Harrah’s plan for casino advances

David Strow

Wednesday, Jan. 30, 2002 | 11:02 a.m.

Harrah's Entertainment Inc. is asking Clark County officials to approve a hotel-casino project directly north of its Rio resort on Flamingo Road, near the Las Vegas Strip.

But officials with the Las Vegas-based gaming company are cautioning the move doesn't necessarily mean Harrah's is planning to proceed soon with an actual project.

A use permit application, filed with the Paradise Town Advisory Board, calls for the construction of a 1,486-room hotel and 70,000-square-foot casino on a 14-acre land parcel on the north side of the Rio complex. The company also applied to rezone the land parcel from light industrial to resort use.

The town board approved the application Tuesday night. It will proceed to the Clark County Planning Commission Feb. 7.

The application, by Harrah's subsidiary Cinderlane LLC, calls for a "three-tower, 24-story expansion to existing hotel-casino."

But Harrah's spokesman Gary Thompson cautioned that the Las Vegas company has not made a final decision to proceed.

"We are merely making certain that, if and when we decide to proceed with a casino and hotel on that property, the zoning is in place to allow us to do that," Thompson said. "It does not signal we are going to proceed in any way at this point."

Thompson said Harrah's has also not decided whether the project would be an expansion of the Rio or an entirely new project; what the theme would be; and what the budget would be.

The Rio currently has 2,548 hotel rooms and about 110,000 square feet of casino space. Harrah's acquired the property in 1999.

Harrah's has been considering an expansion of the Rio since at least early 2000, when Chairman and Chief Executive Phil Satre discussed the possibility with investors on a conference call.

"I consider (expansion of the Rio) as an opportunity, taking advantage of its strong reputation," Satre said a year ago.

But a final decision to expand the Rio or build an entirely new hotel-casino there would depend on a feasibility study "to determine whether building a casino hotel in that area would prove profitable," Thompson said.

"We haven't undertaken that study at this time, and have no current plans to do that," Thompson said.

The Rio began struggling financially shortly after the Harrah's takeover in 1999. Historically the property produced cash flow of about $100 million per year, but cash flow fell to just $30 million in 2000. Harrah's blamed the disappointing results on ultra-high-end play, saying even mild fluctuations in table game hold made this business unprofitable.

Last July, Harrah's moved to get out of that business, announcing it was discontinuing marketing to international high-end players. The new strategy is apparently starting to show some results; in the fourth quarter, Harrah's expects to report roughly $17 million in cash flow at the Rio, a 50 percent increase over the year-ago period.

"First they need to get the numbers back (before expanding the Rio)," said Larry Klatzkin, gaming analyst at Jeffries & Co. "There's a wave (of new development) coming, and they're thinking maybe they want to join in the next wave."

Simply going through the permitting process signals little, Klatzkin said, and he believes it's a wise move by the company.

"If all they're doing is keeping their options open, and it doesn't cost them much to do it, why not?" Klatzkin said. "It's better to get things (permitted) now when people aren't rushing in for approvals."