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Arnold M. Knightly

Harrah's acquisition of Planet Hollywood approved

19 February 2010

LAS VEGAS, Nevada -- Harrah's Chief Financial Officer Jonathan Halkyard said Thursday the company anticipates tripling or even quadrupling the property's cash flow over the next few years.

Union Gaming Group analyst Grant Govertsen said he expects Planet Hollywood's casino revenues should be impacted immediately once Planet Hollywood and Harrah's Total Rewards customer database are integrated.

"There's a massive opportunity set for that property and that casino," Govertsen said. "You had a stand-alone property with a minuscule database compared with the one Harrah's brings. All of a sudden you start making that property available to the existing database and all of a sudden you see revenues driven (up) dramatically."

Winn said the property should be integrated into Harrah's Total Rewards database by the end of March.

Planet Hollywood's casino revenues have traditionally trended below market averages for Strip gaming.

For the state Gaming Control Board's fiscal year ended June 2008, Strip casinos averaged revenues of $155.7 million. Planet Hollywood, however, reported $127.2 million in revenue during the same 12-month period.

The resort's casino revenues dropped 17.7 percent in the first nine months of 2009, and the property was in line to post its lowest revenue numbers since 2002 when the resort was the Aladdin.

Harrah's also plans some physical changes to the property, such as moving the high-limit room away from the front entrance and removing some of the slot machines.

Winn said Planet Hollywood probably has too many slot machines on the floor, restricting customers' flow through the casino.

"More machines doesn't always mean more revenue," Winn said

Harrah's expects to reduce Planet Hollywood's staff of about 2,300 by nearly 100 by eliminating duplications in a few areas such as call centers, accounting and revenue management, Winn told the regulators Thursday.

Winn, however, added that 40 positions need to be filled at the resort and will be posted Friday.

Harrah's paid $70 million to acquire $306 million of the resort's debt at a discount between September and December. Harrah's is exchanging that debt with Planet Hollywood's current owners for 100 percent ownership of the property.

Harrah's already took over management of the property's 2,496-room hotel and food-and-beverage operations on Jan. 16.

Harrah's will receive a management fee to operate the property, terms of which were not disclosed.

Former co-owner and Planet Hollywood founder Robert Earl will consult Harrah's on marketing strategies for the property and Harrah's other eight hotel-casinos in Las Vegas, Harrah's Western Division President Tom Jenkin told regulators.

Planet Hollywood, which will continue to premiere new movies and high-profile celebrity events, adds a new attraction for Harrah's, which hopes to use the property to lure customers back to Las Vegas during the economic downturn, Winn said.

"That whole issue of celebrity and Hollywood, and being on the red carpet, that is something we don't do any place else," Winn said. "And customers love it."

Harrah's also owns Bally's, Paris Las Vegas, Caesars Palace, Rio, Harrah's, Imperial Palace, Flamingo and Bill's Gamblin' Hall & Saloon in Las Vegas.

Harrah's acquisition of Planet Hollywood does not include some restaurants, Privé nightclub, the Miracle Mile Shops or the new 1,201-room PH Tower By Westgate.

Harrah's will manage the hotel inventory for PH Tower, Winn said.

A licensing agreement also allows Harrah's to brand other casinos with the Planet Hollywood name internationally.

Harrah's acquisition of Planet Hollywood approved is republished from