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The Loveman Legacy

By Chuckmonster on Wednesday, 4th February 2015 5:30pm
  » filed under Ooops?  comments: 13


Gary Loveman revolutionized the Las Vegas gaming industry by harnessing the power of every single byte of information casinos gather about their customers to create a marketing machine never before seen in world of business - Total Rewards. Total Rewards knows who you are, what you play, what you like, where you eat, where you shop, what your favorite color is, what hotel offer types you don't respond to, whether you like free rooms at lower star hotels or buy one get one free at higher star hotels, when you visit, who you come with, where you stay, where you play, what specific slot locations in the casino you gamble in, what your favorite cocktails are, who your favorite sports teams are, what music and entertainment you like, what kind of computers you have, how much you paid for your house on and on and on and on. It was the invention of the Total Rewards program - certainly not the style and class of Harrah's/Caesars aggregate of mid-tier properties - that gave Harrah's the firepower to take the Strip by storm through acquisition.

Even now, all these years and technological advances later there is no casino rewards program that comes remotely close to the effectiveness of Total Rewards. The properties they market aren't (generally speaking) the best, but are slightly better heeled rollers looking for bargains and freebies? No. Rewards marketing works perfectly for the clientele they were attracting. The folks who play at the local barge a half dozen times a year then pounce on that free night at the Flamingo mailer or the typed up letter from Rio. Y'know, the regular buffet dinner crowd who prefers to put their vacation money into the machine than the pillowcases.

This should be the legacy of Gary Loveman.

Depending on how bad the bankruptcy proceedings go, Gary will probably be remembered for making one big bet at the absolute worst time - following Apollo/TPG down the plank of the leveraged buy out that took the company private and saddled them with the debt that would kill it.

Who was to know that the real estate market collapse would implode the entire economy? In those days, money was cheap and rooms at lux resorts were asking and getting $300-600 a night. Loveman got caught in the same fervor that brought us CityCenter (almost bankrupted), Cosmopolitan (bankrupted), the SLS (failing), Echelon (mothballed, sold), the Strip version of New York's Plaza Hotel (bankrupted, sold), Tropicana redo by Columbia Sussex (bankrupted, sold) Crown Towers (aborted), Fontainebleau (bankrupted, sold), Maxim Magazine Resort (aborted), the City Center North (aborted), Venetian expansion (mothballed) and a litany of other pipe dream projects, large and small. They all made the decision to go for it when the gettin' was good. Unbeknownst to all, the gettin' would get them got.

Perhaps Loveman deserves credit for keeping Caesars' listing ship afloat for as long as he did. The other casino companies had their death spiral financial crisis' in the late 00's. They took their medicine by scrimping, saving, selling, refinancing and paying down debt. Caesars did some of that via deferring maintenance and mothballing capacity expansion at Caesars Palace, but what about all the other post-LBO bets? The purchase of Planet Hollywood, the golf course play in Macau, buying Imperial Palace, Octavius Tower, recent spends on The Linq, High Roller, The Quad, east coast projects and the The Cromwell. Caesars Entertainment could've limped along making minor, yet significant upgrades along the way (finishing the inexpensive but awesome Go Room refurb at Flamingo) but instead, they opted to feed the debt monster by buying.

How can I be broke, I still have checks?

Caesars has known that their death knell was about to peal. Their asset-hiding shell game was transparent enough that even an untrained financial doofus like yours truly could see right through this charade of an endgame. To think they think they've fooled anyone?Seven out, new shooter.

The details surrounding the end of Loveman's tenure will come forth at some point - was he pushed? did he jump? was it mutual agreement? And how much is his golden parachute worth? In the end, Gary Loveman turned a collection of funky riverboat casinos into one of the smartest failures of a casino company we may ever see. It truly is a fabulous disaster.

Bow your heads.


Comments & Discussion:

The Imperial Palace purchase was prior to the LBO, as the deal was announced in August 2005 and was completed in December of that year. The deal to take the company private wasn't announced until October 2006.

Damn you fact checkers.

It's an impressive train wreck. It's changed the Strip forever and probably not for the best. I'm glad they've kept everything open. Hopefully we'll see more competition when this is over. Loveman has been well paid for this high stakes shell game. Had the economy not tanked, the scheme might have worked.

Amen, bruh. Amen.

Great post, Chuck.

He also delt severe damage to Atlantic City, and instead of doing something actualy smart he closed and sold off what was probably the best overall property they had there. Seriously, who closes and sells a profitable casino?

Safe to say he will leave a mixed legacy.

