Big LV casino operators detail plans for spending: Caesars, Venetian expansions top lists

David Strow

Wednesday, April 4, 2001 | 10:40 a.m.

Park Place Entertainment Corp. is earmarking funds toward the construction of a fifth hotel tower at Caesars Palace, one month after receiving approval from Clark County to move forward.

In its annual report, Park Place said it expects to spend up to $275 million on expansion and improvement projects in 2001. The report says this includes the "master plan of casino, hotel and amenity expansions at Caesars Palace," which Park Place officials say refers to the new hotel tower.

According to plans filed with the Clark County Planning Commission, Park Place wants to add a 30-story, 864-room tower at Caesars Palace, boosting its room inventory by 35 percent. The expansion would include a 320,000-square-foot shopping and retail area and additional high-end casino space.

The company anticipates funding the project entirely with free cash flow, with a 2002 completion date.

The $275 million figure doesn't refer to Caesars Palace alone -- Park Place said it is also adding a 500-room hotel to its Caesars Indiana riverboat near Louisville, Ky., and expanding and renovating its Sheraton property in Tunica, Miss.

The company anticipates spending an additional $275 million on maintenance of its properties in 2001. The total expected capital expenditure figure of $550 million is a 18 percent increase over 2000.

Park Place's 2000 capital expenditures of $468 million included the expansion of its Wild Wild West casino in Atlantic City, the Caesars Indiana expansion, casino, suite and restaurant expansions at Caesars Palace and the purchase of the Cascata Golf Course in Boulder City from MGM MIRAGE.

Meanwhile, the parent company of the Venetian disclosed in its annual report that it will spend $27 million on the construction of the new Guggenheim and Hermitage museums at the resort, set to open in September.

Las Vegas Sands Inc. said it will spend $21 million on the 63,000-square-foot, multilevel Guggenheim museum, and an additional $6 million on the 8,000-square-foot Hermitage. Those projects are included in the $46.4 million capital expenditures the Venetian anticipates in 2001. In 2000, the hotel spent $28.6 million on capital expenditures.

The Venetian's agreements with its creditors permit the resort to spend only $25 million per year in capital expenditures, but said it is requesting a waiver of these provisions. The projects will be funded by both cash flow and borrowing under the company's credit facilities.

But capital expenditures at Harrah's Entertainment Inc. will be coming down significantly in 2001, with the company saying it expects to spend between $450 million and $525 million this year.

In addition to maintenance spending, notable Harrah's expansion projects include a $113 million expansion of Harrah's Atlantic City, a $47 million expansion of Harrah's East Chicago and a $45 million expansion of Harrah's North Kansas City. Not all of these expansion costs, however, are budgeted for 2001.

In 2000, Harrah's spent $568.3 million on capital expenditures. Significant projects included a $32 million entertainment showroom at the Rio, a $147 million expansion of its Shreveport, La., casino, and a $41 million upgrade of its Lake Charles, La., property.

Another significant expense for the company was $277.6 million spent on the repurchase of 12.4 million shares in 2000. Those buybacks were paid for from cash flow and bank debt.

Harrah's said it is authorized to repurchase up to 4.5 million more shares through Dec. 31.

MGM MIRAGE, the third major gaming company to file its annual report last week, did not provide a capital expenditure estimate in its report. However, company officials said on a Feb. 1 conference call that they expected to spend $200 million in maintenance capital in 2001 and an additional $100 million to $200 million on expansion projects. The largest expansion project for MGM MIRAGE, by far, is the $1 billion Borgata, an Atlantic City resort casino being developed in partnership with Boyd Gaming Corp. That project is slated for completion in 2003.

MGM MIRAGE spent $336 million on capital expenditures in 2000. These costs included a renovation of the MGM Grand's hotel rooms, completed in 2000, and the acquisition of a land parcel in Detroit to be used in the construction of a permanent casino.

MGM MIRAGE also disclosed that it laid off just under 200 employees at the MGM Grand and New York-New York in 2000, as "duplicative functions" were eliminated between the two properties. Positions were cut in marketing, retail operations, entertainment, information technology and human resources.

About 125 of these layoffs occurred shortly after MGM Grand Inc. acquired Mirage Resorts Inc., as part of a company-wide cost cutting initiative. The company recorded a $24 million charge ($15 million after-tax), as a result of its restructuring.