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Best of Liz Benston

Gaming Guru

Liz Benston

Bally's Could Be Imploded, Rebuilt

14 June 2005

Harrah's Entertainment Inc. is contemplating a major renovation of its Bally's resort on the Strip that might involve imploding it and building a Horseshoe-brand hotel, the company's top executive said Monday.

Harrah's Chief Executive Gary Loveman, whose company assumed control of Caesars Entertainment Inc. Monday afternoon, said that's just one of several options available. Sections of the property might also be rebuilt over time, he said. Bally's will likely be renamed because it lacks a compelling brand identity, he added.

"We consider that corner one of the great locations in the city and we think there's probably something better that could be done there," Loveman said. "We're in the process of figuring out what that ought to be."

With the Caesars purchase, Harrah's picks up Caesars Palace, Flamingo, Paris and Bally's, all of which sit on or near the corner of Las Vegas Boulevard and Flamingo Road, like Harrah's other two Las Vegas casinos. This creates an opportunity for the company to develop some kind of major attraction in the future to lure visitors to that part of the Strip, Loveman said.

Harrah's became the world's largest gaming company Monday with nearly 100,000 employees in 12 states and multiple countries and more than 40 casinos. In Nevada, the company will employ nearly 40,000 people and own 12 casinos after it sells the Reno Hilton later this year. It moves from the No. 4 operator on the Strip to No. 2 behind MGM Mirage, which owns 11 of the Strip's major casinos after it bought Mandalay Resort Group last month.

About 40 percent of the company's revenue will come from Nevada, up from about 20 percent before the deal.

"On the one hand the company's very big but on the other hand for everybody who works here it's very small," Loveman said. "This is a collection of people who ... experience their involvement with the company in a highly localized way. In Joliet, Illinois, there are 1,200 people who are not going to see a new casino that we own anywhere near them ... and they're going to be taking care of their customers and working with their colleagues and stopping in the employee dining room just as they did before."

"My job and my colleagues' job is to make sure that for every every person, whether they are at Caesars Las Vegas or Harrah's Joliet, that there's something in this that is motivating and encouraging to them," he said.

Over the next couple weeks, Loveman and other top executives will be meeting with management at all of the Caesars properties nationwide. Those will be followed by management meetings with rank-and-file workers.

Harrah's will continue to operate under a different business model than MGM Mirage, which fills many of its rooms with cash-paying customers who are attending conventions, shows or other nongaming attractions, Loveman said. Harrah's will continue to focus on attracting gamblers with perks obtained through the company's Total Rewards loyalty program, he said.

"It would have been hard to imagine that the industry would evolve in this direction we find ourselves in," Loveman said. "Although I did always think that there were two strategies that would emerge in this industry, one of a national distribution-oriented business like ours and the other, being a principally Las Vegas-oriented fulfillment business like MGM's."

Going after customers with high-end, nongaming attractions is a strategy that has been validated lately with the Venetian's strong performance and Wynn Las Vegas' initial success, he said.

"Like in many consumer industries there's more than one way to do this," Loveman said. "And that's good news because it means people can compete on a different basis."

During Friday's hearing to vote on the deal, Nevada regulators expressed concerns that Harrah's would homogenize the Caesars properties including Caesars Palace, the company's only luxury casino.

Critics also have speculated that Harrah's -- which caters mostly to middle-market slot players, will run off high rollers at Caesars Palace or table games players at other Caesars properties.

Loveman said Harrah's customers aren't much different from Caesars' in Las Vegas, where the Rio's table game business is "huge" and where Caesars' four properties do a significant amount of slot machine business. Nationwide, the vast majority of revenue comes from slots because Harrah's has casinos in many smaller markets where slots are most popular, he said.

Caesars Palace, now the company's flagship, is the exception to the rule because it also caters to high rolling table players, he said.

"That's something we're very much going to study and see how it goes," Loveman said of the high roller business at Caesars. "If Caesars can continue to do that business well and profitably and customers enjoy it and we can make money at it, we'll do it with great vigor."

Over the next few months, Caesars' slot customers will be converted to the Total Rewards program. Harrah's expects to have more than 40 million Total Rewards members once the transition is complete.

Loveman said Harrah's was prepared when regulators asked pointed questions Friday about the company's diversity efforts and local charitable contributions.

"I would argue that virtually every company in America needs to do better in having a more diverse and inclusive management workforce," he said.

"When you think about their charge, they are reflecting the interest of the citizens of Nevada," he said of regulators. "That's what they're charged to do and certainly those two issues are relevant to them."