Loveman's biggest mistake was not getting into Macau when he had the chance. He himself has admitted this in public. Just imagine a gaming CEO not understanding the potential of a gambling joint in China. Everyone that posts here understands enuff about gambling to have jumped at that opportunity!

'Tis posts like this that make this the best informed and most intelligent site for Vegas news.

Excellent post, thanks

Love your site, Chuck, but strongly disagree with your assessment of Total Rewards. You describe it the way Loveman wants you to: intelligent, precise, profit-generating, ahead of the curve. It is not. TR is a chainsaw used to perform surgery, a sledgehammer employed to crack eggs. TR "works" by overwhelming customers with the most free slot play, the most comps, the most hotel rooms and flights, combined with the most properties at which to use them and the most ways to earn points. Sure it drives business, but at what cost? How much of that expense is unnecessary overkill? You have heard the expression "we lose money on every deal, but we make it up in volume." This is TR in a nutshell. The profitability of every player in its database is severely diminished because the cost of comps is so high. TR overcomps everyone, instead of gaining insight from all that data and figuring out who and when it can under-comp, benefiting the bottom line. The database is never utilized to market *smarter*, only to market *more*. The acquisition of Caesars was never going to deliver long-term ROI, even with a strong economy, because too many of the properties were redundant, and the players they were purchasing were those who tended to prefer, and respond to, Caesars' marketing philosophy over Total Rewards. 2 + 2 = 3, so to speak. It's like McDonald's buying all of Burger Kings and converting them all -- you're trying to force-feed Big Macs to customers who prefer a Whopper, and do you really need to own 2 stores on the same street corner?

And there's no mention of the failure to pursue Macau here. This is bad. Unforgivably bad. Babe Ruth to the Yankees bad, Sam Bowie before Michael Jordan bad, Pete Carroll at the 1 yard line bad. No other decision better demonstrates the negative connotation associated with the "ivory tower." To guys like Wynn and Adelson, deeply entrenched in the business of gambling, the opening of China was an obvious golden goose, an absolute no-brainer. Meanwhile Gary Loveman the academician, the manager, philosopher of "service" and "process", never recognized that the Chinese culture and propensity to gamble represented the largest opportunity that would ever exist for a casino operator. Macau generates SEVEN TIMES the revenue of Las Vegas ($45 billion to $6.5 in 2013) -- but Dr. Loveman, proud that he never ever gambled before joining Harrah's, never really understood his own business. Instead, the casino was just a laboratory to conduct experiments -- "this kind of ongoing feedback system that, Loveman contends, could be applied to theme parks, ski resorts, cruise lines, retailers, and subscription businesses such as AOL and satellite TV." Good luck with that, meanwhile your peers can't count their Asian profits fast enough.

A final comment on TR: as much as Loveman insists it is, Total Rewards is hardly "revolutionary." First and biggest in the gaming industry, yes (it helps that some casino companies are *embarrassingly* bad), but loyalty programs and database marketing in other industries preceded Total Rewards. TR is much more of a natural progression than a revolution. Further, its legacy is diminished by being passed up -- in the 1990's, tracking millions of players at thousands of slot machines at dozens of casinos was a massive undertaking requiring the most sophisticated technology available. For a very brief period, TR modeled some pretty impressive engineering. But today, it would be considered a small project that could easily run on cheap hardware, probably a single server. TR doesn't come close to pushing the boundaries of data management like internet companies, genomics, meteorology, finance, machine learning, etc. But while computing power has exploded and the tools to interpret, organize, and visualize data have improved and multiplied, TR has not evolved much -- with a few minor advancements, most of TR is still the same system that was implemented in the late 90's and early 00's. Slow, difficult to work with, expensive, incompatible with powerful new tools, error-prone, resistant to innovation. Come to think of it, a reflection of the outgoing CEO.

Quote from: http://www.forbes.com/asap/2002/1007/048_print.html

Great read- thank you.

Great write up Chuck, although I do agree with many of ScreenDoorSlams points, that while TR is the crown jewel that Loveman holds up, the hype of it, is way off compared to what they could have done/be doing with it.

I thought Loveman tried to get into Macau?
I might be a little fuzzy, but I recall that Loveman was hesitant to buy the concession (or sub-concession) that could have been had. Maybe he thought the price was too high? Then he had a change of heart, and bought the golf course in hopes of using that land if the government opened something?
It's possible that avoiding Macau could be a good thing in the long run. If the government continues to clamp down on the money laundering and corruption, then we might already have a region with too much casino inventory? Is it possible Macau could be another Atlantic City? Admittedly at a magnitude of zoomo-zoomo-wowza-X!

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