Where I Stand — Guest Columnist Henri Lewin: An emerging future

Wednesday, Aug. 25, 2004 | 8:31 a.m.

Editor's note: In August the Where I Stand column is turned over to guest writers. Today's columnist is Henri Lewin, who spent 22 years with Hilton Hotels, retiring in 1985 as an executive president of the company. Lewin currently operates a hotel/gaming consulting firm, Aristocrat Hotels, based in Zephyr Cove, Nev.

MGM-MIRAGE wants to buy Mandalay Resort Group. Meanwhile, Harrah's Entertainment Inc. has signed an agreement to acquire Caesars Entertainment Inc. Before you place bets on what the outcome will be, however, let's consider the two proposed mergers.

If both deals go through, the two corporations will have vast controls in the industry. These two corporations would control 15 of the major gaming operations in Las Vegas.

But the competition for these operations would come from other cities, such as San Francisco, New Orleans, Chicago, New York, etc. I mention this because of the convention business.

I think that if these deals go through it will not affect the business within Las Vegas. It might even be advantageous for the future of Atlantic City and Las Vegas, as the convention business is still increasing in both locations. The national sales possibilities for the two mergers would be a strong plus for these two cities.

If you look at Harrah's business and the people it caters to, it is my belief that it has never directly competed with Caesars in Las Vegas. So if you talk about Harrah's acquisition of Caesars, I think the two will complement each other in this merger.

There might be many possible outs concerning this merger under certain conditions. Regulators might order divestitures. Such provisions are not unusual.

We all know that a deal has to be good for the seller and the buyer, so obstacles need to be overcome to finish a deal.

When Harrah's took over The Rio hotel and casino in Las Vegas, I did not think Harrah's maintained The Rio's momentum. But as time went by, I think they got a hold on it. But if the deal with Caesars goes through, there will be no room for adjusting or learning on the job.

At this time I cannot evaluate if such a transaction will bring an economic domination in the industry. After such a merger, that one company might have such strength and power that it would dominate the industry, but I cannot be certain. I do not think it will, but there are differing opinions.

In Lake Tahoe for example, concerning the Harrah's-Caesars deal, you must be reminded that Harrah's already owns Harrah's Hotel and Casino and Harvey's Resort. So I would not think that they would need to own Caesars across the street after the merger.

I have not given much time regarding the possible MGM-MIRAGE and Mandalay deal. But when this deal came on the table, I said it then, and I say it again now: Kirk Kerkorian has done it before. He will do it now. He will do it again.

Kerkorian puts the money on the table and has a brilliant army to give the deal a boost in quality. Terry Lanni heads a magnificent staff of brainpower at MGM-MIRAGE.

Please remember that Hilton entered Las Vegas after Kerkorian sold them the Las Vegas Hilton (previously the International) and the Flamingo. This was good for Hilton and good for Kerkorian. You know what happened to Hilton in Las Vegas and you know what Kerkorian is in the hotel and casino industry today -- a legend and proof that to get bigger, in this case, is better.

The possible merger of Harrah's and Caesars and the MGM-MIRAGE-Mandalay deal is the beginning of something big. In the language of gaming, I put my bet on the mergers.

Is less competition a problem? I am not an expert in that domain. There is only one Kerkorian. The principal mark of a genius is not perfection but originality and the opening of new frontiers. You do not get harmony when everybody sings the same note.

We live in a new era where Indian reservation gambling is growing like wheat. Slot machines are all over the world. This is a new beginning and nobody can see the end of it.