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Chris Jones

Hard Rock Still Aims to Manage Tribal Casinos

22 September 2003

Despite being edged out in its initial bid, Hard Rock Hotel President Kevin Kelley said Friday his company will continue to pursue deals to manage California tribal casinos.

"Clearly, the Indian gaming market in California is something you can't turn your back on," said Kelley, who cited likely changes to the compacts that would expand current slot machine limits for tribal gaming operators in the Golden State.

"As that happens, the gaming market is going to continue to grow and California will be, one day, the largest gaming market in the world," Kelley said.

Kelley's comments came two days after Hard Rock lost out on its nearly 8-month-long effort to secure a deal to run an approximately $300 million to $350 million resort near San Diego on 30 acres of land controlled by the Pauma Tribe.

The contract, which remains subject to regulatory approval, was instead awarded to Las Vegas-based Park Place Entertainment Corp. It plans to build a $250 million project featuring the Caesars brand, including 500 hotel rooms and an approximately 100,000-square-foot casino.

Though Park Place will likely partner with the Pauma Tribe, Kelley said Hard Rock officials were pleased by the tribe's response to his company's bid. It showed that Hard Rock can compete with larger players like Park Place and Las Vegas-based Station Casinos.

"The whole tribe voted and we finished second behind Caesars," Kelley said. "I thought that was pretty cool. ... It kind of showed us what the strength of our brand really is."

Station, which in June opened the highly successful, $215 million Thunder Valley casino near Sacramento, Calif., also bid unsuccessfully for the Pauma deal. It has also been selected to assist the Federated Indians of Graton Rancheria with a casino project north of San Francisco.

Hard Rock is not now negotiating for another tribal contract, but Kelley said the company will continue to seek out partnerships that fit well with Hard Rock's business model of catering to a younger, hipper crowd than most major casinos.

"We're very selective," Kelley said. "We don't have a bunch of development deals in our queue. We thought that particular site (Pauma Valley) made a lot of sense for us. The weather is good down there; it sits right in the middle of three counties that have a lot of people that are familiar with the Hard Rock brand."

Casino industry analyst George Smith praised Hard Rock's interest in expanding into Indian gaming.

"It would be huge for them," said Smith, a vice president with Davenport & Co., a Richmond, Va.-based investment firm.

Though the financial effects of a tribal management deal would vary depending upon its location and other factors, Smith said operating an Indian casino would allow Hard Rock to earn new revenue, expand its brand name and potentially increase its Las Vegas business.

"It's such a well-known name around the country among gamblers and nongamblers," Smith said. "(A tribal deal) would allow them to bring more people into the customer database, and that could help cross-sell the Vegas property."

Added Kelley: "You never know how things are going to shake out here in Vegas. A little diversification in the right places is a good thing."