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Best of Liz Benston

Gaming Guru

Liz Benston

Looking in on: Gaming

17 October 2007

LAS VEGAS, Nevada -- There was a time when casino executives worked their way up through the ranks in Las Vegas, from dealer or downtown hotel manager to the finest Strip resorts. With the industry's evolution into global businesses that make most of their money outside of gaming, companies are looking farther afield for talent.

One example is Howard Karawan, who built up an illustrious career operating the sprawling Atlantis casino in the Bahamas. He will head the Fontainebleau Las Vegas when it opens as chief operating officer of parent company Fontainebleau Resorts.

Karawan most recently served as president of Kerzner International's destination resorts division, which includes Atlantis and the upcoming Atlantis resort (sans casino) in Dubai, United Arab Emirates. Atlantis opened in 1998 as a kind of Bellagio-meets- Disney World, with amenities ranging from kid-friendly marine habitats to fine dining.

Ancient by Las Vegas standards, the original Fontainebleau Hotel opened in 1954 in Miami Beach, Fla., and swiftly became the epitome of cool, stealing scenes in such iconic films as "Goldfinger" and "Scarface." At the time, Las Vegas was considered a backwater for hard-core gamblers. Today, the Miami Beach resort is getting a major, Las Vegas-like makeover that includes a convention center and 1,500 hotel rooms that will open next summer.

Karawan estimates the $2.9 billion Fontainebleau Las Vegas will benefit from $100 million in brand equity built up in the Miami Beach property. Because of its storied history, the hotel has become a major lifestyle brand, transcending its identity as a mere hotel, he said.

That's one reason why the Las Vegas property, opening in fall 2009 with 1,000 condo-hotel units and 2,000 or so hotel units, has an unusual, angular shape.

"This will be an iconic building," Karawan said. "Frank Gehry recently said that one of the greatest opportunities for branding in the next 30 to 40 years is going to lie in architecture."

• • •

News last week that MGM Mirage will build a $5 billion resort in Atlantic City isn't surprising. The company has talked for years about plans to build a huge resort on vacant land next to Borgata, of which MGM is half owner.

But some analysts are questioning the timing of the announcement in the midst of an overdue report from the New Jersey Gaming Enforcement Division, which is investigating the company's controversial business partnership in Macau with Pansy Ho, the daughter of Macau casino magnate Stanley Ho.

Stanley Ho controlled Macau's gaming market until that government opened it to foreign investment in 2002. He has been implicated with turning a blind eye toward triads - Chinese gangs that are involved in independently operated VIP rooms in his casinos.

Although Nevada regulators approved the Pansy Ho deal in February, New Jersey's Casino Control Commission has yet to weigh in. Although some gaming insiders think New Jersey will give the nod soon, some Wall Street experts say it doesn't make sense for the company to move forward with a project of this scope in the face of regulatory uncertainty.

Nevada regulators determined that Pansy Ho, a self-made businesswoman, will not be influenced by her father, nor will he meddle in her business affairs.

But Nevada - with its record of pushing out organized crime - has also had a more liberal approach to questionable business relationships than New Jersey.

Atlantic City famously denied Hilton Hotels Corp. a gaming license in 1985 because of reputed connections to organized crime. The decision sent a shock wave through the industry and stalled casino investments in Atlantic City for years.

In 1981 New Jersey regulators forced Stuart and Clifford Perlman to resign their positions at Caesars World before their Atlantic City casino could be licensed. The executives were licensed in Nevada and celebrated for their ingenuity, although New Jersey regulators focused on their continuing side deals with reputed mob associates.

MGM Mirage executives say the company wants to move forward with the Atlantic City resort because of the opportunity to capitalize on luxury tourism. The timing of the announcement, they say, is not related to the Ho investigation. The luxury market is largely controlled by the Borgata, Atlantic City's highest-grossing casino. Borgata swiftly attracted a new audience of upscale travelers from New York and Philadelphia after its 2003 opening for $1 billion.

Although that makes sense, those plans also make for a helpful bargaining chip while the Pansy Ho investigation hangs in the balance. Passing up a $5 billion investment by requiring MGM Mirage to divest its soon-to-open Macau casino would be difficult for any New Jersey official.