Once upon a time, there was only one St. Regis Hotel and only one Waldorf Astoria. And once upon a time, there was only one Caesars Palace Resort and Casino. But just as St. Regis and Waldorf Astoria grew their names into luxury brands, Caesars Entertainment is turning four of its signature hotels into brands that are open for licensing around the world, growing beyond the gaming hubs of Las Vegas and Atlantic City into new markets.
The announcement came during June’s NYU International Hospitality Industry Investment Conference, when president and CEO Mark Frissora detailed how the brands would be segmented. The Caesars Palace brand will apply to luxury hotels, while Cromwell will cover the luxury lifestyle boutique sector. Flamingo will be the upscale brand and Linq will be the upscale select-service flag.
The Caesars team began considering licensing opportunities upon the advice of several industry insiders, Bob Morse, Caesars Entertainment's president of hospitality, said after the conference. “We said, ‘You know, this is something that we should take seriously,’” he said. In late 2016, the company’s board of directors began exploring the possibilities and reaching out to markets that made sense from a brand distribution standpoint.
By April of this year, several deals already had been signed. Caesars and Meraas Holdings entered into a nonbinding letter of intent for Caesars to manage two luxury hotels and a beach club at Meraas' Dubai-based Bluewaters Island development. In late 2018, Caesars Palace Bluewaters Dubai and Caesars Bluewaters Dubai will open as Caesars Entertainment's first nongaming resorts. Caesars also is opening a $200-million nongaming Caesars Palace beachfront resort in Puerto Los Cabos, Mexico, through a deal with local development company Grupo Questro. Caesars Entertainment will manage the property and receive a licensing and management fee. A Caesars development in Korea also is underway.
Brands and Brand Standards
All of these properties, said Morse, would reflect their locations in terms of both design and operating style. “In select-service and midrange brands, you do come up with a cookie-cutter approach because it's all about consistency and keeping the cost of construction and the cost of entering the market lower,” he said. All of the Caesars Palace properties, however, will be distinctive, and while at this point all the upcoming properties will be beachfront resorts, Morse can imagine city-center Caesars properties.
“Caesar's Palace could go on a variety of locations, but we think it's more probably resort driven based on the amenity that we offer,” said Morse, adding that if a destination can support a Four Seasons, it could support a Caesars Palace. Flamingo hotels, meanwhile, would be ideal for South Florida, the Caribbean and Latin America, Morse predicted.
And Caesars is not ruling out adding more brands to its licensed portfolio—someday. “We have the most recognizable brands in the gaming industry today,” Morse said, “and we're very recognizable as a hospitality entity as well, of course. We're taking our current brands out that we think have a lot of equity behind them, but under the right circumstances, in the right location with the right owner/operator, we would definitely consider something outside.” Just a decade ago, he noted, few major hotel companies would have considered launching soft brands. “Every single one of them has one now.”
The Right Partnerships
So far, all of the projects slated for expansion are management contracts, but Morse expects Caesars to consider licensing agreements if the right operator comes around. Before joining Caesars, Morse was the president of Sheraton’s franchise division and is familiar with the process of approving operators for branded hotels. Still, for the time being, owners of Caesars-branded hotels will not be choosing their operators. “It's really hard when an owner also has an operating company and they do it themselves and they are really good at it,” Morse said. “It's tough to look at them in the eye and say, ‘We won't let you do it.’”
When Hyatt Hotels Corporation began franchising its brands, Morse noted, the company was “very careful” about selecting its partners, especially for the full-service flagship brand. “We're going to do the same thing,” he said. “We're going to be with people that we're comfortable with and that understand the brand, are excited about the brand and really want to be part of it.”
Because Caesars is well-established as a gaming company, upcoming locations for its hotels may depend on the rules and regulations that surround gambling. “We're watching Brazil very closely to see what happens there on gaming legislation,” Morse said. “There are some gaming opportunities that exist currently in Greece that we're looking closely at. Then, of course, everyone has their eye on Japan and the three licenses that should be issued in late 2019, early 2020.” But while it makes sense to target gaming-friendly destinations, Morse is thinking outside the box. “Those locations are fewer and farther between, whereas the [range] of where we could drop hotels in is huge,” he said.