Park Place betting on Dion success

Friday, March 21, 2003 | 11:05 a.m.

Las Vegas was built on big gambles. Most involved tearing down small hotels and replacing them with opulent attractions that have drawn a greater stream of visitors and profits for casino giants.

Nowadays, Wall Street is watching to make sure every Las Vegas room, restaurant booth and slot machine makes money.

Stock analysts and investors will also be watching when Park Place Entertainment Corp. unveils its $95 million Colosseum theater Tuesday at Caesars Palace with a music and dance extravaganza led by pop diva Celine Dion.

Park Place won't share in ticket sales for "A New Day," which will go to Dion and producer Concerts West, a division of Los Angeles conglomerate Anschutz Entertainment Group. Nor is the company paying a dime toward the cost of the show.

The company's sole financial investment is the Colosseum itself -- a high-tech, 4,000-seat theater that boasts seats that are no more than 120 feet from the stage.

Unlike past generations of attractions in Las Vegas, this venue is no loss leader. Park Place expects to reap a 20 percent return on additional business the show will draw to the company's retail, dining and gambling venues.

"We're looking at a whole range (of customers) -- fans of Celine who wouldn't otherwise have come to Las Vegas, people who normally come to Caesars but haven't otherwise taken a trip to see Celine, guests at other properties interested in staying at our properties," Park Place spokesman Robert Stewart said.

With top seats going for more than $200 a pop, that may be a tall order, some say.

"Whatever risks there are, are calculated and reasonable," counters Stewart. "We have a unique show that features the world's most popular female singer. I'd take those odds any day."

Merrill Lynch casino analyst David Anders disputed those odds in a December report estimating that couples would have to spend nearly $450 each for show tickets and other items for Park Place to achieve that return.

The company would need to generate $20 million in cash flow from "guests who would not otherwise spend time or money at the property," Anders wrote.

Assuming a cash flow margin of 35 percent, the company would need to generate revenue of $57 million a year, or $103 per person in addition to the roughly $125 price of a concert ticket, he said.

Stewart has disputed those figures, saying the company can achieve its goal if attendees spend an extra $30 to $50 during their trip.

Anders' report also assumed that the Celine show would run at 90 percent capacity. A full house each night would be unlikely given that the Colosseum is two to three times larger than the showroom for the popular "O" show at MGM MIRAGE's Bellagio, he said.

Park Place expects to sell out each night. Ticket sales have been brisk so far, with more than 90 percent capacity over the next three months, Stewart said. Future tickets will be sold in three-month blocks, though release dates haven't yet been determined.

Blocks of tickets have been held for promoters to release shortly before show dates so last-minute visitors will still be able to buy seats, he said.

Observers who haven't even glimpsed the production are comparing "A New Day" to the Bellagio's hugely popular Cirque du Soleil performance of "O" in scope and production value. The two shows, with average tickets of more than $100, will also share the steepest ticket prices in town.

That doesn't faze the city's tourism gurus, who say the show will add to an already dazzling array of entertainment options unique to Las Vegas.

"The tickets are being priced based on expected demand," said Rob Powers, a spokesman for the Las Vegas Convention and Visitors Authority. "People are going to come out of that show thinking that that was some of the best money they ever spent. You can only see a show like this in Las Vegas."

The success of increasingly luxurious properties in Las Vegas -- with high-priced experiences intended to make money on their own without help from the casino floor -- augurs well for the show, said Anthony Curtis, publisher of the Las Vegas Advisor consumer newsletter.

"They've got a lot of money on the table," Curtis said. At the same time, "there are people here who have money to spend. Someone who spends $400 to $500 at the blackjack table is not going to worry about spending another $200 on dinner" or a show, he said.

Park Place is funnelling more into the Colosseum than what Caesars Palace generated in cash flow last year. The cost is also about half what the company's combined Paris Las Vegas and Bally's Las Vegas properties generated last year.

The investment comes amid concerns about less-than-stellar performance at Caesars Palace, which faces stiff competition from newer luxury resorts such as Bellagio and the Venetian. Park Place has already invested hundreds of millions into its flagship property in recent years. A management shakeup at the top has also yielded a focus on driving better returns with help from new features such as a planned hotel tower.

Dion has a contract with Park Place to perform 200 shows per year for at least three years, after which other shows could take her place.

While the show will no doubt make a big splash during its first year, it will need Park Place to flex its marketing muscle behind it to achieve staying power, said Jack Wishna, a Las Vegas entertainment and gaming consultant who helped negotiate a 10-year contract for Wayne Newton at the Stardust.

"By aligning herself with Park Place she has the ability to cross-sell into five megaresort properties owned by the same company in the same town. That has never been done before," he said. Still, "no one -- Celine, Wayne, Sinatra, Elvis -- could ever sustain 4,000 seats per show on a long term contract without the full support of the hotel property."

"Hotels should hire entertainers under a guaranteed contract with incentives and make the entertainer more a part of the hotel structure," he said.

"One has only to look at the many horror stories on the Strip where there has been a 'rent the room' mentality at many properties."