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Harrah’s Entertainment Inc. GS-50 p. 12
EPILOGUE
Instead of investing lavishly on the “dazzle factor” of their properties like most of their major
competitors, Harrah’s decided to follow a very different path. They committed themselves to
knowing more about their customers. Harrah's heavily invested in building up a state-of-the-art
IT infrastructure designed to collect information about customers and to interact with them on an
individual basis. Harrah’s leadership in the technology arena was well recognized by CIO 100
and Enterprise Value Awards, as well as awards from Forbes, Computerworld,
InformationWeek, and the Data Warehousing Institute. 16
This strategy had paid off and resulted in Harrah’s establishing itself as the leading performer in
the industry (see Exhibit 8 for its income statement). With its IT-based customer service
strategy, Harrah’s had the potential to significantly improve customer loyalty. In its customer
satisfaction scoring (CSS) system, 38.7 percent of respondents gave A ratings in 2000. These
ratings climbed to 42.1 percent in 2001 and to 44.3 percent in 2002. These high scores also
translated to sizable revenue increases. Harrah’s estimated that a one-grade increase in CSS
would lead to 5 to 10 percent in revenue lift, and a two-grade increase could cause a 10 to 15
percent lift. Indeed, same store revenue (hotel and gaming combined) grew 33 percent, from
$172 to $229, between 2000 and 2002. Further, the company experienced 17 consecutive
quarters of same store sales growth since 1999 until 2003 Q1. A large portion (23 percent) of
this increased revenue resulted as cross-market play brought in more than $1 billion in 2002.
Harrah’s share of gaming budget has also increased from 36% to 42% between 1999 and 2002,
and Harrah’s estimated that each 1 percent increase in share consolidation represented $.20 in
earning per share (EPS). During the same period, EPS grew 110 percent, from $1.28 to $2.90.
The stock price reflected similar performance (see Exhibit 9) over the years during the
company’s transformation to an active enterprise.
Harrah's Enterprise Data Warehouse project was an essential component in achieving this
success. Its recent strategic partnership with TIBCO added a real-time dimension to its existing
data warehouse, enabling Harrah’s to move one step closer to its vision of becoming a “real-time
active enterprise.” This powerful mix of technologies opened up a whole range of exciting new
possibilities for Harrah's, and the company appeared well positioned to not only maintain but
further extend its lead over competitors. It also held great potential for other companies (in
many different industries) that wanted to build long-term customer loyalty by interacting with
them in real-time. Harrah's story was that of a company which, when driven by intense
competition, re-invented itself by going back to the basic values of its founders, realized through
the use of the latest technology.
16 http://www.techieindex.com/tibco/firsttimeuser/news.asp.