Casinos play it safe
By Paul
Despite the resurgence of casino stocks post 9/11, most of the big players of the casino industry are likely cool their heels on any big expansion plans, with customer loyalty and new markets likely to be the focus this year.

'Expect a different kind of growth in gaming,' said Monte Koch, head of mergers and acquisitions for the Americas at Deutsche Bank. 'Instead of mega-projects that are wowing people, you'll see companies growing by leveraging off of their customer base, maybe buying a small casino in a new market.'

Although most analysts agree that big acquisitions and resort developments are likely to be thin on the ground this year, many of the big companies are looking to smaller acquisitions such as riverboat casinos. Experts say that investments such as these are recession-proof to an extent, and build brand loyalty. Even better for the big casino companies, they have limited competition due to the scarcity of licenses and the difficulty in obtaining them: for the big players, barriers to entry are a good thing.

'You can have your own market virtually unencumbered,' said Michael French, a hospitality and gaming partner with PricewaterhouseCoopers. 'You can add more bells and whistles to keep it fresh, and you don't have to worry about anyone coming in next door.'

The number of gaming mergers has dropped 71% since 1997 according to Thompson Financial, with no big takeovers since MGM Grand Inc. bought Mirage Resorts Inc. for over $4 billion in 2000, creating MGM Mirage. This can be put down to consolidation in the industry running its course: 'In a big market like Vegas, a lot of consolidation has already occurred,' said Sharon Lewis, an associate in the Chicago office of investment bank Houlihan Lokey Howard & Zukin. 'Mandalay, MGM Mirage and Park Place now control a large portion of the Las Vegas Strip. Not that there won't be smaller deals, but the mega ones have likely already transpired.'

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