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Rod Smith

Crowds Jam Colosseum, Fan Caesars Revenue

23 February 2004

LAS VEGAS -- The Colosseum at Caesars Palace has rendered crowds and financial rewards substantially surpassing expectations since it opened almost a year ago, Caesars Palace President Mark Juliano said Friday.

In the case of Elton John and his new "Red Piano" show, which opened at the Colosseum last weekend, the new theater is bringing more than $20 million to Caesars Entertainment's coffers in added revenue over his three-year contract.

The Colosseum overall is adding as much as $45 million a year to Caesars' revenues, almost all of which goes straight to the bottom line because there are few added costs associated with the theater.

Financially, it boils down to almost $175,000 in added revenue and cash flow every night there is a big-name performer booked into the Colosseum, Juliano said.

Company management had promised the performances in the $95 million, 4,000-seat theater that opened almost a year ago would add $20 million to the bottom line, but so far the reality substantially exceeds the promise.

Concerts West produces the Celine Dion show and collects all of those gate receipts, so the financial rewards for Caesars from that show come from the incremental spending by the crowds the theater attracts.

Caesars Entertainment President Wally Barr said when the theater opened that if 1 million people a year drop an extra $50 each at Caesars, then the Colosseum will return company shareholders the promised 20 percent return on investment.

So far the formula has worked, with Dion drawing an added 800,000 customers into Caesars where they are dropping even more money in the megaresort's casino, bars and restaurants.

"(Developing the Colosseum) was a wise move on their part. It's a very strong organization and it's been making good financial moves. (The Colosseum) bodes well for their future and for Las Vegas as well because we're connected," said University of Nevada, Las Vegas professor and casino industry expert Bill Thompson.

Juliano said that since the Colosseum opened and the casino connector in front of it was completed, food-and-beverage revenues at Caesars Palace have increased about 35 percent, guest traffic has increased about 30 percent and gaming volumes have increased about 20 percent.

"We're pretty sophisticated in tracking head counts and volumes and (the Colosseum) is having an obvious impact. (We've had) double-digit increases everywhere since Celine opened," he said.

Deutsche Bank analyst Marc Falcone said the combination of Celine Dion and Elton John are substantially improving the foot traffic through Caesars Palace.

"It was a good move for the property and I'd expect (the increases in foot traffic) to continue. Certainly, I think the Colosseum was a good investment (for Caesars Entertainment)," Falcone said.

Thompson said the foot-traffic diversion is important for Caesars, but less important for Las Vegas.

"It's a shuffle because they're tourists, but because it's a high-priced ticket, they're spending more than they otherwise would, and this is good for Vegas, too," he said.

Juliano also pointed to the intangible benefits Caesars Palace is getting from the new theater and from renovating its casino.

"It's added a tremendous level of energy and excitement to the property that's noticeable in the guests, but also the employees. When I go downstairs, the bellmen are high-fiving me because it translates into that kind of excitement," he said.

He said more is coming, with work starting on the first new main porte cochere for the property since 1967. Construction of new entrances for the Forum Shops, on the north end of the property's Strip frontage, and a Roman Plaza, on the south end, should draw even more foot traffic into the landmark casino.

Juliano said that Jay Sarno, the original developer of Caesars Palace, said the hotel-casino had been set back too far from the Strip, but that the new entrances will finally correct that, 40 years after it first opened.

Bear, Stearns & Co., in a recent analysis for investors, said Caesars Entertainment, unlike most of its major competitors, is in the lucky position of having room to improve cash flow, a key measure of profits, and return on investment without entering new markets or completing an acquisition, thanks largely to amenities such as the Colosseum.

However, it also warned: "While recent projects such as the Colosseum have been successful at (Caesars Palace in Las Vegas), we believe 'doubling down' at the location carries significant risk due to the age of the facility, the company's historically high turnover of senior management and additional supply and competition on the Strip."