Inustry Competitor Analysis-Casino Hotel

Executive abbreviation The center of our manufacture and foe analysis research is MGM Mirage, the second elephantinest gambling cassino hotel operator in the domain with $7. 2 one thousand one million million million in r pointue enhancements in 2008. The only parliamentary procedure that surpasses MGM Mirage by tax and scale is Harrahs Entertainment Inc. with $10. 8 billion in revenues in 2008. Other adversarys that should be considered be Las Vegas littoral Corp. and Wynn doctors Ltd with respectively $1. 7 and most $1 billion in revenues in 2008. Our group focused on researching the microscope stage of scourge and the alikely future combative moves that Harrahs Entertainment, Las Vegas sands Corp. nd Wynn Resorts Ltd get out undertake in short ( con conditioninous 3-6 months) and long term (next 1-3 eld). In order to be fitted to consider the cont prohibiters stage of threat and future moves we completed a pair-wise devil-step competitor analysis t hat included research and comparison of grocery commonality, competitive asymmetry, preferencefulness standardizedity, intentions, beliefs, relation resource differences, past moves, and counter moves for all abovementi adeptd competitors versus MGM Mirage. After the completion of our research, we think that presently, MGM Mirage is in a direct competition with only one of its competitors-Harrahs Entertainment Inc.The early(a) dickens competitors, Las Vegas littoral Corp. and Wynn Resorts Ltd, do non represent a direct threat to MGM at the moment however, their strategical moves should not be overlooked, because of their alike product offerings, geographical elaborateness plans and rumped consumer base. In order for MGM Mirage to be up of its competition, the smart hard-boiled should focus not only on geographic working out in US, precisely too on supranational expansion including through cooperative arrangements with other industry caprioleers, modifyd operat ional cleverness to minimize tolls and technological increase to maximize revenue. Focal FirmMGM Mirage, the focus of our research, is one of the stellar(a) companies in the gambling gambling cassino hotels industry. The unwaveringly emerged from the consolidation between MGM Grand and Mirage Resorts in 2000. Some of its most acknowledge dents argon MGM Grand, Luxor, Bellagio, and The Mirage. The gild became the capaciousst by revenue within its category after acquiring Mandalay Resort grouping for $7. 9 billion in 2005, however was surpassed by Harrahs after the acquisition of Caesars. The flying owns 16 properties in Nevada, Mississippi, and Michigan and has 50% investments in four other properties in Nevada, New Jersey, Illinois, and Macau, china.MGM acts in the front place as a holding participation and the majority of its operations are conducted through its wholly owned subsidiaries1. MGMs system is to develop and maintain its competitive receipts through sloshed portfolio of lags in-house touch ons operations to ensure outstanding customer service and to include for maximum revenue and profit generation execution of sustainable process outline and leverage of brand name and management assets1. The time line of our research study is 2008-2011.The beau monde owns, invests, and manages resorts in different food commercialise segments and it focuses on premier resort ownership in severally geographic marketplace. The largest segment is Nevada however, the alliance is looking as well for parvenu markets with harvest-tide potential. Some of the perils associated with the current strategy are consociateed to limitations in geographic diversifications-all major resorts are concentrated in Las Vegas and some of MGMs largest competitors operate in the same geographic area. MGMs revenue for 2008 was $7. 2 billion. CompetitorsThe instaurations largest competitor in the casino hotel industry Harrahs Entertainment Inc. founded in 1937 in Reno, NV. The company owns, operates, and manages over 50 casinos in US and UK in different industry sectors. Its operations include casino hotels, riverboat casinos, Indian casinos and so on This firm, as well as other major competitors in the industry, expands primarily through mergers and acquisitions. A fresh example of this strategic behavior was Harrahs acquisition of Caesars Entertainment, which made the company the largest one in the world by revenue, followed by MGM Mirage.In 2008, twain private firms Apollo Advisors and TPG Capital, acquired Harrahs. Since the beginning of 2009, the company has had some major difficulties with revenue generation. The firms facilities boast more(prenominal) than 3 meg sq. ft. of casino s grounds and 39,000 hotel fashions and suites. The company obtains more than 70% of its revenues from gambling. Its US properties are located in Illinois, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nevada, New Jersey, and Pennsylvani a. Harrahs in any case owns and operates the World serial publication of Poker tournament and brand, and manages casinos on Indian reservations.Globally, the firm owns or manages casinos in UK, Egypt, South Africa, and Macau, China. The companys revenue for 2007 was $10. 8 billion. Las Vegas sands Corp. founded in 1988 is another well known company that operates in casino hotels and development niche. It is headquartered in Las Vegas, Nevada. Some of its well known brands are The Venetian Resort Hotel Casino, The Palazzo ResortHotelCasinos, the sandpaper exposition and Convention Center, and Venetian Macao contain, a developer of multiple casino hotel resort properties in Macao, China.The company is expanding boost with the control surfaceing of Sands Casino Resort in Bethlehem, Pennsylvania in 2009. The firms revenue for 2008 was $1. 7billion. Wynn Resorts Ltd was formed in 2002 by a former Mirage Resorts chairman and chief executive officer Stephen Wynn. The company has two casinos in Las Vegas-Wynn Las Vegas and encore at Wynn Las Vegas one in Macau, China and another one, scheduled for completion in 2010, in Macau, China. Wynn Resorts revenue for 2008 was a little little than $1 billion. Industry predictions for future attractiveness and implications for MGM MirageResearch gesture The casino hotel industry is sensitive to changes in the consumers disposable income domestic and external travel volume law of proximity to consumer base as well as government regulations. The ingrained gross revenue from gambling was $90. 