NEW YORK (Reuters) - For a former Harvard Business School professor, Gary Loveman has a surprisingly simple way of knowing whether the more than 50 casinos he runs are doing well or not: heel size.
The chief executive officer of Las Vegas-based Harrah’s Entertainment Inc, the world’s largest operator of casinos, says that he likes to see stilettos rather than flat heels.
To Loveman it means that the guests are literally and figuratively well-heeled. They are likely to spend more at the casino tables and at the machines, or in the hotels, shops and restaurants.
Its Atlantic City casinos, for example, have been going through rough times, something reflected in the flatter footwear.
“I have noticed that one can proxy this by the average heel height of the ladies visiting our casinos, which had historically been very low,” he said during an interview at the Reuters Travel and Leisure Summit in New York this week.
And in a sign of a possible pickup, he said: “I’m pleased to remark that it is growing.”
But despite his love for elevated customers, Loveman, who has been the company’s CEO since 2003, is still skeptical about the value of luxury in the industry and critical of those who have been building more and more expensive casino palaces.
“We are not building these places to live in them ourselves. We are not building them to show them off to our friends and our girlfriends and our boyfriends. We are supposed to be building them to make a return.”
Harrah’s Las Vegas may be a modest facility but it is making a lot more money than some fancier looking places, he said. “There is only so big a hotel room one needs. There is only so soft a bed can be.”
The opening of new luxury resorts like MGM Mirage’s (MGM.N) 6,000-room CityCenter help to make Loveman bearish on the outlook for Las Vegas — at least in the near term.
He said that hotel rates had got so cheap in Vegas — $89 a night for a room at a very nice hotel — that anyone might be tempted to sell their home and move into a hotel. “We are the cheapest date in the world,” he said.
Harrah’s, which was acquired by Apollo Management and TPG Capital in a 2008 leveraged buyout, operates more than 50 casinos, many in regional U.S. markets like Tunica, Mississippi and Joliet, Illinois, with four in Atlantic City.
Loveman, who still commutes to Las Vegas from his home outside of Boston, has steered the debt-laden company through a harrowing couple of years. The private equity deal was the largest done before the 2008 market implosion.
Yet despite skating close to a debt default, Harrah’s has never considered bankruptcy, Loveman said.
“I have two investment partners in this deal that each have tens of billions of dollars of uninvested capital available,” he said. “Surely if you had been a private equity entity, you would rather pony up, whatever it is, $100 million, than kiss $3 billion goodbye. I mean it just would not make any sense.”
Loveman is also relieved that being head of a private company means he doesn’t have to answer to analysts and short-term investors every quarter.
“You don’t have to listen to people asking you ‘did it rain last week in Atlantic City?’ and all of these just ridiculous questions that are serving a community of people that are buying and selling the security hourly.”
Loveman, who left Harvard to join Harrah’s in 1998 as chief operating officer and presided over deals like the company’s 2005 acquisition of Caesars Entertainment, has again expanded Harrah’s footprint on the Las Vegas Strip with the acquisition last week of the financially troubled Planet Hollywood resort.
The move gives the company seven contiguous resorts on the east side of the Strip — it also owns Caesars Palace on the west side of the Strip.
The CEO is confident that Harrah’s can get more cash from the 2,500-room Planet Hollywood through the introduction of the casino company’s sophisticated loyalty program, called Total Rewards.
Loveman is the architect of the program — which enables the casino company to mine and cross-market a database of 40 million members. It means, for example, that a regular visitor to its casinos will be sent relevant discounts and free offers based on their previous travel and spending habits.
“He really was the mastermind of that system,” said Bill Lerner, a principal at Union Gaming Group. “Everyone said it won’t work and it worked so well that they all changed their view and tried to follow suit.”
Harrah’s is in the process of rolling out the next iteration of the loyalty program to include much more individualized, real-time targeting of customers.
Loveman said it will allow Harrah’s to make on-the-spot offers to frequent gamblers — things like a free hotel night if occupancy is low or their favorite cocktail before they even think of it.
“Casino beverage service has always been a source of some disappointment to our customers,” Loveman said. “Now within three or four minutes, some lovely person is serving you a tequila rather than you waiting 20 minutes to see the person and 20 minutes more to get the drink.”
The CEO, who likes to bet on sports and play 21, said he has no plans to return to academia, describing his current job as both fun and intellectually complicated.
“I intend to be at Harrah’s for a long time, assuming I do a tolerable job,” Loveman said.
Reporting by Deena Beasley; Editing by Tim Dobbyn