New tower part of Caesars, Park Place revival strategy

Tuesday, July 15, 2003 | 10:58 a.m.

Park Place Entertainment Corp. has resurrected plans to build a $350 million room tower at Caesars Palace, a company official said today.

An "edgy" brand campaign is also planned for the Las Vegas Strip resort and Park Place will rename itself Caesars Entertainment Inc. to capitalize on the transformation of Caesars Palace, which better resonates with consumers than Park Place, company officials said.

The company's board or directors, which has long supported the idea for a room tower, has more recently directed management to come up with a final plan that would include design details as well as an exact room count, according to Park Place officials close to the plans.

Initial plans call for about 1,000 rooms, said the officials, who declined to be named.

The project would mark the fifth room tower at Caesars, which now has just over 2,400 rooms. The property, which now ranks in the top 20 of Las Vegas' largest hotels but falls short of several newer megaresorts, would move up to the top six or seven resorts with the addition.

The company had discussed the tower as early as 2000 and a year later announced it would complete a $450 million-plus room tower, with at least 900 suites, by 2004. The plans were scuttled after the Sept. 11 terrorist attacks, which slowed tourism and choked appetites for expansion projects.

The increased focus on the Caesars brand could also signal a move to sell off non-core assets such as the company's Reno and Las Vegas Hilton casinos, Belle of New Orleans and Sheraton Tunica, Deutsche Bank Securities analyst Marc Falcone said.

Some of the properties, including the Sheraton resort and New Orleans riverboat, aren't actively marketed as Park Place properties. They also haven't been marketed for sale.

Such a sale would depend on the merits of each transaction and wouldn't be tied or otherwise related to the company's Caesars projects, officials said.

Analysts have long speculated that the company may eventually look to sell "non-strategic" properties to pay down debt or raise capital for new projects. The company, spun off from Hilton Hotels Corp. in 1998, acquired some of these properties when it bought Caesars World Inc. from Starwood Hotels & Resorts Worldwide Inc. in 1999.

Park Place spokesman Robert Stewart said the company hasn't made any decisions on whether to sell those or other assets.

Some analysts applauded today's news, saying the company is taking concrete steps to extract more value out of its most well-known brand.

"We believe the revitalization of Caesars Palace is having a positive impact on the bottom line," Falcone said.

The analysts said they remain cautious about long-term prospects at the company.

"We think (Park Place) continues to move in the right direction but still remains a long-term turnaround story," Falcone said.

Park Place has spent about $450 million since 2000 to pump up its Caesars-branded properties, including the Colosseum theater as well as new dining and entertainment attractions, a Roman-theme Strip entrance and a Forum Shops expansion set to open in 2004 at Caesars Palace, Lehman Brothers analyst Joyce Minor said.

Annual cash flow at Caesars properties in Las Vegas and Atlantic City -- which received the majority of these funds -- has risen to only $274 million compared to $230 million in 1999, Minor said. "This, as well as our generally cautious view on the intermediate and long-term outlook for the convention segment in Las Vegas, would make us somewhat cautious on the proposed $350 million hotel tower and meeting space were it to be completed," she said.

As for the name change, company research has indicated that "Caesars is the most powerful brand in gaming and one of the best-known brand of any kind in the world," Park Place President and Chief Executive Officer Wally Barr said.

"A lot of people think of a brand as a promise," Stewart added. "We thought it was important to wait until we had the ability to meet the promise created by the Caesars brand to reposition the company."

Some analysts say the Colosseum's Celine Dion show, which opened in March, has drawn bigger crowds to the resort who linger in the casino, shop and otherwise spend money that otherwise would have gone to nearby properties. The company also is touting a new restaurant at Caesars named after its celebrity chef, Bradley Ogden.

The name change will ease the company's planned expansion into new markets, aid in recruitment efforts and boost prospects with partners, vendors and sponsors, Barr said.

"As we have looked at new development opportunities in the United States and abroad, it has become clear that the Caesars brand commands tremendous attention and respect," he said.

If approved by shareholders, the name would take effect in January and the company would begin trading on the New York Stock Exchange under the symbol CZR.

Barr has focused attention to remaking the Caesars brand in the face of stiff competition from newer, hipper resorts such as the Venetian and Mandalay Bay. The resort has undergone continuous remodeling efforts since it pioneered the theme resort look in 1966.

The brand campaign, which will include print and television ads nationwide, is squarely aimed at the competition.

The ads will feature the tagline "Live Famously" along with images of guests having fun. Unlike previous ads that prominently featured the property's Roman theme, the new campaign will instead rely on tongue-in-cheek references.