9 billion in US in 2006-an increase of 7. 7% in comparison with the previous course. In 2009, the Casino Hotels industry is estimated to generate $42,324 million in revenue. The competition in the industry is very eminent and get out probably pass to increase. Around 95% of casino visitors are local2.The casino hotel industry is in its produce life cycle stage. The industry shows signs of slow revenue process. Lower profits t riggered consolidations in the mid(prenominal) 2000s amongst the major industry players- Harrahs merged with Caesars and MGM merged with Mandalay. These two players account for a third of the match industry revenue. Due to the saturation in the domestic market, some of the large industry operators are expanding world(prenominal)ly, mainly to UK and China, which further increases the competition in these countries.The downturn in the economy exit most likely sound to continuous slow ontogeny in the near future. The industry structure has shown that with high barriers to entry, moderate arguing that is limit to 4-5 main competitors, and limited bargaining power of buyers, near-term profitability should be obtainable. There are development electronegative social, political, and economic forces that ordain additionally impact the harvest-tide aspects of the industry. around 70% of industry growth is re modernd to these external forces, while 30% of industry growth is related t o changes in industry structure.The negative con installments of the external driving forces outweigh the positive consequences of the industry structure. MGM Mirage accounts for approximately 14% of the total market capitalization of the industry and 15% of the total industry revenues and it get out most likely follow the industry trends during the next one to leash historic period. Therefore, the casino hotel industry appears unattractive for MGM Mirage. Keeping in mind these industry and competitor characteristics our group focused on researching the degree of threat and the likely future competitive moves that Harrahs Entertainment, Las Vegas Sands Corp. nd Wynn Resorts Ltd will undertake in short (next 3-6 months) and long term (next 1-3 years). Pair-Wise Two-Step Competitor digest Model A pair-wise two-step competitor analysis lesson was utilised in order to deduce and test MGM Mirage and its competitors future moves. The pose consists of researching and evaluating th e following aspects of rivals compared to the central firm market commonality, competitive asymmetry, resource similarity, intentions, beliefs, relative resource differences, past moves, and viable counter moves.The model proposes a comprehensive reasonableness of the focal firm, the focal firms competitors, the rivals intentions, and facilities the extrapolation of feasible strategies for the focal firm (See Figure 1) 3. The first step of the model is to fall upon the degree of threat a competitor poses to the focal firm by defining the competitors and evaluating the focal firm and each one of the competitors as a pair in terms of market commonality, competitive asymmetry, and resource similarity.Competitors are identified as firms operating in the same industry offering similar products and targeting similar customers4. Competitors in this evaluation are limited to Casino Hotels, NAICS code 72112, which are crystalizeified by the US Census Bureau as an industry that consists of establishments primarily manoeuverd in providing short-term lodging in hotel facilities with a casino on the premises. The casino on premises includes control panel wagering games and may include other gambling activities, such as slot machines and sports betting.Market commonality is defined as the degree of presence that a competitor manifests in the markets its overlaps with the focal firm (multi-market competition)5. Throughout this analysis, geographic divisions as well as product types or offerings pctage contribution to gross revenue are utilized to analyze market commonality. Resource similarity is defined as the extent to which a given competitor possesses strategic endowments equal in terms of both the type and the amount to those of the focal firm (value chain)6.The special resources utilized to contrast organizations engaged in the Casino Hotels industry are monetary strength, image, brand, product offerings, number of years in operation, number of casinos, and expansion plans. Identifying resource similarity of competitors is crucial because firms with analogous resources tend to implement comparable strategies, possess similar strengths, and suffer from similar weaknesses. The final phase of the first step in the competitor analysis model is to explore competitive asymmetry, which defines What are the differences in market share across markets?Who has more market power? Where? 7 Competitive asymmetry helps to rank the degree of threat of competitor to the focal firm. The second step of the model consists of deriving competitors future moves and strategy from the information compiled in step one and their beliefs, intentions, and past strategic moves. Competitors beliefs consist of beliefs roughly their organizations point in the market, the industry likely, the focal firm, and the organizations mission. Competitors beliefs provide a window into their intentions.The second phase is to infer competitors intentions such as immemorial ob jective, target market, pose towards risk, and ownership objectives. The model used to analyze MGM Mirages competitors focused on debt to determine attitude towards risk, expansion focus to determine target market, and brand image to determine ownership intent. In order to reinforce the inferences made about a competitor beliefs and intentions, a timeline of the competitors past strategic actions are