Harrah’s plots Strip strategy

Friday, April 30, 2004 | 10:48 a.m.

Harrah's Entertainment Inc. plans to ride the new wave of Las Vegas development, affirming to shareholders Thursday that it would buy or build a new Strip resort.

"Next year's opening of Wynn Las Vegas, the first new megaresort on the Strip in five years, will mark the beginning of the next wave of casino development here, a wave we plan to ride," said Gary Loveman, chief executive of the company that operates Harrah's on the Strip, the off-Strip Rio hotel-casino and currently is operating Binion's Horseshoe in downtown Las Vegas.

In an interview following his remarks at the company's annual shareholders meeting, Loveman said the company is studying several options to open a new property and would announce its intentions in three to four months.

If the company plans to build a new resort, it probably wouldn't open until 2007 or 2008, he said.

Loveman made it clear that the company wants to expand its capacity in Las Vegas and that any expansion wouldn't involve reconfiguring the existing Harrah's property on the Strip.

Analysts say a process of elimination leads many to believe that Harrah's may be talking to Phil Ruffin, owner of the New Frontier hotel-casino about a possible deal.

"The most talked-about possibility has always been the Frontier," said Marc Falcone, a gaming analyst with Deutsche Bank. "It makes a lot of sense in terms of it being a great location across from Steve Wynn (Wynn Las Vegas) and there's sufficient acreage."

"Everybody is a big respector of Steve Wynn," added Dave Ehlers of Las Vegas Investment Advisors. "Why wouldn't they want to do something near Steve Wynn? I think they would opt to build something new. If you can't buy something decent, why bother?"

Ehlers said Harrah's might also talk to Boyd Gaming Corp., which operates the Stardust hotel-casino and has more than 60 acres near the Stardust for future development.

Falcone, who thinks a deal with the Frontier is more likely than one with Boyd, said the biggest obstacle for Harrah's is the price.

"It's an extremely expensive land proposition, but there's not a heck of a lot out there," Falcone said.

He said it's also possible that Harrah's and Ruffin could mold a partnership, but he thinks Harrah's would prefer to develop the land outright.

Ruffin was traveling today and could not be reached for comment.

Earlier this month, Loveman said the company would probably capitalize on its newest brand asset, the Horseshoe name, in developing a new Las Vegas property.

Harrah's also intends to capitalize on its acquisition of the World Series of Poker tournament to drive further growth for the company. Loveman said the public's embrace of poker is an indicator that gambling has become a more accepted form of entertainment in the United States than in the past.

"The explosive popularity of poker -- a game historically confined to a handful of casinos and Saturday night home games -- is just one manifestation of the public's acceptance, indeed, its embrace of the forms of entertainment we provide," Loveman said.

He said ESPN would broadcast 22 hour-long segments of the World Series of Poker tournament and that more than 150 journalists are covering the event and will generate publicity for the company.

"Over time, we believe the public's strong appetite for casino entertainment will convince lawmakers to see it and treat it as a mainstream business," Loveman said. "And over time, we believe Wall Street will award casino operators stock multiples similar to those enjoyed by mainstream entertainment providers."

Prior to Loveman's remarks, shareholders voted to affirm four members of the board of directors, including the board's only insiders, Loveman and Harrah's Chairman Phil Satre. Shareholders also approved the re-election of private investors Ralph Horn and Boake Sells.

Shareholders also rejected a resolution requiring the company to disclose its political contributions. The Harrah's board recommended rejection of the proposal, stating in its proxy statement that the resolution would impose additional costs and administrative burdens without giving shareholders any appreciable benefit.

The company said about 67 percent of its shares were voted in opposition to the proposal, raised with several companies by the Washington, D.C.-based Center for Political Accountability. About 7.5 percent of the shares were voted in favor.