If you put much stock in the bleak financial headlines, shareholders of Harrah's (NYSE:HET) might as well dump their shares now and move on. Yes, Harrah's is undeniably the largest and most geographically diversified gaming company on the planet, but it has no exposure to the booming Asian markets. That's it. Game over. Checkmate.
Much like Anna Kournikova, the tennis star whose name is always followed by the phrase "who has never won a major tournament," Harrah's seems to have been given a dubious new tagline: "Harrah's, which has been shut out of Asia ."
This all started several years ago, when Harrah's chose not to aggressively pursue possible expansion into Macau -- in hindsight, a regrettable decision. As most are aware, Macau has become the focus of the gaming world, with nearly $6 billion in annual revenues and projected growth rates that are off the charts. In March, Wynn (NASDAQ:WYNN) auctioned off the last ticket into the flourishing Chinese district for $900 million, which essentially left Harrah's on the outside looking in.
With Macau seemingly out of reach, Harrah's hopes to break into Asia then hinged entirely on Singapore, where the powers that be were poised to award one of two lucrative casino resort bids. Perhaps emboldened by the runaway success of its neighbor to the north (and tired of seeing possible tax revenues siphoned away), Singapore had decided to boost tourism and tap into the wallets of affluent Asian tourists by lifting its long-standing ban on casinos.
Unfortunately for Harrah's, the final verdict recently came down in favor of Las Vegas Sands (NYSE:LVS). As the first U.S.-based company in Macau, Las Vegas Sands was already an established player in the region, and the Singapore government ultimately went with the proposed $3.2 billion Marina Bay Sands resort over competing proposals from Harrah's, MGMMirage (NYSE:MGM), and Malaysian-owned Genting. Genting attracted more than 17.4 million casino visitors last year, a further testament to the insatiable gaming appetite of Asian players.
While it was not considered the front runner, Las Vegas Sands' expertise in the business-convention market reportedly tipped the scales in its favor -- once again shutting Harrah's out of the party. To be sure, these are meaningful setbacks that will leave the industry leader trailing key rivals in some of the world's most promising markets. Nevertheless, the situation is not as dire as some journalists would have us believe.
First, Singapore is expected to award a second casino license on the resort island of Sentosa later this year, and Harrah's could quickly emerge as one of a handful of top contenders. Next, Macau is not completely off the table, because additional operating concessions could be handed out there as early as 2009. Finally, with organized casino opposition losing influence and melting away, the global expansion of gaming could soon open up previously untapped Asian markets like Japan, Thailand, and Indonesia.
In the meantime, the company has its hands full with new projects that will expand the Caesars brand from the Bahamas to Europe -- not to mention development opportunities here at home.
How quickly we forget that just five years ago, few had heard of Macau, and Singapore was known more for public canings than casino resorts. Odds are good that the industry will evolve just as much over the next five years -- and I'm betting Harrah's will find a way in.
Fool contributor Nathan Slaughter owns none of the companies mentioned.
