Finding the ‘core’
of Harrah’s holdings

Nov 7, 2006 7:06 AM

Can the Rio be bought?

Possibly, maybe even probably, if the price is right.

The issue arose recently as Harrah’s CEO Gary Loveman was asked if all the Harrah’s properties in Las Vegas should be considered "core."

That’s "core" as in the company absolutely, positively, and probably does not want to sell it.

Loveman might have said they all qualify, but he didn’t.

What he did was remind the questioner that the company’s Las Vegas game plan calls for maximizing the appeal of the adjacent properties it owns around the intersection of Flamingo and the Strip.

The Rio does very nicely a mile west of that intersection. As everyone knows it is a stand-alone resort on about 90 acres of real estate.

Viewed in this light, Loveman explained, no, the Rio would probably not be considered core.

"If you were to part with one," he continued, "that might be the one you would part with IF someone were to offer us an enormous amount of money."

He added in the next breath, however, that the Rio has been a big moneymaker. Its performance has been superb. All systems are humming nicely.

If that trend continues, there is no reason for Loveman to pace the floor wondering how they were going to unload the Rio.

But in today’s market with, real estate along the Las Vegas Strip corridor commanding prices that were unimaginable a couple years ago, it’s not hard to imagine Harrah’s strategists finding some appeal in the prospect of easily retiring the nearly billion-dollar debt associated with its myriad Las Vegas land purchases of the last year or so by seeing what kind of interest the Rio might get.

It must be nice to have these kinds of options available.

Trump plans
next condo phase

Donald Trump says he is close to announcing the next phase of his construction at Phil Ruffin’s New Frontier. The details will come "at some point in the near future," was the way he put it

Construction of the first tower of 64 floors with 1,282 units in what will be known as the Trump International Hotel and Tower has reached the 42nd floor as of several days ago and, according to Trump, is "virtually sold out." The Tower will be ready for its first residents by early 2008.

Trump declined to discuss specifics associated with the next tower, but he appears to discourage speculation that he will have anything to do with Ruffin’s plans for redeveloping the Frontier as a themed resort to be known as the Montreaux.

Upscale dining
has its (high) price

Those pricey Las Vegas resort restaurants are fueling a trend that has attracted national notice.

A recent New York Times story notes that Las Vegas and New York are leading the steady migration of restaurant entree prices to points north of $40.

The same Times piece also said, "A new breed of menu engineer has proven highly priced entrees increase revenue even if no one orders them ”¦ A $43 entrée makes a $36 item look like a deal ”¦ In Las Vegas the current talk is about Gus Savoy at Caesars where desserts alone are $22 and a meal for two can easily run $500."

South Point owner Michael Gaughan, who opened his well-received and, yes, expensive, Michael’s at the Barbary Coast some 25 years ago, said changing trends have seen it regularly fill up with customers happy to pay whatever the price may be.

Not like the old days when most meals were comped for friends and the best casino customers. Gaughan created Michael’s based on the Flamingo’s old Candlelight Room.

Gaughan guesses that an average per person check at Michael’s now runs to a bit more than a hundred dollars.

"It used to be the most expensive place in town," he says, "until some of the big hotels started bringing in restaurants from places like New York."

The appeal of such restaurants helps explain the fact the biggest resort companies get more than half of their revenue from non-casino sources.

At this rate the Wall Street analysts who follow gaming may eventually augment their questions about casino action with inquiries about the revenue generated by sea bass and truffles.

Which is why it was a no-brainer for Gaughan to decide to move Michael’s from the just-sold Barbary Coast to the South Point by April or May.

"It’s just a matter of getting the new place built."

He also notes it is fitting that some things should never change. Steve Delmont created the Flamingo’s Candlelight Room. He also supervised the opening of Michael’s and will be overseeing the creation of the next Michael’s at the South Point.