analyzed. former(prenominal) actions of a competitor consist of changes in pricing model, product mix, promotions, and target market.In addition to the competitors past actions, the duration, frequency, and reason for past actions require additional analysis. Implementing the pair-wise two-step competitor analysis model provides estimations about a rivals future moves, when the moves will occur, how a rival will respond to the focal firms strategic moves, and what types of strategic moves to which the competitor is vulnerable. Understanding the focal firms competitors and their compet itors future strategies and responses can be used to provide the focal firm with an edge in creating a sustainable competitive gain. MethodologyThe group first looked to identify our research objectives, which primarily consisted of identifying the competitors to MGM Mirage who operate Hotel Casinos, analyzing the competitors utilize the pair-wise two-step model of competitive advantage to predict future strategies that would create a competitive advantage for the focal firm. Secondary research was conducted to determine the extent of research on consumer attitudes towards shimmer, consumer bespeak for free rein, gambling consumer demographics, gaming statistics, and information pertaining to competitors of MGM Mirage who operate Hotel Casinos.A plethora of information was available on these topics from individual publications to industry overviews, and even more recently a casino hotel study, which helped to lay the foundation. Secondary research helped to focus the research questions and to provide general information about U. S. gaming consumers. The U. S. Census Bureau provided information and classification codes to help foreshorten down the research and potential competitors. Secondary data consisting of yearbook reports, public filings, news articles, business publications, psychoanalyst projections, and industry associations provided a magnitude of statistics and information.Harrahs Entertainment Inc. Overview Harrahs Entertainment is the worlds largest casino operator. The firm has long history and operates more than 50 casino hotel and golf game game facilities around the world. It went public in 1971. In 2008 the firm went private after its acquisition by Apollo Advisors and TPG Capital. It has more than 85000 employees and it focuses on first class facilities, services, operational efficiency, and technology leadership. Intentions Harrahs intention is to be the number one or two casino operator in almost every major market in the US. The co mpany is living up to their intention.There are only two major domestic markets where the company is beakably absent conscientious objector and Detroit. In 2008, Harrahs purchased Casino Windsor and rebranded it as Caesars Windsor. Although Windsor, Canada is across the river from Detroit, the company does not consider it to be sub syllabus of the Detroit market. Harrahs vision statement states the company strives for each of our brands to be the overwhelming first choice for casino entertainment of its targeted customers8. This statement projects the company is affiliated to the entire brand portfolio and that brands are not used to merely fill the gap between price points.The statement besides suggests the company is not satisfied with existence the first choice but strives to be the overwhelming first choice. Harrahs intentions are focused on the company being the best in the industry. Beliefs Harrahs believes that their recountd and highly efficient business model provi des competitive advantage9. The company describes their strategy as a circular flow chart in which a knockout brand portfolio builds customer loyalty which the company uses their decision science capabilities to further improve their brand portfolio thereby repeating the process.Harrahs believes this business model will lead to same ancestry gaming revenue growth and cross-market play. Harrahs in like manner believes their recent cost cutting initiative will provide tremendous operating leverage once revenue growth returns. The majority of the cost cuts present been in labor and benefits followed by merchandising. Since Harrahs was taken private, the company has substantially improved productivity. The company believes similar operational excellence will repeat itself in their recent cost cutting initiative. Past moves, countermoves, and quantifyHarrahs has almost never been a first-mover to a new market. The firm did not enter Las Vegas until 1980, about 43 years after opening their first casino in Reno, Nevada. Even then, Harrahs did not enter the market on its own. The firm gained a Las Vegas property when the company was acquired by Holiday Inns, which already owned a property in Las Vegas. In a similar sequence, Harrahs entered also late to Atlantic City and was nudged into the market by their parent company, Holiday Inns. It was actually MGM Mirage that first proposed to build a property in Atlantic City in 1979. in spite of having blueprints, the MGM Mirage property was never built, which opened the access for Harrahs to enter Atlantic City a year later with a Holiday Inns project. In 1992, Holiday Corporation spun off their casino business from their hotel business and it wasnt until 1995 that the casino segment was renamed Harrahs Entertainment. Again, Harrahs was a second-mover in another market. This time it was the world(prenominal) market. Harrahs opened their first internationalist property in New Zea solid ground, almost a full year afte r MGM Mirage purchased their first international property in nearby Australia.More recently, Harrahs has continued to take a conservative come on to international development with their wait-and-see attitude with regards to Macau, China and Singapore, the two regions driving international efforts at other casino operators. Harrahs has even followed quickly behind MGM Mirage in acquisitions. In June 2004, MGM Mirage announced the purchase of Mandalay Bay for $7. 9billion. non to be outdone, a month later, Harrahs announced the purchase of Caesars Entertainment $9. 