Las Vegas Hilton may be sold

Gary Thompson

Wednesday, Sept. 22, 1999 | 11:23 a.m.

The venerable Las Vegas Hilton, once the favorite hotel of Hilton Hotels Corp. Chairman Barron Hilton, may be sold, the Sun has learned.

Now owned by Park Place Entertainment Corp., the 3,200-room hotel-casino next to the Las Vegas Convention Center is being eyed by major lodging companies such as Marriott and Hyatt, as well as by private investors, sources said Monday and today.

Executives of Park Place, the gaming company spun off from Hilton Hotels at the end of 1998, declined to comment. But the property could command a sales price of $350 million or more, based on cash-flow multiples lodging companies have paid recently for hotels.

The Las Vegas Hilton's cash flow fell 68 percent in the June 30 quarter, to $7 million, due to competition from increased room inventories in the market and a drop in play by high rollers. Cash flow for 1999's first half was $34 million, down $5 million from the year-earlier six months.

The Hilton's historic focus on premium play has been hit hard over the past year by the opening of high-end facilities such as Bellagio and the Mansions at MGM Grand. As a result, executives have initiated a new marketing program designed to boost non-premium play in the casino.

Park Place's acquisition of Caesars World, expected to close by November, provides an incentive for the company to sell the Hilton, since it would be competing against another of its Las Vegas holdings -- Caesars Palace -- for high-end players.

Another factor in Park Place's interest in selling the property is that the Hilton's proximity to the Convention Center would allow lodging companies that cater to conventioneers to leverage their experience in that business and rely less on casino play to bolster the bottom line.

Lodging companies have been paying anywhere from seven to 11 times annual cash flow for quality hotels in desirable metropolitan areas in recent months. One reason for the higher multiples than pure gaming companies have commanded is that it would be far more costly to build similar structures than to buy them, particularly as land costs escalate.

Park Place stock was quoted at $10.8125, down 12.5 cents, in late-morning trading today.