Caesars Entertainment's Latest Disaster Unfolding Before Our Eyes

The High Roller in Las Vegas is lowering prices, a sign that the new attraction is already underperforming expectations.

Jul 8, 2014 at 6:17PM

It seems to be one misstep after another for Caesars Entertainment (NASDAQ:CZR) and Caesars Acquisition Company (NASDAQ:CACQ), which can't seem to recover from massive losses and over $20 billion of debt. The most recent debacle may be the brand-new High Roller Ferris wheel at The Linq complex next to The Flamingo, which recently had to lower prices just to get people to ride the ride.

The High Roller is the centerpiece of a $550 million construction project called The Linq that's an entertainment street running parallel to the Las Vegas Strip between Flamingo and The Quad. The complex will include old favorites like O'Sheas as well as new experiments like a 78,000-square-foot bowling alley (because who doesn't want to bowl in Las Vegas) and music venue called Brooklyn Bowl.

Czr High Roller Linq Image Wikimedia

High Roller at The Linq is a big bet that may not pay off for Caesars Entertainment. Source: Nate Stiller via Wikimedia.

At the very least, the development was intended to spruce up an outdated area of The Strip north of The Flamingo Resort and south of the old Imperial Palace, which is now The Quad. If Caesars can divert traffic off The Strip in that area and get people to spend money on drinks, entertainment, or even gambling, it will be a success. But the big draw is supposed to be The High Roller, which is found at the end of The Linq's walkway, and it's already showing warning signs that aren't good for Caesars.  

High Roller is already flopping
When the 550-foot-high High Roller opened on March 31 of this year, there were high hopes for demand for the new attraction. Caesars set prices of $24.95 for a daytime ride and $34.95 at night for the 30-minute ride and even offered a VIP ticket with no line wait for $59.95.  

But demand has been slow and Caesars has lowered prices to $19.95 during the day and $24.95 at night. If you're so intrepid, you could even get a Groupon that gives you two VIP rides for $65. If we assume Groupon's normal 50% take, that's just $16.25 per VIP ride for Caesars, nearly 75% off the regular price.

Giving discounts in Las Vegas isn't the end of the world, but it's not a good sign for a ride that's barely three months old in what is supposed to be a high traffic area of The Strip. The other problem is that it's a high price to pay for views that many visitors already have access to in a town that's built to give away amazing entertainment shows like the fountains at Bellagio, Mirage's volcano, or Treasure Island's pirate ship. 

Las Vegas Strip Image

The Las Vegas Strip is full of attractions that are free to visitors. 

Giving people what they already have
I think the core problem is that The High Roller gives many people what they already get in Las Vegas. Megaresorts tower over The Strip and unless you're in a room with an off-strip view or a low floor, it's likely you already have a good view of The Strip. Combine that with the fact that you can see amazing views of much of The Strip from ground level, and you have a hard sell for a 30-minute trip in a confined space with up to 40 other people.

This is in contrast to similar Ferris wheels like London's Eye or the Singapore Flyer, which give unique views of the city that may be worth the price.

A flop Caesars can't afford
From an investment perspective, the problem is that Caesars Entertainment, Caesars Acquisition Company, and Caesars Growth Partners can't afford to make mistakes with new investments. The parent company is drowning under debt, and after pushing assets to new ventures like Caesars Growth Partners, the company is being sued by bondholders who say the asset sales are illegal.

CZR Net Income (TTM) Chart

CZR Net Income (TTM) data by YCharts.

If the underlying company were healthy, there would be no problem, but that's far from the case. The High Roller does nothing to solve that, and after lowering prices, Caesars may have another money-losing business on its hands. 

Make a safer bet for the future
It may be fun to take a gamble on a stock like Caesars, but long-term dividend stocks simply crush their non-dividend-paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers