Park Place chief pays attention to detail

Gary Thompson

Thursday, Sept. 2, 1999 | 11:40 a.m.

Thirty-three months ago, Arthur Goldberg took an opening-night stroll through New York-New York, the city-themed hotel-casino destined to become one of Las Vegas' biggest draws.

Eyes drinking in the intricately detailed decor, Goldberg gestured emphatically to an aide as he pointed toward the cobblestone streets, intimate sidewalk dining areas and soaring four-story ceilings that carried through on the implicit promise made by the building's architecturally inviting exterior.

A reporter asked Goldberg, then head of worldwide gaming operations for Hilton Hotels Corp., his opinion of the unique character of the city's newest resort.

"Coming from New York, I was prepared to be disappointed," Goldberg said. "But this is an absolutely beautiful facility. I haven't seen a single thing I haven't liked. They paid unbelievable attention to detail, with touches that are simply amazing."

"Will there be as much detail in your Paris-themed resort?" the reporter asked about the concept Goldberg had announced just a few months earlier.

"There will be now," Goldberg said quietly, gazing once again around the New York-New York interior.

Fast forward to the present. Goldberg sits in his office at the Las Vegas headquarters of Park Place Entertainment Corp., the world's largest gaming firm, speaking with top aides on the eve of the opening of Paris-Las Vegas. A reporter asks Goldberg his opinion of the $800 million French-themed hotel-casino that's drawn raves from those afforded pre-opening peeks.

"The French are a very direct and forthright people," he says, "and would let you know if they didn't like it. The French citizens who've seen the property have been very receptive to it.

"I've walked through there a number of times in the past three to four weeks," Goldberg says. "The attention to detail is phenomenal.

"There's a flow and warmth to the design of that property that's truly unusual. The layout is perfect, with wonderful use of space, and it isn't overburdened with anything.

"I think a lot of people will go here rather than Paris," he says.

Goldberg knows he's got something special with the new resort, a world-class property he's built from scratch rather than acquired. Not that he's averse to acquisitions, mind you.

Goldberg has been both acquirer and acquiree in the past three years. During that whirlwind period, Hilton Hotels Corp. acquired the Goldberg-led Bally Entertainment Corp., made the former East Coast trucking company executive the lodging-and-gaming chain's second-largest individual shareholder after Barron Hilton, and put him in charge of its worldwide gaming operations.

Goldberg and Hilton President Steve Bollenbach attempted to add ITT Corp.'s casino and hotel assets to Hilton's portfolio in the biggest takeover battle in gaming history, but dropped out of the bidding when the price got too high.

Hilton then spun off its hotel-casinos into the new, publicly traded Park Place Entertainment Corp., installed Goldberg as its president, and acquired Grand Casinos Inc.'s three wholly owned Mississippi casinos -- a deal that gave the 57-year-old Goldberg operational control over the only major casino company with properties in the three largest domestic markets.

Four months later, Goldberg cemented that dominance with a blockbuster deal -- the purchase of the former ITT Corp.'s Caesars World assets for $3 billion, an acquisition expected to close by year-end.

"When we left Hilton on Dec. 31, 1998," Goldberg says, "we were slated to do $700 million in cash flow in 1999." That included about $150 million in cash flow, or earnings before interest, taxes, depreciation and amortization, from the Grand Casinos purchase. Analysts project the company will boost its EBITDA another $400 to $450 million with the Caesars acquisition next year.

"That means," Goldberg says matter-of-factly, "that we're almost as big as Hilton was before it spun us off" -- just nine months ago.

Park Place executives don't believe Wall Street fully appreciates the value of the company's assets, management team and strategy -- a sentiment shared by gaming analysts who almost universally have "buy" or "accumulate" ratings on Park Place equity. Still, the stock price has climbed from $6.375 a share six months ago to above $11 this week, a 72.5 percent gain.

Ultimately, though, the Park Place team believes the stock market will award the company a proper cash-flow multiple, especially once the returns expected from the Caesars investment become a reality.

The Caesars deal was especially savory, "a once-in-a-lifetime opportunity to get the leading brand name in the industry," says Goldberg. It didn't hurt that the Caesars properties were all profitable -- and could be made even more so by a corporate management team that understood the gaming industry as well as did the front-line executives at each property.

