Can Caesars Entertainment's Strategic Relationships Help It Perform?


Caesars Entertainment has suffered some bad luck recently. The biggest headwind has been debt. At the moment, Caesars has $1.7 billion in cash and short-term cash equivalents versus $21.5 billion in long-term debt.

This debt is a big concern, as it impedes growth potential... especially if interest rates increase in the future. Caesars is likely to use divestments in an effort to reduce its debt. Caesars recently sold 10.3 million shares of its common stock for $200 million; it sold its Macau golf course to Pearl Dynasty for $438 million; and last year it sold its Harrah's St. Louis property to Penn National Gaming for $610 million.

However, Caesars Entertainment is still highly leveraged, and it has been trailing peers Las Vegas Sands and MGM Resorts International on the top line. We'll take a look at that soon.

Despite all these negatives, Caesars Entertainment has been rewarding its shareholders, seeing stock appreciation of 164% in the past year. This has a lot to do with the company's online gambling potential. But Caesars Entertainment isn't relying on just one potential revenue stream to fuel the top line. It has been wheeling and dealing in the physical world as well.

A HOT deal
Caesars Entertainment recently partnered with Starwood Hotels & Resorts Worldwide to combine Caesars' Total Rewards and Starwood Hotels' Preferred Guest programs. Thankfully, this is a simple partnership to understand. If you're a Total Rewards member, you can redeem your points at a Starwood Hotels location. This includes the following brands: W, Westin, St. Regis, The Luxury Collection, Le Meridien, Sheraton, Four Points, and Element.

I began with Total Rewards because it has a whopping 45 million members. If you're a Preferred Guest member, then you can redeem those points at Caesars Entertainment properties.

This might not be a massive marketing move for Caesars Entertainment, but it's not going to hurt. It's also a wise move considering MGM Resorts and Hyatt Hotels formed a similar partnership earlier this year. Caesars Entertainment can ill afford to fall short of its peers in any area. On top of being highly leveraged, consider its weak top-line performance compared to peers for the past year:

CZR Revenue (TTM) Chart
CZR Revenue (TTM) Chart

Caesars revenue (trailing-12-month) data by YCharts.

Caesars Entertainment recently made a bigger announcement...

I only used one word in the subtitle above because that's what Caesars Entertainment is trying to accomplish in regard to branding: The goal is for The AXIS at Planet Hollywood Resort & Casino to become the No. 1 live music venue in Las Vegas.

Considering the company's partnership with Live Nation , which has established a top-notch reputation for delivering popular names that draw big crowds, this partnership is likely to pay dividends for Caesars. And just like all great partnerships, both sides have put themselves in a position to win. For Live Nation, this will be the biggest test yet, and the company will be eager to prove its capabilities, which would build its brand.

The biggest draw for AXIS, and an immediate one, will be "Britney: Piece of Me," which is set to open on Dec. 27. Britney Spears has stated that she's excited about performing in such a unique venue, where she can see the faces of everyone in the crowd. She's also likely to draw large audiences.

Company direction
Unfortunately, the Caesars Entertainment story needs more time to unfold before determining whether or not it's likely to be a successful turnaround. Its online gambling potential has yet to be established, and it's highly leveraged. However, it's finding ways to free up cash to pay off debt while also forming partnerships to help drive the top line. Stay tuned.

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