Harrah's Casino Empire Reverses Huge Losses

Harrah's Entertainment isn't the flashiest gaming operation in the world, but it's the largest, with more than 40 casinos across the U.S. and others overseas. Held primarily under ownership of Apollo Management LP and Texas Pacific Group Capital, Harrah's provides a casebook example of how casinos make money in down markets.

During the fourth quarter, Harrah's had a net income of $298.3 million, according to its recent report -- a far cry from fourth-quarter 2008, when Harrah's lost $4.78 billion. The uptick comes in spite of a 7.9% downturn in revenue, year over year, which reflects casino gaming's lackluster state.

But the bottom line is testament to Harrah's skill at maximizing all of its available edges. While Harrah's can't change the public's current aversion to blowing money at games with hopelessly tilted odds, the company has worked hard on what it can control.

"They're doing a phenomenal job of cutting expenses," says Bill Lerner, principal of Union Gaming Group in Las Vegas, including buying power, reduced wages, and yielding labor -- precisely the expenses that get overlooked during boom times. "When business recovers, Harrah's operating leverage will cut the other way," Lerner says. "A little bit of revenue will contribute to a disproportionately large growth in cash flow and earnings."