That hadn't been the case with Starwood Hotels & Resorts Worldwide, which had acquired Caesars assets in the ITT transaction. Executives at Starwood, once the fastest growing real estate investment trust in the country, weren't comfortable with the volatility of the gaming business and were eager to revert back to the safer, more predictable revenue streams of the lodging business.

"Caesars has always been No. 1, not only in this town but all over the world," Goldberg says. "And the wonderful thing about Caesars Palace here is that we have room to expand, maybe even build another hotel tower."

Another tower won't be the first order of business at the famed Strip hotel once the acquisition closes, however. Goldberg and the Park Place board have already authorized spending $85 million over and above normal maintenance capital expenditures to move part of the Caesars casino, construct a new buffet and build some luxury villas for high-end gamblers.

The Grand Casinos deal also gave Park Place more expansion room, including 2,000 acres in Mississippi for additional golf courses, time-share apartments, possible theme-park attractions and other amenities. Goldberg says Park Place directors are already considering building hotel towers at the Grand properties in Tunica and Biloxi.

Goldberg's delight over acquiring the Caesars brand shouldn't be taken lightly, as he indicates Park Place plans to take full advantage of the name's power.

"Take the Grand Casino Tunica property, for example, which is doing just fine right now. But think how much more it might do if it had the Caesars brand," he says.

Goldberg is the reigning master of the consolidation trend that has seen larger gaming companies buy up smaller ones over the past few years. And he thinks there's more such deals to come.

"If I were president of one of the smaller companies, I'd be consolidating right now to rationalize my expense structure," he says. "It just doesn't make any sense for four small companies, for example, to pay four presidents, four teams of lawyers, or have four purchasing departments. You'd slash corporate expenses and have so much more buying power by consolidating."

Goldberg hints strongly Park Place isn't finished playing the consolidation game itself, though its search for new targets will be put on the back burner until it completes the integration of the Grand Casinos and Caesars World purchases.

"We wouldn't be afraid of more acquisitions after the Caesars deal closes," he says. He downplays -- but doesn't specifically address -- speculation about a possible merger with another gaming giant, Mandalay Resort Group.

Mandalay Resort Group executives Mike Ensign and Bill Richardson "are very, very good friends of mine, and we talk about a lot of things besides business," he says.

Meanwhile, Goldberg plans to leverage Park Place's purchasing power in areas beyond tangible purchases of food, furniture, fixtures and equipment and into such spheres as entertainment.

"We'll be able to have one entertainment buyer for the whole company, and can guarantee entertainers a range of first-class venues in Las Vegas, Atlantic City and Mississippi," he says.

For the present, he's ecstatic over the "Notre Dame de Paris" musical production scheduled to debut at Paris-Las Vegas in January. But he acknowledges the company is still looking for "the right production show" to install at another local property such as the Las Vegas Hilton because he recognizes the value of entertainment in drawing people to resorts.

"Steve Wynn has done a great job with entertainment," he says, referring to the Mirage Resorts Inc. chairman with whom he's sometimes crossed verbal swords. "I'd have happily settled for any one of his shows."

Goldberg appears more tanned, fit and relaxed that one might expect after his recent five-week hospital stay brought on by a bout with pneumonia. One reason for his confidence is the performance of the Park Place management team during his recuperation.

"When I was out, they didn't miss a beat," he says. "There were no in-house fights or feuds, no hesitance in making decisions. They've come to understand how I think, and they did a great job."

The management team includes executive vice presidents Wallace Barr, Clive Cummis, Mark Dodson and Scott LaPorta, all of whom have Goldberg's complete confidence.

He prefers such a lean management structure, he says, "because you have fewer mistakes, you can transmit messages directly without any danger of miscommunication, you can make decisions much more quickly, and you save a lot of money."

That conservative philosophy carries through in the financial projections the company makes for all its properties, including the newest.

"We're projecting $125 million in cash flow for the first year at Paris-Las Vegas, based on a $105 average daily room rate and 90 percent occupancy," Goldberg says. The new resort's 2,916 rooms are sold out through September at an average daily rate of $168, however, and the prospects for the remainder of the year look equally strong.

As he gets ready to head back to the new property for another last-minute walk-through, Goldberg is asked about a recent story by Barron's, the financial news weekly, proclaiming him the new king of Las Vegas gaming.

"I never believe my own newsprint, whether it's good or bad," he says. "And I tell my people to have the same philosophy.

"But I'll tell you one thing," he adds after a beat. "I really love this town."

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