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Rod Smith

Respect Caesars, Harrah's Told

13 August 2004

LAS VEGAS -- Shirley Marx, a widowed Chicago businesswoman, won $40,000 on a recent visit to Caesars Palace, and promptly dropped $25,000 of it.

Marx, a high roller who loves playing craps and a 25-year customer at Caesars Palace, decided it was time for a change of pace and headed across the Strip to Harrah's Las Vegas where she had no trouble losing another $6,000.

To catch her breath, she and a friend wanted to enjoy dinner at Harrah's to discuss whether to gamble away the rest of the evening there or head back to Caesars Palace.

But a casino host declined to comp dinner for the pair at a Harrah's restaurant, despite their heavy gambling -- and losses.

"I didn't need the comp. I put dinner on a credit card, but that never would have happened at Caesars (Palace)," Marx said.

Veteran Caesars Palace patrons, including Marx, are threatening to pull up stakes and gamble elsewhere over the prospect of Harrah's Entertainment assuming ownership of the Strip landmark and imposing its imprimatur on casino operations there.

Even marketing gurus are warning that playing with the Caesars brand, arguably the best recognized in gaming, could damage the value of Caesars Entertainment, which Harrah's is buying for $9.4 billion.

Harrah's President Gary Loveman sparked this drumbeat of criticism when he discussed his company's merger plans in a conference call with Wall Street analysts and announced his company already is considering closing the high-roller areas in Caesars Palace because it would duplicate those at the off-Strip Rio hotel-casino.

He expanded on the preliminary plans in a conference call announcing Harrah's second-quarter earnings, and said his company -- which failed to return several phone calls seeking comment for this story -- can boost operating margins at Caesars Palace and other Caesars Entertainment properties by cutting back on high-roller operations and adding more slot machines throughout the casinos.

Marx and other veteran casino customers say they plan to vote with their feet by taking their business elsewhere if Caesars' cachet suffers in the merger.

"I'll pick a different hotel. If Harrah's took it over and pulled back on high-end tables, I'd probably go to Bellagio," Marx said.

Marx visits Caesars Palace eight times a year and also regularly gambles at Caesars Palace at Sea casinos, which Caesars Entertainment operates on all three Crystal Cruise ships.

"Harrah's isn't Caesars. It isn't in the same class. I like the people. When you gamble, you want to play with people you like. Harrah's is like a place where people are playing with their last $25," she said.

Jack Hood, a 20-year Caesars Palace veteran and a self-employed businessman from Valparaiso, Ind., is similarly concerned as a customer.

"It'll be like a Motel 8 taking over a real fancy hotel. Harrah's is for people coming to play slots. Caesars is the class place, the place to go," he said.

"I tried The Venetian and I hated it. I checked out and went to Caesars. I could go to MGM (Grand), but it wouldn't be the same. (If Harrah's cuts the high-end area), I wouldn't go back to Vegas any more," said Hood, who has a $50,000 credit line at Caesars Palace and plays an average of 10 hours to 12 hours a day when he stays there, usually with his wife and eight grown children.

Another veteran Caesars customer, an electronics executive from Tennessee who asked not to be named, was less critical.

"I've followed Harrah's for years, even when it was Holiday Inn in Memphis. Even back then, Harrah's was into computerized data-mining and that can improve operations," he said.

But he also predicted Harrah's will have a change of heart as the acquisition nears and decides to maintain or expand the high-roller areas where he gambles in Caesars Palace.

"That is Caesars. It is the highest of the high end. I like Bellagio, but Caesars is better, and I can't image Loveman will want to change it," he said.

A long-time Caesars Palace executive who asked not to be named said the concerns are much ado about nothing.

"I've seen a lot of other owners come in here, and Caesars (Palace) always comes back to being (the) Caesars (brand)," the executive said.

Still, Heidi Strauss, the daughter of Jay Sarno who developed Caesars Palace almost 40 years ago, said she would hate to see her father's "diamond exchanged for a zircon."

"I'm concerned it could become more ordinary, although profitable, I'm sure," she said.

A source close to the original development who asked not to be named said Caesars Palace is still one of the world's leading hotels, despite the last three owners having diluted the brand identification.

"I don't know if Harrah's customers could come close to filling the Colosseum, and Harrah's would be mixing up brands. That's the same mistake they made with Circus Circus years ago, and there's no sense in repeating it," the source said.

Advertising and marketing professionals echoed that concern, arguing the Caesars brand could be seriously damaged, depending on the operational changes that are made following the merger.

Billy Vassiliadis, chief executive officer for Las Vegas-based R&R Partners, said Caesars Palace has gone through a renaissance in the past two years while his company has handled Caesars Entertainment's advertising account.

"We're seeing a return of high-paying customers -- not necessarily high-stakes gamblers -- because Caesars is the leading brand in the industry and has been very focused on restoring Caesars as a high-end brand," he said.

"The goal was to get a higher income and (higher) spending customer there and it's been working -- and working despite the construction disruption (which is wrapping up)," he said.

"The fact is Caesars is still in transition, but there's a lot of confidence that Caesars will really emerge in the next few years," Vassiliadis said.

An advertising insider who asked not to be named said replacing high roller casino areas with slot machines as planned would turn Caesars Palace into "a pretty expensive shell for a slot house."

"I can't even imagine the amount of money that's gone in there. That's a very expensive property and I don't know it'll pay off out of a casino. And as Harrah's expands internationally, Caesars is a brand it could really market as a draw. I think cutting back on high-roller areas could damage the value of the brand," he said.

Another marketing expert said it would be risky for Harrah's to cut back on any of the higher end areas of the Caesars Palace operation, including the casino.

"It sound like it's a pure matter of short-run economics. It costs more to market to high rollers. But would you want to use Celine Dion to attract slot players. Plus, it's easy to turn off customers. They know what they want and that's why they pick where they play. Once they leave, you're not going to get them back (except at great expense)," he said.

"The No. 1 reason people pick a casino is they feel comfortable there. It's the old 'Cheers' thing. When it's transferred over to database (marketing), the bond of trust is broken. You're saying trust me because I'm a salesman, and that'll kill the brand loyalty which is always fragile," he said.

Respect Caesars, Harrah's Told is republished from