eye at a choice casino market, one of the most lucrative casino markets in the country.

But Las Vegas-based Harrah's Entertainment isn't looking far. It covets the hometown locals casino market and has already made preliminary inquiries about buying the valley's second biggest operator, Coast Casinos, sources said.

Harrah's Chief Operating Officer and CEO-in-waiting Gary Loveman recently acknowledged the attractiveness of the Las Vegas locals market in an appearance on a local cable television talk show.

He noted that the company is an expert locals casino operator in a number of markets outside Nevada.

Coast Casinos Chairman Michael Gaughan said that Harrah's executives made inquiries about the availability of his company, operator of locals powerhouses Suncoast, Gold Coast and The Orleans as well as Barbary Coast at center Strip.

"They've expressed interest, but there's nothing happening now," Gaughan said, declining to elaborate further, citing a Securities and Exchange Commission quiet period that accompanied the privately owned company's registration to sell stock to the public.

Gaughan said in September that he'd placed the IPO on hold, and said this week it remains on hold.

Gaughan also said he was delaying an announced $65 million expansion of the Suncoast that would include 700 additional slot machines, a 1,600-car parking garage, four new restaurants, a sports bar and a new sports book.

Loveman, slated to assume Chairman and CEO Phil Satre's day-to-day management responsibilities in January, wasn't available for comment on the Coast inquiry, but company spokesman Gary Thompson said the company looks for strategic opportunities in every existing market.

The company has bought four other casino operators in the past four years, he noted, referring to Showboat in 1998, Rio in 1999, Players in 2000 and Harveys in 2001.

Harrah's has emerged as the industry leader in database marketing, parlaying its 25-million person database of customer names into a powerful revenue driver.

"Our financial position is in such good shape that we have the capability to build and the ability to buy," Thompson said while declining to confirm or deny the company's interest in Coast Casinos or any other valley operator.

Harrah's interest in the Las Vegas locals market makes sense, Deutsche Banc casino industry debt analyst Andrew Zarnett said.

"It's very logical for them," Zarnett said. "The Las Vegas locals market would fit Harrah's perfectly, but it's very hard to get into the market."

Industry insiders believe only Station Casinos and Coast Casinos operate locals properties that might interest Harrah's. The company could build its own casinos, but, as Station Casinos executives remind the world at every opportunity, there aren't many good locals casino sites left in the valley, and they own most of them.

Glenn Christenson, Station's chief financial officer, said the company doesn't comment on potential mergers and acquisitions.

"With two entrenched operators, that makes it hard for Harrah's to enter the market without acquiring all or part of Station or Coast," Zarnett said.

He doesn't expect Harrah's to buy one of the two companies in the near term, but said the market is a perfect fit.

"They have extraordinary expertise at attracting locals," Zarnett said. "There's no better local customer in the country than the Las Vegas local customer."

Las Vegans visit casinos much more often than customers in other markets, he said, treating the gambling complexes as frequent entertainment destinations.

Bear, Stearns & Co. estimates that the average household income in the Las Vegas market will rise from $63,643 to $78,173 by 2006, a 22.8 percent jump, while the adult population is expected to jump by 17.3 percent during the same span, to almost 1.2 million.

Harrah's is a 26-casino operation with 42,000 employees.

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