A Day at the Horseshoe Races

Back in November, Harrah's Entertainment (NYSE: HET) announced the first expansion of the "legendary" Horseshoe brand since closing the acquisition of Horseshoe Gaming and its three riverboat properties this past summer. Last night, the casino operator said that it had received final approval for the project from the local city council.

The newest Horseshoe-branded property will come in the form of an $85 million investment in Harrah's Bluffs Run Casino, an existing racetrack and slot machine operation directly across the river from Omaha, Neb., in Council Bluffs, Iowa. Slated to open during the first quarter of fiscal 2006, Horseshoe Council Bluffs will be the largest casino in the market, featuring 68,000 square feet of gaming space, 36 table games, and 1,900 slot machines.

Bluffs Run currently operates 1,642 slot machines and zero table games on just more than 40,000 square feet of gaming space.

Harrah's is looking to transform its position in the three-property Council Bluffs market. In addition to Bluffs Run, Harrah's runs a smallish riverboat casino with 1,187 slot machines and 39 table games in 28,000 square feet of gaming space. Both Harrah's properties substantially trail the riverboat casino property owned by rival Ameristar Casinos (Nasdaq: ASCA). See the chart below for financial details.

Ameristar maintains a strong position with the largest riverboat in the state, a 3,776-seat outdoor entertainment venue, and the only AAA four-diamond-rated hotel accommodations in the region. But while Ameristar announced its own expansion plans in October -- primarily the addition of a poker room and the renovation of its hotel rooms -- a number of factors will help improve Horseshoe's competitive position.

Key factors in favor of Horseshoe:

• Horseshoe Council Bluffs will be the only land-based casino in the market. As such, all 68,000 square feet of gaming space will be located on a single floor, a trait that gamblers far prefer over multilevel riverboats.
  
  
• Twenty of the 36 table games being introduced to the property will be poker tables, giving the Horseshoe the largest poker room in the market, a locale for large tournaments, and a neat brand-builder.
  
  
• The property's dining options will get a makeover with popular Horseshoe restaurants including the buffet and a Jack Binion's Steak House.

Harrah's estimates that the new operation will add $50 million in state gaming taxes through the end of fiscal 2010, or about $10 million per year. Based on the state's 24% gaming tax rate on racetracks with table games, it is clear that Harrah's is not only moving to improve its odds, but is also aiming squarely for Ameristar's market share lead.

This chart shows where the players stand now:

Council Bluffs Gaming Market

Casino	FY'04*	Share	FY'05**	Share
Ameristar (ASCA)	$163.1M	40.6%	$86.0M	40.5%
Bluffs Run (HET)	$127.6M	31.7%	$68.6M	32.3%
Harrah's (HET)	$111.2M	27.7%	$57.5M	27.1%

*Fiscal year ending June 30, 2004
**Through six months

For related coverage, check out:

• ESPN Goes "On Tilt"
• When Competition Hurt the Game
• Ameristar Is a Hold
• The Magnitude of Pennsylvania's Slots
• Argosy Gambles on Expansion
• Harrah's Gains, Gamers Lose

Fool contributor Jeff Hwang owns shares of Ameristar Casinos. The Motley Fool has a disclosure policy.