Caesars’ wheel of pain

“Loveman ‘fascinated’ by complexities of High Roller,” read one of today’s headlines. Perhaps he ought to be more fascinated by the complexities of Caesars Entertainment‘s bankruptcy, of which he is the undisputed architect. The company announced quarterly earnings yesterday, losing a mere billion dollars compared to last year’s $1.76 billion, helped by $9 million in unspecified cost cuts. The blow was softened by a 6% increase in revenue, though not much of that was attributable to gambling win, up 2%. Dining and drinking (+9%) and hotel rooms (+5%) were stronger drivers of financial performance. If there’s one thing Caesars has been successful at, it’s been in rebranding the “Four Corners” of the Las Vegas Strip as a dining/shopping/sightseeing destination, as the quarterly figures imply.

Caesars also credited “continuing strength in the company’s interactive business, new hospitality offerings and sequential improvement in same-store regional results” with the narrowed loss. Players, however, are consistently cleaning the clock of Caesars Palace, in a bit of news I’m surprised the company admitted. Caesars missed all of Wall Street‘s key estimates for financial performance and the stock price suffered. (You also have to wonder how much longer they can afford to lose a billion here and a billion there, and yet keep the doors open.)

Refusing to take questions (a display of imperial arrogance that has become all too familiar), CEO Gary Loveman issued a cloud of hot air: “The financial restructuring for CEOC is part of a comprehensive plan to strengthen CEOC and all of Caesars Entertainment and position them for sustainable, long-term growth and value creation.” Pure boilerplate.

If Loveman was full of gas, KDP Investment Advisors analyst Barbara Cappaert punctured the balloon. “To be sure, we are not happy with any of the transactions which served to move assets off of the CEOC balance sheet and to strip away parent company guarantees. However, litigating this could serve to drag out when creditors will see their claims settled and this too would impact eventually returns,” Cappaert said, offering a welcome dose of candor.

In addition to blocking my view of the Red Rock Escarpment, Loveman’s beloved Vegas High Roller is in danger of becoming his biggest white elephant. Caesars predicted it would draw 11,000 riders a day and it is pulling less than half that many. Maybe tourists don’t want to make the time commitment, don’t find our scenery compelling enough to warrant an expensive half-hour Ferris wheel ride or are frustrated by the frequently obstructed views.

Whatever the reason, Loveman sounds schizoid about the wheel, saying one minute that it’s proven hard to market and corporate outreach is being improved. In the next breath, he says, “I’m very excited about how the wheel is doing. I’m also fascinated by how complicated it is.” He does have some cause for hope, ridership having picked up 10% from 3Q14 to 4Q14. Even if the High Roller becomes a financial success, I think we’ve heard the last of that nonsense about multiple Ferris wheels being built in Las Vegas. The market clearly won’t sustain it — just as Caesars has been unable to sustain the Loveman administration.