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Hard Rock Welcomes New Competition

LAS VEGAS --Though his property is no longer the city's undisputed hot spot among members of the young and hip crowd, the Hard Rock Hotel's new president, Kevin Kelley, is not threatened by newer rivals such as Green Valley Ranch Station and the Palms.

Instead, he welcomes the competition.

"The opening of the Palms really hasn't hurt us that much; to some degree, it's been good for our business," Kelley said Wednesday, one day after his company reported its 2002 net income of $2.5 million was down about 11 percent compared with the previous year's total of $2.81 million.

"(Regardless of) what business the Palms drives to the city, people are ultimately going to want to come and see the Hard Rock because that's basically what they've (the Palms) patterned their business after," Kelley said.

Despite that confidence, Kelley isn't allowing the nearly 8-year-old Hard Rock to stand pat. It recently added a new upscale restaurant, Simon Kitchen & Bar, and continues to pay top dollar to lure popular music acts like the Rolling Stones and Ozzy Osbourne, who's scheduled to perform March 14.

"Pushing our entertainment and event offerings all helps to develop the (Hard Rock) brand," said Kelley, a former Station Casinos executive who joined Hard Rock in mid-January after former Hard Rock President Don Marrandino left the company to work at Wynn Resorts.

Kelley said up-and-coming music acts will also be booked to continue development of the property's younger customer base, and this year, the Hard Rock will further diversify its offerings by adding a lingerie shop and high-end jewelry store.

"Those don't sound like big items, but for (cash flow) that's potentially another $500,000 a year," Jim Bowen, vice president and chief financial officer, said of the new retail offerings. Last year, the company reported nearly $9 million in retail sales.

A parking garage expansion is also under consideration for sometime in 2004, Bowen added, and the Hard Rock also plans to initially improve its hotel rooms on several floors so they'll appeal to upscale travelers, Kelley said.

"People are expecting nicer linens, more amenities inside the rooms like robes and slippers," Kelley said. "And quite frankly, they're ready to pay for them."

The Hard Rock's hotel revenue in 2002 was $26.6 million, up more than $300,000 from 2001.

Since it opened in November 2001, Hard Rock rival the Palms has used its trendy Ghost Bar and affiliation with MTV's "The Real World" television program to lure away many of the younger patrons who once made the Hard Rock the city's hottest spot on Friday and Saturday nights. Additional competition for the 20- and 30-something set has come from Green Valley Ranch Station, whose Whiskey Sky bar has become a haven for movie stars and members of the Hollywood in-crowd.

Still, Deutsche Banc Securities analyst Andrew Zarnett said Las Vegas has proven it is large enough to support multiple casinos targeting the Hard Rock's core demographic.

"The sense that a new competitor in that segment couldn't be added without cannibalizing the Hard Rock wasn't true," Zarnett said. "The Palms has been able to generate healthy play among that group, as has the Hard Rock."

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