Las Vegas Sun

July 22, 2014

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Caesars project to include Colosseum replica

In recent years Las Vegas has become famous for re-creating the wonders of the world along the Strip; the Eiffel Tower, the canals of Venice, the Statue of Liberty, the pyramids of Egypt.

Add the famed Colosseum of Rome to that list.

Park Place Entertainment Corp. on Tuesday announced plans to build a replica of the Colosseum at Caesars Palace. The $65 million project will be a 4,000-seat entertainment venue, designed to replace the hotel-casino's famed 1,000-seat Circus Maximus showroom, which was demolished in September. Located in the center of the Colosseum will be a 22,000-square-foot stage.

The Colosseum, located near the entrance to the Forum Shops at Caesars, will be part of Park Place's aggressive plans to expand Caesars Palace. Also on deck are a 35-story, 800-room hotel tower, which would give the property more than 3,250 rooms.

With 2,454 rooms now, the expansion would push Caesars on to the list of the city's 10 largest hotels. It would still trail such giants as the MGM Grand, the city's Mandalay Resort Group properties (Luxor, Mandalay Bay, Excalibur and Circus Circus) and Park Place's Flamingo.

"The name Caesars has always been synonymous with the word 'entertainment' in Las Vegas," Thomas Gallagher, Park Place chief executive, said. "This new venue will mark the Palace's return to that pre-eminent position."

Park Place spokeswoman Debbie Munch said construction will begin in the coming weeks, though she said a specific timetable for its completion hasn't been set yet. Nor has a timetable been set for construction of the new hotel tower.

Further details will be announced in the next two to three weeks, she said.

The project comes on top of heavy capital spending at Caesars in 2000. To make Caesars competitive with the Strip's newer properties, Park Place changed the facade on Caesars' older hotel towers, redesigned 600 hotel rooms and added two restaurants. This summer, two high-end poolside villas will be completed at a cost of $24 million, and a high-end gaming salon will be added by year's end.

For Las Vegas, the return of a big entertainment venue at Caesars could give the Strip something it's been missing since the Circus Maximus vanished -- a venue for regular appearances by big-name headliners, said Anthony Curtis, publisher of the Las Vegas Advisor newsletter.

"They stood out as one of the few headliner venues before they got rid of (Circus Maximus)," Curtis said. "The key is, 'Are they going back to the same kind of headliner entertainment they had at the showroom?' If they have that, it'll stand out. If it's just another arena ... they're just going to blend in like everyone else."

Entertainment venues can generate revenues from ticket sales, but they are often more valuable in terms of generating pedestrian traffic for the casino. For that reason, Wall Street analysts say the Colosseum makes good business sense.

"Clearly, there's the potential for upside (in Caesars' cash flow), but you're not going to get that from changing the skin on the (old) towers," said Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown. "You need to do something to create some excitement at the property. An entertainment venue can generate strong walk-through traffic, and that's how you generate strong returns in the business."

Jason Ader, gaming analyst with Bear Stearns, believes the property could help Caesars recapture its position as a sporting events leader in Las Vegas, particularly in booking major boxing matches.

However, Ader believes the additional plans -- the fifth hotel tower -- are a bad idea. The addition of more rooms just hasn't been a good investment in recent years, he said.

"Honestly, I'm skeptical (about the new rooms)," Ader said. "Wall Street doesn't want to see Park Place spending money on infrastructure and room additions in Las Vegas, if they're not going to get returns exceeding their cost of capital."

Because Park Place stock is at such low levels right now -- it traded at $10.50 this morning, well below its 52-week high -- Ader believes the company would be better off buying back its own shares rather than building another tower.

"It's hard for me to imagine they could get better returns on anything other than buying back stock," Ader said.

Park Place executives, however, have said in the past that demand for Caesars rooms has far exceeded supply, and that they believe the resort needs additional capacity.

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