4billlion. The past actions of Harrahs suggest the company will not be the first into new a market.Relative resource position As the largest and most diverse casino operator, Harrahs has greater resources relative to MGM Mirage. establish on total assets, Harrahs is nearly a third larger than MGM Mirage. Harrahs operates 56 properties in 6 countries where as MGM Mirage operates 20 properties, all but the companys Macau pr operty are located in the US. Despite being larger in total size, the size of each of Harrahs properties is considerably smaller than each of MGM Mirages properties. 10(See Figure 2) Harrahs also has the industrys leading customer loyalty program alled Total Rewards. Total Rewards allows players to earn cash, comps, and other benefits for playing at the companys casinos. There are over 40 million members in the program and the company tracks approximately 80% of all gambling. Approximately 45% of all tracked play is cross-market play (guests who visit more than one Harrahs property)11. The company considers the Total Rewards program the engine to generate same store gaming revenue growth and cross-market play through superior marketing and technological capabilities12 .The information in their customer database allows Harrahs to profit by allowing them to monitor the play of all members and to focus marketing efforts on the highest return uses. Total Rewards benefits Harrahs by driv ing revenue, optimizing costs, and maximizing profitability. Predictions Short-term In the short-term, Harrahs actions will be determined by their monetary position. Currently, Harrahs has a large debt overhang, which will reduce the amount of further debt the company is willing and able to take on.Harrahs is not expected to retain big capital spending projects however the company will remain focused on their intention of being the number one or two casino operator in almost every major market in the US (See find 4). Harrahs is predicted to increase non-gaming revenue by utilizing information gleaned from their Total Rewards program. As mentioned earlier, the Total Rewards program is one of the companys largest relative resource advantages. In terms of product mix, Harrahs has one of the worst percentages of non-casino revenue to gross revenue of the four major casino operators.When further analyzing non-casino revenue, one will notice that Harrahs has the lowest percentages of Entertainment, Retail, & Other revenue to gross revenue. The firm can use the Total Rewards political platform to increase the non casino revenue mix. Its members will use their card at stores, restaurants, and events in a style similar to how they scan their cards while gambling. Harrahs can encourage them to start scanning their cards at places other than the slot machine or the blackjack tables by providing discounts on purchases.Harrahs could also count retail points in a method similar to the metrics used for gambling points like time spent gambling, amount wagered, etc. This information would show which restaurants, shops, or events are truly preferred to their customers and it could be mined from the Total Rewards database. Since the majority of Harrahs customers are local, this strategy would not be a national strategy it should be tailored to specific properties (See Figure 3). Additionally, Harrahs will seek a partner to continue construction on their Margaritaville pr operty in Biloxi, Mississippi.The property is a $700 million project, which already includes the singer-songwriter and Mississippi native, Jimmy Buffett, as a partner13. Plans for the project were first announced in 2007 and a year later, the company announced construction will be delayed citing a poor economic environment. The primary reason for the desire for an additional partner is due to mounting financial costs but a partner should also provide get in property construction and development, an area where Harrahs is relatively inexperienced due to their focus on growth through acquisitions.Harrahs should continue construction on the property because the economies of Gulf Coast region ingest held up relatively well due to higher(prenominal) reliance on the energy industry, which has benefitted from rising energy prices in the past year or so and is predicted to do well in the near future. Harrahs has reaffirmed their commitment to the project and has received interest from pro spective partners. Moreover, Harrahs should continue with its regional expansion as legislation and financing permits.The past actions of the industry refer that casino operators enter a state immediately after legislation allows slot machines and video table games like poker and blackjack. Once casino operators establish a presence in new markets, they power in full lobby for expansion of operations, which is typically successful in permitting full casino operations including table games. This sequence has recently repeated itself in Pennsylvania, West Virginia, and Indiana. It is predicted the next states will be Ohio, Rhode Island, and Massachusetts.Harrahs already has a presence in Ohio when they purchased a bankrupt, horse-racetrack outside of Cleveland earlier this year. Since a bill was just passed in Ohio to allow slots, we believe Harrahs will start to add slot machines to their new property outside of Cleveland. In repetition of the usual sequence, legislation was recentl y proposed to allow four full-service casinos in Ohio. This domestic expansion strategy will not risk cannibalizing sales from their other properties because the typical Harrahs customer is local and the company does not have any properties east of Indiana except for Atlantic City and outside of Philadelphia. long-run In contrast to short-term strategies found on domestic projects, Harrahs is predicted to focus on international efforts in the long-term. During the past four years (2004-2008), the US casino and gaming sector experienced step up annual growth of 3. 7%, which includes a growth rate of -1. 3% in 2008 and is on pace for a decline of 8. 