BUILDING A GIANT
Following Bill Harrah ’ s death in 1978 , Mead Dixon was elected chairman of Harrah ’ s , and he hired Philip G . Satre . In 1980 , Harrah ’ s was acquired by Holiday Inn . Driving fast growth and running efficiently were fundamental to the strategy of the lodging giant .
The multi-disciplinary corporation that was so prevalent in strategic thinking during the 1970s and 1980s was to end . Promus , the holding company of three prominent hotel chains , divested from non-gaming to focus on expanding their casino vertical . Satre ’ s high-growth experience was perfectly placed to take advantage of the recently legalized regional and tribal casino and riverboat business , in a way that many established Las Vegas operators were not .
The newly rebranded Harrah ’ s Entertainment rapidly expanded its regional footprint , yet all properties were effectively stand-alone casinos under a common brand .
One of the characteristics found in Holiday Inn ’ s corporate culture was an openness to innovation and thinking outside the typical casino box . Satre did just that .
In 1991 , Satre was appointed the president of the Promus companies and immediately outlined a compelling vision that the company ’ s executives embraced : A “ One Company ” philosophy to identify and apply compelling strategies and practices from the casino to the hotel business and vice versa .
Almost immediately , he assembled an internal team to develop a new analytics platform , one focused on the lifetime value of customers that could be distributed and operationalized across the rapidly growing number of riverboat and tribal casinos the company was developing . Satre ’ s vision of the hub and spoke model — establishing local casinos feeding into flagship resorts in Las Vegas , Lake Tahoe , and Atlantic City — was taking shape .
The underpinning of many decisions in the “ One Company ” program was customer-centricity and the added insight that gamers visited multiple casino markets , similar to hotel customers . Whereas loyal hotel customers across multiple markets received cross-property benefits , Satre believed the company ’ s gamers should receive the same , based upon their value as a Harrah ’ s customer .
He applied his hotel learnings , transitioning Harrah ’ s from what appeared a loose collection of five properties into a well-defined , branded company with platforms similar to hotel companies : The first national casino chain was born .
The national delivery system was both physical ( bricks and mortar ) and virtual , similar to successful hotel brands . Harrah ’ s first grew physically through regional legalization and later through acquisition . The investment in virtual capabilities created company-wide , national back office and customer-facing technologies , bringing the benefit of consolidated scale and the establishment of applied expertise , driven nationally and adapted to local conditions .
Shortly before the implementation of the Total Gold loyalty program in 1997 , Satre posed the question to his team , “ What is the greatest obstacle constraining our creation of customer value from the investments we ’ ve made in our national delivery systems ?”
One of his senior executives said , “ We have F-16 planes that can do remarkable things , but we have Piper Cub pilots to fly them . We need to upgrade !” referring to the current expertise within the organization .
Harrah ’ s already had the executive development “ President ’ s Associates ” program in place when the instructor , Gary Loveman , joined the company from academia to an executive position , launching a bid to bring MBA graduates and data scientists to the company .
This fundamentally reshaped the gaming industry , by investing heavily in the back office to analyze and interpret their data , which would be translated to improve business efficiency and assist in every aspect of management decision-making .
“ What is the greatest obstacle constraining our creation of customer value from the investments we ’ ve made in our national delivery systems ?”
— Phil Satre
In many ways , this was the antithesis of traditional casino operations , making decisions from the bottom up , rather than top-down .
They tested , tweaked , refined and monitored , becoming one of the leading data-driven companies in the country . Growth in cross-market revenues drove strong same-store revenue growth throughout the 2000s .
“ Everything we do to market Harrah ’ s is framed in terms of players ’ decisions to visit , or not visit , one of our casinos . One measure of the effectiveness of our strategy is that many of our competitors have adopted similar programs after viewing our company ’ s performance over the past few years ,” wrote Loveman .
In 2003 , Loveman replaced Satre as CEO , with Satre moving to chairman of the board . In 2006 shareholders accepted a $ 29 billion dollar private equity buyout .
Using Day and Moorman ’ s examples in their study “ Strategy from the Outside In : Profiting from Customer Value ,” one could observe that Lanni ’ s MGM was an inside-out company , one that prized internal management and learned capabilities to drive the business forward , whereas Satre ’ s Harrah ’ s / Caesars was outside-in , reflecting the strategy of learning from customer behavior to drive incremental customer value and growth .
CONSOLIDATION , CORPORATIZATION AND CUSTOMER SEGMENTATION
With Lanni at the helm , MGM Grand acquired Mirage Resorts in 2000 for $ 6.4 billion , and Circus Circus Enterprises , renamed as Mandalay Resorts , in 2005 for $ 7.9 billion .
Harrah ’ s had also gone on a buying spree , picking up international properties , regional casinos and dramatically increasing their Las Vegas presence , including Barbary Coast , Imperial Palace , Planet Hollywood , Bally ’ s , Paris and Caesars Palace .
The challenge facing these new corporations was how to integrate the distinctive business models employed , requiring some management skill .
Lanni believed that each resort had a different character and wanted to maintain that uniqueness , but also prized strong internal management and consensus-based decision-making , rather than the traditional top-down leadership model found in the companies he acquired . The resolution was to continue property-level operations , with Lanni ’ s trusted aides implanted to build teams and implement the corporate culture , with each resort managed internally on a competitive basis .
By contrast , Harrah ’ s managed expansion by adding nodes to the powerful central corporate hub .
Impact of consolidation strategies on the two large corporations was initially met with divergent outcomes . Within the MGM portfolio , many resorts repositioned to attract more convention business and fewer leisure customers ,
28 Global Gaming Business OCTOBER 2024