Las Vegas Sun

August 29, 2014

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Palms opens tonight, competitors ready

George Maloof is aiming for the young, hip visitor with his $265 million Palms hotel-casino, set to open near the Las Vegas Strip this evening.

He's also trying to draw the local patrons that frequented the Fiesta while his family owned the North Las Vegas property.

Across Flamingo Road, however, the Rio has long competed for the type of visitor for which the Palms is designed. Within a mile of the Palms lie two locals casinos owned by Coast Resorts Inc.-- the Gold Coast and the Orleans. And two miles east, on Flamingo Road, lies the Hard Rock -- the ultimate "cool" venue for the young gambler.

All four will have new competition when Maloof's new resort opens its doors.

On the surface, the situation appears the most urgent for the Rio. The off-Strip property was once one of the cool nightspots of Las Vegas, but has struggled in recent years as offerings that were once unique to the Rio popped up along the Strip.

"The Rio will try to get hipper again," said Anthony Curtis, publisher of the Las Vegas Advisor newsletter. "They may need to move in that direction again."

But Harrah's Entertainment Inc., owner of the Rio, believes the new neighbor isn't necessarily bad news for the Rio. If you're trying to draw customers a mile west of the Strip, to the intersection of Flamingo Road and Valley View Boulevard, it helps to add a third attraction.

"We view it as a complement to the Rio and the Gold Coast," said Harrah's spokesman Gary Thompson. "It creates a mini-concentration of casinos in a convenient locale, and should increase traffic to all three casinos. From our perspective, it's a net positive."

Still, Harrah's is moving to defend what it considers to be its traditional Rio customer base. Two days after the Palms opens, the Rio and Maxim Magazine -- a men's magazine focused on sex, adventure and partying -- will hold a "Maxim Lounge" invitation-only party at the Rio's Palazzo Suites. The two companies said they will begin exploring cross-promotional branding opportunities, and Harrah's will launch an advertising campaign for the Rio in the 2.5 million-circulation magazine.

"There are various ways of bringing these people back, and the Maxim deal is one," Thompson said. "We're going to be very aggressive in competing for those customers, because we think we have a great product there."

And customers that may wander to see the new property often do come back, Thompson said.

"These (Harrah's/Rio customers) are people who go to other places, see them, and come back because of our customer loyalty programs and the services we provide," Thompson said. "Certainly they'll go to see the new property, but we think they'll come back to the Rio."

The Gold Coast, on the other hand, aims at an entirely different customer, said Harlan Braaten, president of Gold Coast owner Coast Resorts.

"Their facility (the Palms) is really geared for the younger, hipper patron ... the majority of our customers are older and more conservative," Braaten said.

Still, Coast is moving aggressively to protect its business at the Gold Coast. Over the past year, a $50 million renovation and expansion project has been underway at the casino. Additions include a 2,000-space parking garage, 10,000 square feet of new convention space, and 30,000 square feet of additional casino space. The goal is to make Gold Coast more competitive with the Palms.

"Certainly the fact that it's located near your property makes it a competitor, because people will have a choice to go there or to our properties," Braaten said. "Realistically, we expect there will be some impact to our business initially. Hopefully it's very moderate, and we slowly get that back as time passes, with the continued growth of this community."

A $130 million expansion of the Orleans is also under way. This project includes the addition of a 9,500-seat arena, a 620-room hotel tower, a 2,600-space parking garage and 40,000-square feet of additional casino space.

Though the Palms has been called a competitor of the Orleans by some, Braaten said the Palms wasn't the trigger.

"The hotel has been running at 95 percent (occupancy) for three years or more," Braaten said. "The covered parking is something we've needed for quite awhile."

Two miles west of the Palms lies the Hard Rock, one of the city's hottest hangouts for younger gamblers. Though they're separated by some distance, the Hard Rock and the Palms are often mentioned as direct competitors. Ironically, there's some family competition between the two as well -- Hard Rock owner Peter Morton's younger brother, Michael Morton, is one of the partners in "Nine," the Palms' steakhouse.

Though the two sides have insisted there's room for both in the market, Hard Rock executives have sent some barbs the Palms' way in recent months.

"They're going to have bingo at the Palms," Hard Rock Chief Financial Officer James Bowen told Forbes Magazine in September. "How cool can you be if you have bingo?"

Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown, once believed the two casinos would be each others' biggest competitor. But he's no longer convinced that's the case. The Hard Rock is primarily a tourist property, while the Palms is chiefly a locals' property, Zarnett believes.

"The Hard Rock is a gigantic nightclub that offers table games ... the slot business they get is from people playing while they're waiting (for a seat at a table or for a show)," Zarnett said. "The Hard Rock customer will quickly migrate back to the Hard Rock."

There's 623 slot machines at the Hard Rock. Palms, by comparison, has 2,400.

Zarnett believes Maloof won't have problems getting Las Vegas residents and visitors to check out his place in its first year. The trick will be getting them to come back, he said.

"The first six to 12 months will be more difficult than they would have been prior to Sept. 11," Zarnett said. "Nevertheless, he has a formula that will work."

That's the biggest challenge the Palms will face, Maloof said.

"The No. 1 challenge for us is to build our brand, and build customer loyalty," Maloof said. "The easiest way is when someone experiences the Palms, you take care of them, and they tell their friends.

"I am fully convinced I can compete with anyone in town."

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