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Caesars Entertainment's Latest Disaster Unfolding Before Our Eyes

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.

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At the very least, the development was intended to spruce up an outdated area of The Strip north of The Flamingo Resort and south of the old Imperial Palace, which is now The Quad.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. 

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.

Read/Post Comments (8) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 08, 2014, at 7:23 PM, tobus wrote:

    they are going to convert it into a restaurant. It will make money then

  • Report this Comment On July 08, 2014, at 7:25 PM, tobus wrote:

    Gary should give himself a raise

  • Report this Comment On July 09, 2014, at 11:48 AM, a7199894 wrote:

    This article gives us an idea how far from the truth is the writer and the website in general.

    They are giving you advices about your money, in some cases this could be millions, but they don't know even the small details !!!

    Quote "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" End of Quote.

    There is no Pirate ship at Treasure Island !! It's been more than 6 months since they are building something else there.

    Be aware - Don't trust people writing non sense!!!

  • Report this Comment On July 09, 2014, at 1:41 PM, mushkane wrote:

    Hello, Caesar's Entertainment? It's blisteringly hot outside. That's what the weather does in the Summer in Las Vegas. Right now, it's monsoon season, so it could also be muggy and/or pouring. Or wait...maybe with thunder and lightning! Why in the world would anyone expect good results for an extremely slow ride out in the open right now? Who was the braniac who dreamed up this roll-out?

  • Report this Comment On July 09, 2014, at 7:30 PM, ROIKing wrote:

    The fact that it is built on the ghetto side of the Flamingo may contribute to the problem as well. The view from back there is hardly epic. As well, the 'Linq' itself (the shopping/dining/entertainment area) was not a very well thought out design, partially due to the restricted space it was shoehorned into.This is a company that largely lost its way many years ago when it became a corporate slug, thinking a bunch of 'outsiders' could figure out how casinos are supposed to be done right. LVS and MGM are far superior operators who don't make a fraction of the operating errors this company does. How there has been no change in the top dozen or so senior leaders is hard to imagine.

  • Report this Comment On July 10, 2014, at 12:30 AM, rexjred wrote:

    Instead of going on this ride to see the lights and city. Just go to THE HOTEL at Mandalay Bay and go to the roof top bar. Last time I was there it was called Mix Lounge. It was free entrance when I was there on a Friday. drinks are about 8-12 bucks but the view of the strip is the the best!

  • Report this Comment On July 11, 2014, at 8:54 AM, luckyinreno wrote:

    Some years ago, while renegotiating an explosive amount of debt, I recall an interview where Mr. Loveman equated his negotiations to a poker game. He seemed quite proud of his feat.

    As a long term former front line employee of Harrah's, once recognized as the best in town, I was quite proud to be an employee.

    I watched the it morph into the biggest, fattest (in more ways than one) casino company on earth while forgetting about the customers and employees that gave it the reputation of being the best. As the years passed, I also watched employee morale decline and the best players go down the street to the clubs that learned from Harrah's. It's no wonder the chickens are coming home to roost.

    Anyone looking for a foolish blackjack dealer?

  • Report this Comment On July 13, 2014, at 1:09 PM, paulbunyon wrote:

    It's too bad that the writer didn't get his facts straight. A simple check of the High Roller ticketing website shows the night time price is still $34.95, not $24.95 as listed here.

    I read the same mistake in pricing across several different blogs across the web. Besides saying that The LINQ is parallel to Las Vegas Blvd (which is isn't) and saying that the Pirate Ship at TI is still in operation (which was shut down November of 2013), I'm wondering what else may not have been fact checked. Has the author even been to Vegas?

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Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

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8/28/2015 4:00 PM
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