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Ed Vogel

License Urged for Aladdin Resort's Owners

12 August 2004

CARSON CITY, Nevada -- A group that intends to turn the bankrupt Aladdin into the first Planet Hollywood hotel-casino won preliminary license approval Wednesday from the state Gaming Control Board.

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

Under plans discussed Wednesday, their company will spend $100 million next year renovating gaming and shopping areas in the 2,567 room hotel-casino. The Planet Hollywood facade probably will not be completed before early in 2006.

Planet Hollywood Chief Executive Officer Robert Earl intends to attract Hollywood stars to the hotel and make it a must-see destination. He said the Aladdin now is a "bed dormitory" for visitors who rent rooms there, but spend their money in other hotels.

Earl said eventually Planet Hollywood will have two major daily entertainment shows, a TV studio and nightclubs. He said movie premieres, CD launches and major awards shows will be conducted in the hotel.

"We intend to capitalize on the trend and power of the celebrity," Earl said.

While praising Earl for his ideas, control board members repeatedly questioned his past business judgments and chastised him for initially leaving details out of his license application.

"You have a track record of being excessively preoccupied with celebrities to the detriment of your company," member Scott Scherer said during the six-hour licensing hearing.

Chairman Dennis Neilander wondered whether the Planet Hollywood brand will be successful in Las Vegas, noting Earl's company went through two bankruptcies in a short time and its image may be negative.

"You don't generally get a do-over on your application," he added.

Earl apologized for his lapses on the application, but defended his belief that the Aladdin-Planet Hollywood will be successful. He contended average citizens have not been affected by the bankruptcies and love Planet Hollywood and celebrities.

"I still believe in the Planet Hollywood brand," he said. "My stock is knowledge of marketing and getting events going."

Neilander said changing the hotel's brand may not be as important in the long run as completing needed physical changes to the casino to make it more competitive.

Member Bobby Siller questioned whether Earl and other Planet Hollywood executives hurt their company several years ago by approving a payoff plan that guaranteed five Hollywood celebrities suffered no losses when the company stock plunged.

While not identifying the celebrities, Earl said they wanted to sell their shares and the company needed an incentive to ensure they stayed. Demi Moore, Arnold Schwarzenegger, Sylvester Stallone and Bruce Willis have been identified in news accounts as Planet Hollywood shareholders.

"The loss of the celebrities would have been the final nail in the coffin," he said. "It was done with the belief it would be helpful for the longevity of the company."

After the meeting, Earl insisted he was not offended by the questioning.

"I have had a rocky road with Planet Hollywood the last few years, so they were expected questions," he said. "I have heard the words of caution, and I am confident we will deliver."

Longtime Las Vegas gaming executive Michael Mecca will serve as president of the hotel. He has more than 30 years of gaming experience with Caesars Palace, Mandalay Bay and most recently as manager of Green Valley Ranch.

Neither Earl nor Bay Harbour managing principal Douglas Teitelbaum will have a role in day-to-day operations. The hotel will be run by Starwood, which operates more than 700 hotels, as a Sheraton hotel.

Before they take over the Aladdin, the partnership needs approval from the state Gaming Commission at an Aug. 26 meeting. They intend to complete the sale Sept. 1.

Teitelbaum received praise for his business acumen, but control board members expressed concern that the Deloitte & Touche accounting firm refused to release "work papers" used in auditing his company investments to state investigators.

"It is very upsetting to me," Teitelbaum said. "I don't know what to do. There is nothing there I don't want you to see."

Deloitte & Touche has told him it will not release the material without the signed approval of every Bay Harbour investor.

His Las Vegas attorney, Frank Schreck, said the control board has the audits. If there were "anything nefarious" in the work papers, according to Schreck, then it would have been included in the audits.

But Scherer and Siller contended the work papers could give them leads about questionable activity.

Members requested Teitelbaum contact Deloitte & Touche executives and try to secure release of the material before the Gaming Commission meeting.