Is the separation of casinos business and hotel business and retail business a good thing? Penn National thinks it’s good business. A few weeks ago they split their casino and hotel businesses into two separate companies.
Penn National Gaming has announced that it will split itself into an operating company and a REIT. The casino properties will be cleft between the two entities, with Penn National leasing most of them from the REIT.
OK, let’s get right to the bottom line: This is a big-ass tax dodge. REITs are exempt from federal taxes. Ergo, Penn rents property to itself and then is “required by law to distribute at least 90 percent of [its] taxable earnings to shareholders as dividends.”
This sounds half like a sketchy big business avoiding taxes but also like smart business move that may provide better service to the customer on both the hotel and casino businesses. Service should become better since employees will be concerned with less and able to focus on creating better experiences.
Penn National is the only company doing this right now, but Seeking Alpha thinks that seperating hotel, casino and mall business would be a good idea for Las Vegas Sands (LVS) (The Venetian & The Palazzo).
LVS is known for its exceptional gaming and lodging brand, but the company’s value proposition is centered on three different (and integrated) business models: Malls, Lodging, and Gaming. Collectively, the company’s three platforms provide tremendous value, and individually, the pieces appear to be worth more than the whole.
I don’t think that big businesses are always able look to the customer first. Take LVS, their priority is split between casinos, hotels and malls on multiple continents. Taking 2/3rds of the worry out of the hands of one person, for example, and handing it to 3 experts in different fields should help make each company operate better.
Additionally if employee bonuses are tied to the performance of their individual company as opposed to all 3 divisions as one company there isn’t the ability to let focus go on a division.
This should produce a better experience for the customer. On the surface, I think separating casinos from hotel and malls could be a good thing for everyone.
Photo – kinchloe