"Gambling is a sure way of getting nothing for something." At least that's what Nick the Greek used to say. Park Place (NYSE:PPE) investors can only hope the opposite turns out to be true as the casino giant makes the costly commitment to change its name to Caesars Entertainment in January 2004.
In the extremely competitive gaming industry, you have to wonder how that consideration even got executive attention. Consider the following: Native American gaming in California and New York threatens the traditional gaming markets in Nevada and New Jersey. Although Park Place will build a Caesars casino with the Pauma-Yuima Band of Mission Indians close to Los Angeles and San Diego, operations like these will be of little consequence if the traditional properties have significant reductions in revenue.
Pennsylvania, Maryland, Delaware, and Kentucky are considering allowing limited casino gaming. Other states may do the same as they try to balance their budgets. Some states are looking at adding casino or lottery operations at racetracks. Even current gaming states may increase "sin taxes."
At every corner, the casino business is threatened. Plus, in its last annual report, and recent quarterly reports, Park Place stated its goal was to reduce debt. Standard & Poor's saw the spending plans for the name change and put the company's credit rating on watch with negative implications.
Given all that, is changing the corporate name really the best move for Park Place right now?
Well, perhaps it is. Park Place is better positioning itself for national and international marketing. With 27 gaming properties, having a stable of names like Bally's and Flamingo requires advertising to be focused at the resort level. By having a single international name like Caesars for more than half the properties, with the namesake resort in Las Vegas, Park Place may be ready to cut marketing costs, focus its corporate identity, and leverage its underperforming assets by associating them with one of the world's great resorts. In a crowded market, and one with many small players, being the big name could be a significant advantage.
A corporate name change is not required to re-brand individual properties. A re-branding, however, could help Park Place lift its profit margins considerably -- and the stock might follow suit.
W.D. Crotty is a Motley Fool contributor. He welcomes your feedback at [email protected].
