Caesars moving ahead with fifth hotel tower

David Strow

Wednesday, Feb. 21, 2001 | 11:18 a.m.

Park Place Entertainment Corp. of Las Vegas is taking the first concrete steps toward the expansion of Caesars Palace on the Las Vegas Strip, one year after discussing the possibility with investors.

On Thursday, the Clark County Planning Commission will consider an application from a Park Place subsidiary to build a 30-story, 864-room hotel tower near Flamingo Road and the Strip.

The cost of the proposed fifth tower isn't being disclosed at this time.

The project, according to Park Place's application, would include a 320,000-square-foot shopping and retail area that would include "retail uses, restaurants, meeting rooms, ball/showrooms, support uses (and) subterranean parking levels."

Caesars Palace currently has 2,454 rooms. Park Place acquired the property at the end of 1999 in its $3 billion acquisition of Caesars World Inc.

Meanwhile, Park Place is clearing the way for this expansion. The company has demolished some of its older meeting space and its Circus Maximus dinner theater to make room for the project, said Park Place Chief Financial Officer Scott LaPorta.

"We're paving the way for an additional hotel tower, suites and an expanded high-end gaming area," LaPorta said. "We're currently working through the planning and feasibility process and hope to have the scale and timing of the project finalized over the upcoming months."

Park Place first brought up the possible expansion of Caesars Palace last February, when former Chief Executive Arthur Goldberg said the master plan for Caesars Palace included the addition of a 1,500-room tower on the Flamingo side of the property. He said the company wasn't ready to begin at that time, but that it would be re-examined later in the year.

Caesars Palace officials then discussed plans for the expansion with employees in June. Company officials, while saying they were enthusiastic about an eventual expansion, once again denied construction was imminent.

While not revealing when the project would finally move forward, LaPorta said demand justified the expansion plans.

"With the property running at full occupancy levels, and only 2,400 rooms serving the 125,000-square-foot casino, we have excess demand for more room product," LaPorta said.

Caesars Palace produced $117 million in cash flow in 2000, up 37 percent from 1999.

Not everyone is convinced, however, that expansion in the near future would be such a good idea.

"You get the sense that Park Place feels it needs to defend that Caesars franchise," said gaming analyst Jeffrey Logsdon of Gerard Klauer Mattison. "It has not been as competitive a product as many other facilities on the Strip. From that standpoint, (expansion) is probably a fulfillment of a corporate goal.

"(But) you sense from other people on the Strip that people want to be a little cautious for awhile. Whether it's the economy, or California gaming, or Internet gaming ... is it really time to be putting more money into bricks and mortar?"

Park Place, however, isn't the only operator considering such an expansion. The Venetian says it has lined up financing for a $200 million, 1,100-room hotel tower, with construction set to proceed this summer. Sheldon Adelson, chairman of Venetian owner Las Vegas Sands Inc., said in January he hopes to proceed with construction of a second, 3,000-room resort at the Venetian site by early 2002.

Plans for a new Caesars tower come as Park Place wraps up a $60 million renovation project at the famed hotel-casino. That project's most visible element was the "reskinning" of its older building to resemble the new Palace Tower, an effort completed in January. Caesars also added two restaurants, renovated 600 rooms and is currently adding two high-end, 13,000-square-foot pool villas.