Caesars Entertainment Is Taking Its Brand Worldwide

Gambling isn't legal in Dubai, but that isn't stopping Caesars Entertainment (NASDAQ: CZR) from putting its Caesars brand on a new hotel there. The company recently announced a deal with Meraas Holdings LLC to manage two luxury hotels and a beach club at Meraas' Bluewaters Island development.

The property will be the first non-gaming resort to carry the Caesars brand and is another way for the company to leverage its name worldwide. If the Dubai resort goes well, this could be the first of many non-gaming resorts in the Caesars Entertainment portfolio.

Caesars' big plans in Dubai

The two properties in Dubai will be known as Caesars Palace Bluewaters Dubai and Caesars Bluewaters Dubai and they'll house six restaurants and bars, 479 hotel rooms, and 164 shopping and entertainment outlets. While the name of the property says that it's an island, it's technically a man made peninsula that's connected to Dubai's dense Marina district. It's an area with thousands of hotels, which is why Bluewaters can justify 164 shops and entertainment outlets while having only about 1,000 guests on-site.

Caesars has done management deals before with partners like Indian reservations, but it's now branching out into managing non-gaming hotels. The model is more in line with what we would see from Hilton or Four Seasons, which often don't own the hotels they operate but collect a fee for the services they provide and their expertise in running large resorts.

The fee Caesars is getting to manage the Bluewaters property wasn't disclosed, but fees typically run between 3% and 3.5% of revenue, according to CBRE Hotels' Americas Research. If we assume that each hotel room averages $400 in revenue per night, the management fee would be $2 million on the hotel business alone. Food and beverage and shopping would increase that fee significantly.

Adding a few million dollars in management revenue may not seem like a big deal for Caesars, but it's high-margin incremental revenue, and if the company plays its cards right, it could use the resort as a feeder for the real moneymaking casinos in Las Vegas.

The new growth market in gaming

Caesars isn't the only company taking its gaming brands worldwide into non-gaming markets. MGM Resorts (NYSE: MGM) has launched MGM Hospitality, a hotel development and management business that mirrors what Caesars is building in Dubai. The company's first major property will be MGM- and Bellagio-branded hotels in Dubai in which MGM will advise on the building process and manage the hotels. Wasl Hospitality will be the owner of the property, which is expected to be completed in 2021.

Like Caesars, MGM Resorts is trying to expand its brand beyond the U.S., and Macau and Dubai have proven to be the locations of choice to start.

Caesars' growing plans worldwide

This is part of a broader growth strategy Caesars is pursuing outside of the U.S. The company is building a resort and casino in South Korea in a joint venture with Guangzhou R&F Properties. Caesars has also said it is very interested in building a resort and casino in Japan if gaming licenses are ever awarded there.

Even though Caesars Entertainment won't be able to win a gaming license everywhere, it could spread its brand by forming management partnerships like the one in Dubai. If the strategy is successful, the company could build a revenue-generating hotel management business that builds brand awareness for international customers who may come to Las Vegas to spend money in the future. Expanding the network could be a lucrative strategy, and investors should watch to see if this kind of deal becomes the norm as gaming companies look to expand in non-gaming markets.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.