News for the Hospitality Executive
|By Dave Berns, Las Vegas Review-Journal
Knight Ridder/Tribune Business News
May 12--Caesars Palace will undergo an expansion of as much as $550 million that will include the addition of a 900-suite hotel tower and a 4,000-seat theater designed in the style of the Roman Coliseum.
Details of the long-awaited effort were released Friday by Park Place Entertainment's Tom Gallagher during his first annual meeting as the company's chief executive officer.
The tower at Flamingo Road and the Strip would be part of an effort to re-establish the Caesars Palace brand, which languished during the mid- to late-1990s under the ownership of ITT Corp. and later Starwood Hotels & Resorts.
"We're going to put it back at the top," Gallagher said after the hour-long meeting that drew an estimated 600 people to Paris. "It had a revolving door of leadership, plus it suffered from the dual issues of needed investment and not having investments play to its strengths."
Park Place shares were up a penny Friday on the New York Stock Exchange to close at $11.91.
Critics, including Gallagher-predecessor Arthur Goldberg, long-argued that ITT and Starwood wasted the Caesars brand, failing to adequately upgrade the 2,419-room property to keep pace with such late 1990s Strip arrivals as Bellagio and the Venetian.
A 704-room hotel addition was planned by ITT for the Strip-Flamingo Road intersection, but the projected died in 1997, as ITT executives fought to defeat a hostile takeover bid by Hilton Hotels Corp., which lost that battle to Starwood.
But Hilton spinoff Park Place acquired Caesars World in 1999, with Goldberg, who died in October, vowing to invest in the brand, which is considered by some marketers to be the best-known in gaming.
The newly announced plans also call for the addition of 50,000 square feet of retail space, 70,000 square feet of meeting space, new restaurants and a spa.
The extension of the property to what some refer to as "the four corners" area of Las Vegas Boulevard is reminiscent of a mid-1990s move by Goldberg, who oversaw the development of a people mover from the Strip to the Bally's casino, a move that paid dividends by generating additional cash flow at the Strip megaresort.
"It's an absolute no-brainer to say we have to get out to the corner," said Gallagher, who had served as Hilton Hotels' vice president, chief administrative officer and general counsel since 1997 before being chosen by the Park Place board to replace Goldberg.
In recent months, company executives had spoken in generalities about adding a new hotel tower at the 34-year-old Strip resort.
Six-hundred rooms in Caesars' three original hotel towers were given a facelift last year, matching the buildings' facades to the outer shell of the 1,120-room tower built by ITT in 1997.
The cost of last year's renovation, which also added mega-suites for high rollers, has not been released by the company. But the new tower project is expected to give the property an upscale product designed to compete with the Venetian for mid-week convention business and Bellagio for casino guests.
"Caesars has been under-roomed relative to its location," said David Anders, a Merrill Lynch casino industry analyst. "I think most people would agree Caesars could accommodate a suite product.
"The Venetian has clearly demonstrated there is a very large market for the suites."
For the first quarter ended March 31, Caesars Palace reported a $4 million decline in cash flow to $35 million, with the most recent New Year's Day falling on a Monday, bifurcating the profitability of the lucrative weekend.
The reason: New Year's Eve and the Friday and Saturday leading up to it fell into the fourth quarter of 2000, boosting that quarter's numbers.
Park Place executives estimate that reduced Caesars Palace's first-quarter cash flow by $7 million.
Similarly, the Chinese New Year and Super Bowl weekend occurred during the same weekend this year, combining what are generally separate revenue generators.
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(c) 2001, Las Vegas Review-Journal. Distributed by Knight Ridder/Tribune Business News. PPE, HOT,