4% for 200914. Estimates of future growth are not very optimistic either. gain is not anticipated to occur until 2011 at which time, it is expected to be gradual. Over the next 5 years (2010-2014), the domestic industry is estimated to grow at an annual rate of 4. %15. On the other hand, international growth has been much greater and is anticipated to continue. During the same year period (2004-2008), the international casino and segment industry experienced a compound annual growth rate of 7. 0%. Recent performance has also been strong including growth of 6. 2% in 2008. Future international estimates include a compound annual growth rate of 5. 8% from 2008-201316. Harrahs will focus internationally given the attractive growth opportunities. As the figures suggest, growth in the casino industry is anticipated to be in the international market.Harrahs has relatively lower percentage of gross revenue derived from outside of the US, only 10%, versus their ternion largest competitors who fair 48%. Harrahs actions acknowledge a focus on international expansion. A month ago, Harrahs hired Peter Murphy, an executive from Disney, to oversee strategy and development because of his international efforts at Disney. One of the first areas Murphy will be asked to expand will be Macau, China, which passed Las Vegas as the lar gest casino gambling region in 2007.Harrahs is also predicted to partner with a casino operator that already holds a gaming license in Macau. Currently only six operators have gaming licenses in Macau including Las Vegas Sands, Wynn, Galaxy Entertainment, Melco jacket crown Entertainment, STDM, and a partnership between MGM Mirage and Chinese casino mogul, Pansy Ho. It is most likely that Harrahs will partner with Melco Crown Entertainment (Melco). Melco is an Australian-based company that focuses on the mid-market customer like Harrahs. Harrahs first international expansion effort in 1996 was in nearby New Zealand.Despite not having a gaming license, Harrahs already has a presence in Macau. The company owns a 5-star golf center, which includes a golf school led by Butch Harmon, the number one golf instructor in the US. peradventure more importantly is the land Harrahs owns in Macau, including the 175 acres of their golf center. The location of the land is also beneficial as it is adjacent to one of only two bridges into Macau from China. Earlier this year, Michael Chen, Harrahs Asia president, said, as the largest gaming operator in the world, we have an interest in the largest gaming market in the world17.Harrahs is also predicted to develop online gaming operations for the UK market. Harrahs, on with MGM Mirage, are the two largest proponents to decriminalize online gambling. Earlier this year, Harrahs established a subsidiary in Montreal to formulate an online gaming strategy. Mitch Garber, the former CEO of online gambling giant PartyGaming, was selected to lead the operation. Despite being headquartered in Montreal, Garbers hometown, the UK market is the most probable future market. Also in the past couple of months, online gaming was approved in the UK.Harrahs is acquainted(predicate) with the brick-and-mortar casino operations in the UK as well. In 2006, the company acquired the London Clubs International. Establishing online gambling operations in other countries may also provide inroads to the online gambling in the US. As mentioned earlier, Harrahs is a strong proponent of legalizing online gambling and has been lobbying to have legislation introduced. Harrahs lobbying efforts appear to have started to bear fruit based on the introduction of a bill that proposes that online gambling be legalized and regulated in the US by Representative Barney Frank18.Additionally, Harrahs will acquire The Lodge Casino and Hotel outside of Denver. This move is consistent with Harrahs intention to be the number one or two casino operator in almost every major market in the US. In 1991, casino gambling was legalized in Colorado. Harrahs entered this market with two casinos in 1993 through Eagle Gaming, which Harrahs owned 1/6th. In 1996, Harrahs sell the Colorado properties due to limited growth and uncertainty about taxes. Except for Isle of Capri, a $33M market cap company, no major casino operator has operations in the Colorado market.M ost large casino operators are hesitant to enter this market because bets are limited to $5. Harrahs focus on slot machines and low-rollers will suggest that the company will reenter the market. Las Vegas Sands Corp. (NYSE LVS) History Las Vegas Sands is a casino resort company based in Las Vegas, Nevada. It is the worlds leading casino based company with a market capitalization of 9. 72 billion as of August 2009. At one point in 2007, it had a market capitalization of $43. 7 billion, qualification its majority shareholder, Sheldon Adelson, one of the worlds richest men.The company owns and operates The Venetian Resort-Hotel-Casino, The Palazzo Resort-Hotel-Casino, and the Sands Expo and Convention Center in Las Vegas and the Sands Casino Resort Bethlehem(TM) in Eastern Pennsylvania. It also owns and operates The Venetian Macao Resort-Hotel and the Sands Macao in the Peoples Republic of China (PRC) Special Administrative Region of Macau. In addition, LVS owns the Four Seasons Hotel Macao and is also developing the Marina Bay Sands(TM) integrated resort in Singapore. Furthermore, LVS is developing the Cotai disassemble(R), a master-planned evelopment of resort-casino properties in Macau. At completion, the Cotai Strip will feature approximately 21000 boards from world-renowned hotel brands such as St. Regis, Sheraton, Shangri-La, Traders, Hilton, Conrad, Fairmont, Raffles, Holiday Inn, and InterContinental. While the companys flagship property, The Venetian, is in Las Vegas, less than a third of LVS total revenues came from Las Vegas by 2008. Macao gaming industry revenues increased every year for a decade until 2007 and then fell in 2008. In January 2009, the revenues had dropped more than 30% from their levels in January 2008.Nevertheless, Las Vegas Sands three Macao properties generated 69. 