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Gaming Guru

Ed Vogel
 

Aladdin Plan Approved

27 August 2004

CARSON CITY, Nevada -- The bankrupt Aladdin will be converted into the first Planet Hollywood Resort Casino under a licensing plan that won unanimous approval Thursday from the Nevada Gaming Commission.

Planet Hollywood, Bay Harbour Management and Starwood Hotels & Resorts will operate the Strip resort. They bought the troubled 2,567-room hotel last year for $637 million in bankruptcy court.

With approval from gaming authorities, they intend early Wednesday to complete the purchase and assume control of the hotel.

The first act of the new owners, according to testimony given to gaming commissioners, will be to upgrade the dining room used by the Aladdin's 2,600 employees.

Planet Hollywood Chief Executive Office Robert Earl said the hotel soon will begin booking top entertainers.

"We support free speech rights and the right of artists to do what they like," added Earl in response to commissioners' questions about singer Linda Ronstadt.

Ronstadt angered current Aladdin management in a July performance when she dedicated a song to Michael Moore, the maker of "Fahrenheit 911," a movie sharply critical of President Bush. Earl said Ronstadt and Moore have been invited to the Aladdin.

Over the next 15 months, the new owners intend to spend $100 million on renovations such as replacing the Aladdin's facade, improving its casino and adding restaurants, a 1,300-seat showroom and 500-seat TV studio.

Earl intends to use his entertainment-industry connections to attract Hollywood celebrities and celebrity fans to the resort.

While the Planet Hollywood brand may not be launched before 2006, Earl may market the resort as "the Aladdin becoming Planet Hollywood."

He expects regular live entertainment to be launched at the hotel by the third week of September.

"We are in the game," he said. "We will be transforming a bed dormitory into a must-see destination."

He said the Aladdin enjoys a high occupancy rate, but many guests spend a lot of their time gambling in other casinos.

Just as happened during a hearing before the Gaming Control Board earlier this month, gaming commissioners' questioned Earl's business judgments.

"You are a promoter," commission Chairman Peter Bernhard said. "I don't think you pay attention to details."

He noted that in recent days, agents discovered Earl had not paid taxes due for more than a year to the Department of Taxation on his restaurant business.

Earl said he knew nothing about the delinquent taxes and paid them as soon as he was told of the problem.

"I don't think it reflects a pattern," he added. "Coming out of two bankruptcies (at Planet Hollywood) I had a depleted work force. I acted on it the second I learned."

His Las Vegas lawyer, Greg Giordano, said that Planet Hollywood received only three or four delinquent tax notices, a statement that caused Bernhard to insist taxes should have been paid immediately.

Commissioners had no ill comments about Earl's partners, Bay Harbour managing principal Douglas Teitelbaum, and Starwood, returning to the gaming industry in Nevada after a four-year absence.

Starwood, which operates 745 hotels, has a customer database of 14 million people. Earl said that list can be used to bring better customers to Planet Hollywood, which will be marketed as a Sheraton.

Teitelbaum had come under criticism two weeks ago at the control board meeting because the Deloitte & Touche accounting firm refused to release "work papers" developed in auditing his company's investments.

But Control Board Chairman Dennis Neilander said agents visited the company's New York office this week and were shown the work papers.

Bernhard also raised questions about whether the partners will meet their obligation to pay off loans they used to finance the Aladdin purchase.

But Commissioner Art Marshall was optimistic about the hotel's chances.

"What would it cost to replace the Aladdin today?" he asked.

"Nine hundred million (dollars) to $1 billion," Teitelbaum replied.

"I think you made a great deal," Marshall said.

The Aladdin earned about $65 million in net income last year, and its new owners expect that to fall to $43 million during the construction year. Eventually they see the hotel earning about $120 million a year.

Commissioner John Moran Jr., who attended his first meeting, joined the others in approving the licensing for the new owners. He replaced longtime Commissioner Augie Gurrola.