Loyalty in Las Vegas After Caesars-Eldorado Merger

Yesterday, TPG reported the news that Caesars Entertainment will be wholly acquired by Eldorado Resorts. In accordance with the merger agreement, the two gaming companies will combine to form the largest owner and operator of US gaming assets, with over 60 properties in 16 states. A statement made by El Dorado clarified that Eldorado's Chairman, CEO, COO, CFO and CLO will lead the combined company, which will retain the Caesars name. Caesars Rewards sent out an email assuring loyalty members that there would be no changes to the reward's program before or "following the close" of the transaction.

Of course, that'll almost certainly change.

Las Vegas Loyalty

Las Vegas casino loyalty programs can play a major role in a traveler's decision about which hotel to stay at, where to shop and even where to eat. How Eldorado's acquisition of CET will affect the customer loyalty landscape in Las Vegas ultimately depends on whether they try to compete with other programs in Vegas like MGM and Wynn. When loyalty programs go head-to-head, it's usually a good thing for customers, because they try to one up each other by offering potential guests the most valuable offers.

Unfortunately, this is probably not going to happen in this specific situation.

Historically, Caesars has been a very generous program for nongamblers thanks to generous promotions and availability of high-level Diamond elite status through nongaming avenues — like status matching and for FoundersCard holders. Regardless of play or spend, anyone with Diamond status gets an array of perks during a stay, including:

• $100 dinner credit
• Free parking
• Waived resorts fees
• Competitive room rates.

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In contrast, Eldorado has a long history of decreasing promotions in order to cut operating costs and boost profits. This SEC archive of the company's Q2 2015 quarterly report provides an example of these measures:

"Marketing and promotional expenses decreased 18.4% for the three months ended June 30, 2015 compared to the same period in the prior year due to efforts to reduce advertising spend at Eldorado Reno and Eldorado Shreveport during the current period along with reductions in promotional offers."

Promotional spend is exactly what leads to consumer-friendly competition. If this same cost-cutting approach is used in the acquisition, Eldorado may squeeze low rollers and infrequent patrons and lead them to competing properties. In keeping with this strategy, it's certainly plausible that the combined company could eliminate the status shortcuts to Diamond and begin requiring players to earn status the old fashioned way.

Additionally, Eldorado plans to sell one of the Caesars properties on the strip, and there's a rumor floating around that it could be Planet Hollywood. Losing this location would likely be viewed as a negative change for many brand loyalists, since it's really the only attractive mid-tier option with a prime strip location.

Bottom Line

At this point, it's too early to know exactly what impact the Eldorado and Caesars acquisition will have on the Total Rewards loyalty program. However, if history is our guide, you may find it harder to enjoy rewarding stays on your future trips to Las Vegas once the merger closes, and we'll be sure to stay on top of these items here at TPG as additional information comes available.