6% of total revenues during 2008. After incurring a net loss of $164 million in 2008, LVS has set aside $3 billion in cash reserves as a cushion for its debt obligatio ns. Perspectives The companys primary business objective is to provide a bounteousness goal casino resort experience in order to drive superior returns on invested capital and to increase asset value. To achieve this objective, the company operates a must-see refinement resort at a premier location in the heart of the Las Vegas Strip.LVS captures premium room rates through a differentiated superior all-suites product. It drives hotel occupancy and casino utilization through the link to the Expo Center and the Congress Center. LVS caters to a higher-budget customer mix by offering a rum combination of assets and facilities. The firm leverages the casino resorts premium co-branding strategy to drive revenues and targets premium gaming customers. Culture of Las Vegas Sands (Big risks and big rewards) Experienced Las Vegas operators have historically been richly rewarded for taking big risks.For example, Adelson, LVS Chairman and CEO, constructed the $105 million Sands Expo & Convent ion Center in 1990-the largest privately owned building of its kind in the country. When it opened critics viewed it as a foolhardy expenditure for a gambling town that had a publicly funded convocation center. With the $1. 5 billion Venetian, which opened in 1999 next door to the Sands convention center, Adelson brocaded the stakes, betting that his flourishing trade show business could fill an upscale megaresort. He lured convention goers to the Venetian with bigger rooms and more hotel amenities, charging top room rates.Adelson proved to be a big risk taker and a big winner. He eventually refinanced the property and paid down the expensive loans, making the 4,049-room Venetian that opened a 1,000-room hotel expansion in 2003, one of the most paying casinos of all time. By making piles of money on hotel rooms, Adelson helped redefine a business that had focused on gambling revenue at the expense of other amenities. His success at the Venetian was imitated by competitors such as Mandalay Resort Group, now part of MGM Mirage, which opened a 1. -million-square-foot convention center in Mandalay Bay in 2003. The convention business, a big part of the Strips growth after 2001, has helped to maintain high room rates in Las Vegas during traditionally slower periods creating year-round demand. Las Vegas Sands was once the envy of Wall Street. In fall 2007, with seemingly unlimited growth prospects in Macau, which was the most lucrative gambling market in the world, the companys share price reached $150. Shortly after that, the company market value plummeted more than 90 percent.Some industry analysts argue that LVS executives played a key role in the financial decline, pushing ahead efforts to dominate the Macau gambling market and stretching the company thin, even as indicators showed that credit was drying up and tourism was faltering. Operations in Asia (Recreating the Las Vegas Strip in Asia) Macau, a semi-autonomous province of China, began welcoming westerl y casino operators in 2002 in an effort to rise above its roots as a unwell gambling den and broaden the regions appeal to Asian tourists with Las Vegas-style resorts.Las Vegas Sands was the first westward company to open a casino in Macau, in 2004. The early bet paid off. The company recouped its $240 million Sands Macau construction budget within a year of the opening. The casino, which has more than 600 table games barely fewer than 300 hotel rooms, primarily offered to Chinese gamblers for free, gained a foothold ahead of the resorts that followed. The company appears to be playacting respectably in desperate times, including achieving 92 percent capacity at the Venetian and 95 percent at Palazzo, at rates of more than $200 a night in quarter three of 2004.The Venetian Macau attracted a record 6. 6 million visitors that quarter. As the lead architect in Macau, Las Vegas Sands, which pound up out American competitors for rights to build one of two casino resorts to open in S ingapore in the coming year, is well-positioned to compete for opportunities in places such as Japan and Taiwan, where observers argue that casinos are simply a matter of time. Trends LVS has large exposure to the Macao gaming market and the company will fight any new or potential competitor there. In 2008, 69. 6% of LVSs total revenues came from Macao.The Venetian Macao alone produced $1. 9 billion in revenues during 2008 while the companys Las Vegas properties produced only $1. 3 billion that year. The Macao gaming market is largely dependent on the Chinese market and economy. While Macao gaming industry revenues had increased every single year for nearly a decade up until 2007, gaming revenues for the region started to decrease in 2008. Industry revenues in January 2009 dropped by 30% in comparison with revenues gained in January 2008 as the global economic crisis affected Asian gamblers.LVS is committed to Macao market exposure with its Cotai Strip development in the works and i f the market continues to worsen, Las Vegas Sands could see its female genital organ line affected accordingly (See Figure 5). Despite economic slowdown, LVS is expanding. The company is building new resort in Singapore, called Marina Bay Sands, and in Bethlehem, Pennsylvania, called Sands Bethworks, despite the slumping casino industry that is ca exploitation companies like Riviera Holdings to default on their credit lines.Because LVS has already begun construction on these resorts, the company cannot cut the casinos funding even as it laid off over 11000 of its staff in 2008 to cut costs. As a result, the company has compile heavy debt. In March 2009, LVS had over $10 billion in debt from financing aggressive growth projects. The company has about $3 billion in cash to cushion upcoming debt obligations but LVSs expansion investments occurred at the beginning of a global recession, worsening the firms financial positions. At the end of 2008, LVS assets were valued at $17. billio n, over 38% higher than its $12. 