New Park Place chief tries boosting Caesars

Monday, Nov. 25, 2002 | 11:16 a.m.

Park Place Entertainment Corp. expects to construct a Roman-themed "entertainment approach" next year at the northwest corner of Flamingo Road and the Las Vegas Strip in front of the company's Caesars Palace resort, newly appointed Park Place Chief Executive Wallace Barr says.

Barr, interviewed Friday, said the project will top off a major theater opening and improve lagging returns at Park Place's flagship property.

The project is an example of a way the company will push to expand non-casino revenues at its major properties, Barr said.

Barr last week replaced Tom Gallagher, who resigned under pressure amid concerns about the company's lagging stock price and relative operating inefficiency compared to its peers in the casino business.

The feature will contain food and beverage areas and entertainment exhibits that will match the flavor of Caesars Palace, Barr said. It will be built atop a two-story, underground parking garage now under construction near the Colosseum, a replica of the famed Roman landmark that will debut in March with a show featuring Celine Dion. The parking structure will serve as valet parking for the expected influx of theater patrons.

Park Place expects the Celine Dion show to sell out for much of the year, Barr said. More than 90 percent of the tickets available from opening day March 25 through June have been sold, Park Place spokesman Robert Stewart said. Tickets will be released for subsequent three-month intervals, he said.

But declines at the Caesars Palace casino were in part responsible for a drop in expected earnings for the company's third quarter.

The property is facing stiff competition for high-rollers from newer luxury properties such as The Venetian and Bellagio, company watchers say. Like competitors, Park Place also was hammered when foreign visitors held off on trips to Las Vegas after Sept. 11 last year -- business that's still far from a recovery.

Caesars Palace is back on track, Barr said.

The unexpected drop in casino revenue was mainly due to the disruption caused by the construction of the Colosseum, he said. Major work is now complete and traffic into the casino is moving more smoothly, he added.

"The construction walls are done now (and) traffic is moving free and unimpeded."

To lure back heavy spenders, especially international tourists, Caesars Palace became the second casino after MGM Grand to be approved for a "private gaming salon."

The salons, enclosed spaces for high-rollers, are aimed at capturing revenues that now go to private casino floors in Europe and Asia.

Besides the Colosseum, the company's second major near-term project is the development of a tribal casino in upstate New York. A federal judge recently dismissed a lawsuit blocking the project, paving the way for an agreement to build a casino in the Catskills next year.

"We hope to continue to move forward through legal challenges and with the Bureau (of Indian Affairs)," Barr said.

Aside from those two projects, Park Place is scouting other states for future development. Those include the Northeast region, an area that appears likliest to approve of expanded gambling due to recent elections of pro-gambling governors, analysts say.

The company recently hired a lobbying firm to make a case for gambling in Massachusetts, for example. The company -- which had owned a racetrack in Maryland at one time -- also is talking with racetrack operators in Pennsylvania about the possibility of an ownership or management position.

"Right now it's just talk and conjecture," Barr said. "But we are definitely looking at those opportunities there."

Park Place has already attained top market share in Atlantic City and Mississippi -- two major gambling markets outside of Las Vegas. That's why the company also is looking outside those markets at other potentially significant gaming areas, such as Chicago and Louisiana, Barr said.

Analysts have noted that Park Place will face tough competition in Atlantic City upon the debut of the Borgata, a $1 billion, luxury casino owned by MGM MIRAGE and Boyd Gaming Corp.

Barr says the company welcomes the challenge.

While visitors are expected to flood into the Borgata, they will eventually "return back to their favorite places" similar to what happened after the Taj Mahal casino opened more than a decade ago, Barr said.

Borgata will attract more attention to Atlantic City, which will increase traffic for other casinos, he added.

"There's enough room for growth in the marketplace."

Analysts say Barr will face a challenge in integrating the company's diverse brands -- casinos that often appeared to compete with one another in the same region. Park Place has its origin in four separate public companies. The company has since added two other brands to its portfolio. The casino behemoth, now the largest gaming company in terms of revenues, owns, manages or has an interest in 28 casinos under the Caesars, Flamingo, Hilton, Paris, Bally's and Grand Casinos brands.

The company expects to receive permission this month from New Jersey regulators to merge its Claridge Casino Hotel -- a property purchased in June 2001 -- into its adjacent Bally's Atlantic City. The hotel would be marketed as the "Claridge Tower" of Bally's.

The merger allows the properties to operate more cost-effectively compared to the expense involved in running two separate casinos next to one another, Park Place executives said.

Park Place also has a Sheraton brand casino in Mississippi, but is considering dropping that brand.

Park Place's relative operating inefficiency is a product of having so many brands that don't blend well, analysts have said.

Barr, with more than 20 years of operating experience at Park Place-related properties, is expected to focus on better integrating those brands.

Barr said last week that he will continue to execute a strategy put into motion during Gallagher's two-year tenure.

"The goals remain the same. We're still a dominant player."

Park Place has had more success recently tailoring its brands to appeal to specific customers, he said.

The company also is in the process of consolidating back-office functions, including customer data warehousing, that will lead to savings in marketing costs and more effective customer promotions, he said.

The company in January announced its Connection Card, a slot player loyalty club card that aims to tie its brands together by allowing players to rack up points by gambling at any of its Las Vegas casinos.

During the first quarter of next year, the company expects to add perks to the club, including a cashback feature, Barr said.

Wall Street reacted favorably to news of Barr's appointment. Still, the promotion doesn't signal any strategic shift at the company, which faces significant challenges as gambling expands across the country, analysts said. Operators continue to face tough competition in Las Vegas, which is still recovering from the decline in tourism and weaker consumer spending.

"The real catalyst for Park Place's stock in the last (four) years has been acquisitions," UBS Warburg analyst Robin Farley wrote in a research note to investors last week. "The market has previously warmed to Park Place as a consolidator much more than it has to Park Place as a cost cutter in our view."