Casino operator Harrah's Entertainment Inc. said Wednesday that one of its subsidiaries acquired a golf course in Macau for undisclosed terms, marking its first entry into the lucrative gambling market but without the rights to build a casino.
Harrah's, which is being taken private in a $17.1 billion transaction, has struggled to find a foothold in Asia while its Las Vegas-based competitors have rushed into the market with massive investments.
The purchase of the 7,200-yard, 18-hole Macau Orient Golf course, sitting on about 175 acres of land on Cotai across from the Macau Studio City development, does not give Harrah's the right to develop a casino.
But the course will allow it to serve its top Asian customers who visit its Caesars Palace casino-hotel in Las Vegas, said Michael Chen, Harrah's president of the Asia-Pacific region.
"Our guests at Caesars Palace are very important to us and we want to be able to service them," Chen told The Associated Press.
"They go to Macau today. We want to deepen our relationship with
Harrah's owns and operates six golf courses in the United States, including Rio Secco, home of a golf school run by Phil Mickelson coach Butch Harmon, and Cascata, an exclusive golf course near Las Vegas with a green fee of $500 per round.
Chen said the Macau course will be improved upon and will likely be part of the casino company's Total Rewards system in which it offers complimentary services in exchange for action on the casino floor.
Golf courses, such as the Cascata about a half-hour's drive from Las Vegas, serve as powerful attractions to guests, he said.
"I know some very good Indonesian and Malaysian customers that come stay at Caesars just because they want to golf at Cascata," Chen said.
Four of six of Harrah's courses, including the Atlantic City Country Club and Grand Bear near Tunica, Miss., have been regularly ranked among the Top 100 courses in America, Chen said.
Analysts suspected that Harrah's would use the purchase to break into the casino business in Macau, although it would have to partner with one of the six existing licensees.
"What will they do with it? Turn it into a casino complex," said Morgan Stanley analyst Celeste Brown in a research note.
"Plan B, if the government does not want to let them build immediately, would be to sit on the land to sell later to concession holders."
Harrah's, which is still a public company until its $90-per-share going-private transaction is closed, said it did not need to reveal the cost of the transaction because it was not material to its earnings.
Analyst speculation that it paid $3 billion for the property is "nowhere near" the mark, Chen said.
The company bought the property from a private Taiwanese investor and a Macau investor using "existing debt facilities," he said.
Chen said the company had no immediate plans to develop the land into a casino or partner with a licensee to do so.
"The Macau government has been very clear that these are not deals that can be done in the current environment," he said.
"Our intelligence so far has said it's unlikely that new licenses will be issued in 2009. But anything can happen in a long period of time. It wouldn't be my place to predict what would happen."
Shares of Harrah's fell 5 cents to $86.59.