4 billion in liabilities. Macaos gaming laws and taxes are relatively new and have a few precedents, making them quite vulnerable to sudden change. China has a large and affluent middle class, but for many years travel and currency restrictions have made it difficult and undesirable for visitors to come to Macao. The Chinese government relaxed many of these restrictions in 2002 when it first give gaming licenses and ended its state-run gaming monopoly. As a result, the Macao gaming market grew to generate over $928 million in revenues in January 2009.Predictions (short and long term) for Las Vegas Sands In the next 1- 2 years the expectation is that Las Vegans Sands will maximize the cash flow from its current operations in Las Vegas and Macau, including through the implementation of annualized cost savings. At the same time, the firm needs to complete on time and on budget the properties presently under development in Singapore and Bethlehem, Penn sylvania in order to stay afloat. Long term Las Vegas Sands will keep increasing investments in Cotai Strip, the area that is rapidly transforming Macau into a world-class resort destination.The company could potentially expand in Japan, Thailand, and India as it looks for growth opportunities in the vibrant Asian region. Wynn Resorts, Limited (Ticker WYNN) Wynn Resorts, a Nevada corporation, was formed in June 2002, is led by Chairman and CEO, Stephen A. Wynn, and is a leading developer, owner, and operator of destination casino resorts. Wynn Resorts owns and operates three casino resorts Wynn Las Vegas, Encore at Wynn Las Vegas, and Wynn Macau. In addition to these three properties, Wynn is shortly constructing Encore at Wynn Macau, an expansion of the Wynn Macau resort.During 2008, the casino resort business experienced difficulties due to a number of factors impact consumers, including a slowdown in global economies, contracting credit markets, and reduced consumer spending. St eve Wynn is the preeminent designer, developer and operator of destination casino resorts and has developed brand name status. Wynns involvement with the casino resorts provides a distinct advantage over other gaming enterprises. All of the Wynn resorts are designed and built to provide a premium experience.The casinos are marketed as full-service luxury resorts and casinos in the leisure, convention, and tour and travel industries. The resorts are marketed directly to gaming customers using database marketing techniques, as well as traditional incentives. While there is significant competition in the Las Vegas and Macau markets, Wynn seeks to differentiate from other major resorts by concentrating in its fundamental elements of design, atmosphere, personal service, and luxury. Intentions / Beliefs of Wynn ResortsIn relation to MGM Mirage, Wynn Resorts competes in similar geographic markets, primarily Las Vegas and Macau, with secondary markets in Atlantic City, Riverboats, etc. How ever, based upon Wynns detailed disclosures in its public financial statements, press releases, and transcripts from earnings calls, Wynn Resorts believes that it has a fundamental core competency in providing an atmosphere of the utmost luxury. Therefore, it may be possible that while Wynn Resorts and MGM Mirage compete in the same geographic markets, the companies will compete for a slightly different customer base.Wynn Resorts has consistently targeted those customers with a very large net worth and require the most luxurious accommodations. In that regard, Wynn Resorts has found that it is not necessary to typically use comps and other forms of customer promotions to attract the wealthiest clients. The company attempts to portray itself as the top-tier casino-hotel, providing unmatched services for those individuals that demand the very best in customer service and quality.Therefore, it appears that Wynns intentions are to attract customers through the marketing of its luxuriou s hotel-casino properties, particularly in Macau. In Wynns 2008 annual report, expansion plans were depict for the Macau geographic area. We have commenced construction of Encore at Wynn Macau, a further expansion of Wynn Macau. Encore at Wynn Macau will add a fully-integrated resort hotel to Wynn Macau, planned to include approximately 400 luxury suites and four villas along with restaurants, additional retail space and additional VIP gaming space.We expect Encore at Wynn Macau to open in 201019. In addition, Wynn Resorts has improved approximately 142 acres of land for use as a golf course in the Las Vegas area. However, no future improvements are planned due to the current economic environment. Based on these disclosures, MGM Mirage management can be certain that Wynn Resorts continues to belief that its best prospects for growth are in the Asian gaming market, evidenced by its expanding construction projects in the Macau region. Wynn Resorts also believes that future developmen t opportunities in the Las Vegas area may present profitability.However, current economic conditions may not make these development projects profitable in the near-term. Meanwhile, Wynn Resorts expects that MGM Mirages CityCenter project, along with other Las Vegas expansion projects by industry competitors present significant competitive challenges in the near-term. Past moves, countermoves, and timing of Wynn Resorts Since its inception in 2002, Wynn Resorts has attempted to distinguish itself amongst the fierce competition in the casino industry by developing casinos that are state-of-the-art, cutting-edge, and luxurious.Wynn Resorts attempts to attract the wealthiest of customers that have a appositeness to spend more of their disposable income on luxury items, specifically gambling-related activities. As a result, Wynn Resorts is not besides concerned with differentiating their products based upon price. Wynn Resorts is focused on product differentiation. This is evident by W ynn Resorts statement that we are attempting to differentiate the Wynn products. However, at this time, we are uncertain how our customers will value the existing Wynn properties on a relative buttocks20.Wynn Resorts is attempting to differentiate its casinos from one another not based upon price, but based upon qualitative factors such as the availability of restaurants, spa services, shopping boutiques, nightclubs, etc. Typically, competitors in the casino industry have limited strategy initiative options. These options include expanding to new domestic markets, expanding to new international markets, and providing additional services at be casino-hotels. During the past several years, Wynn Resorts has chosen to avoid providing additional services at pre-existing casino-hotels (i. . Wynn Las Vegas), but preferably move forward with large expansion projects both domestically and internationally (Encore at Wynn Las Vegas and Wynn Macau). Relative resource position of Wynn Resorts As of year-end 2007, Wynn Resorts held approximately 8% of the total market share in the Nevada region, as compared to 18% market share owned by MGM Mirage. As stated previously, Wynn Resorts currently has three casinos, two in Las Vegas, one in Macau) as compared to MGM Mirages twenty casinos. Recently, Wynn Resorts has been noncommittal in its disclosures regarding future expansion projects.Wynn Resorts is in a position of strength in terms of financial stability, as its financial statements introduction large amounts of current assets along with positive cash flows and manageable debt ratios. Wynn Resorts has a risk-averse attitude towards the growth of its dimension sheet. The company is not highly leveraged and has over $1 billion in cash to assist in absorbing losses during the current recession. An additional source of competitive advantage for Wynn Resorts is the leadership of Stephen Wynn. Mr.Wynn has several decades of experience in the gaming industry, and has been ins trumental in the construction of the Bellagio, the Mirage, and Wynn Las Vegas. Generally speaking, Steve Wynn is known as The Man Who Helped reinvent Las Vegas. Mr. Wynns importance to the organization is paramount, and The loss of Stephen A. Wynn would significantly harm Wynns business21. When considering brand and image, Wynn Resorts has strong brand loyalty amongst customers in the high roller community, as well as strong brand recognition in Las Vegas and Macau.However, due to the lack of presence in other areas of the United States, Wynn Resorts is not currently leveraging the notoriety of its brand name and Steve Wynns reputation as an innovative leader in the industry. Predictions (short and long term) for Wynn Resorts Given the strong financial position of Wynn Resorts and their historically selective approach to casino expansion, Wynn Resorts will not expand the number of casinos in operation in the near term (12- 18 months). On November 2009, Wynn Resorts has stated to its shareholders that they would not focus efforts on expanding in the U.S. until the business environment improved. Instead, it is predicted that Wynn Resorts will instead make enhancements to their two existing casinos in the Las Vegas market. In response to our evaluation of our Las Vegas operations and the reactions of our guests, we have and expect to continue to make enhancements and refinements to our resort, the company said this week in its quarterly financial report in November 2009. The project expansion in the casinos will enhance the availability of pools, food and beverage services, and nightlife offerings.MGM Mirage may respond to Wynns actions by also expanding upon its casino customer offerings. Furthermore, MGM Mirage should also avoid direct casino expansion during a depressed economic environment. Instead, MGM Mirage should strive for financial stability while attracting customers with non-gaming services and accommodations. Being that Las Vegas is a mature market w ith several strong competitors, MGM Mirage may consider its presence in other domestic regions in the Midwestern section of the United States.Over the next 18 48 months, however, Wynn Resorts will continue to engage in competition as it relates to worldwide casino expansion. By analyzing the growth in industry revenue, and the statistics described regarding market commonality, Wynn Resorts will most likely directly engage in a battle with Las Vegas Sands for market share position in the Macau region. Additionally, Wynn Resorts will continue its financially frugal decision-making patterns by buying racinos and undervalued real estate properties with the intention of capturing profits through capital appreciation.These types of purchases by Mr. Wynn and Wynn Resorts have been consistent with actions represent during the past three years. MGM Mirage may engage in the competition for casino expansion in the Macau region, but should be cautious in making full-scale investments into a c asino market already fully dominated by Las Vegas Sands and Wynn Resorts. Instead, cooperative arrangements and joint ventures may be suitable alternatives (See Figure 6). heavyset and ConclusionsThe casino hotel industry is sensitive to changes in the consumers disposable income, domestic and international travel volume proximity to consumer base, as well as government regulations. The industry structure consists of high barriers to entry, moderate rivalry that is limited to 4-5 main competitors, limited bargaining power of buyers, allowing for the possibility of near-term profitability. The pair-wise model utilized provided a comprehensive understanding of the focal firm, the focal firms competitors, the rivals intentions, and facilities the extrapolation of feasible strategies for the focal firm.In order for MGM Mirage to create a competitive advantage, the company should focus on geographic expansion in US and on international expansion, through cooperative arrangements with ot her industry players, improved operational efficiency to minimize costs, and technological advancement to maximize revenue. In the short term, MGM Mirage may be able to extract profits from the market by creating a competitive advantage but long term the industry structure, negative social, political, and economic forces will negatively affect the growth aspects of the industry.