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Rebuilding The Roman Empire


Old Las Vegas casinos usually die slow deaths. First comes Wayne Newton, then the wrecking ball. That seemed to be happening at Caesars Palace, which had been the grandest hotel on the Strip when it opened in August, 1966, at a cost of $25 million, financed largely by Teamsters' pension money. The casino's legendary creator, Jay Sarno, insisted that the apostrophe be left out of the name to convey to guests that anyone could be a Caesar. In its heyday, Frank Sinatra was the headliner, the waitresses wore skimpy togas (they still do), and Evel Knievel nearly killed himself trying to jump over its famous fountains. But the shine started to dim in the mid-'90s, as one owner after another failed to keep up appearances and flashier places such as the swanky Bellagio (FS) moved into town.

Now, after years of decline, a new boss is trying to recreate Caesars' glory with -- what else? -- cheeky advertising and an orgy of new construction. And he's hoping those efforts will boost the fortunes of Caesars Entertainment Inc. (CZR), the parent company, and give it a fighting chance against more focused rivals such as Harrah's Entertainment Inc. (HET) and what could be the biggest operation in Vegas: the proposed combination of MGM Mirage (MGG) and Mandalay Resort Group (MBG). "An icon like Caesars is not something I want to disappear," says Wallace R. Barr, the longtime casino executive who took over Caesars Entertainment last year. Created in 1998 when Hilton Hotels Corp. (HLT) spun off its casinos, Caesars Entertainment is a disparate, some might say disorganized, collection of 29 hotels and casinos operating under six different names on four continents. It earned $150 million last year on sales of $4.5 billion, a 7% decline in profits from the year before and way less than its main competitors.

Barr has kicked up the marketing with a campaign that plays on Vegas' recent rediscovery of its hedonistic past. So much for the Strip's attempt to go wholesome. Kiddie rides are out these days; topless revues are back. To get the right tone for the Caesars ads, Barr hired R&R Partners Inc., the local ad shop that has generated national attention with its "What happens here, stays here," campaign for the Las Vegas Convention & Visitors Authority. One magazine ad for Caesars features a tousled, unshaven man being fed an olive by a woman at 2:13 a.m. The copy reads: "Ah. Nothing starts the day like a good breakfast." For this, Barr makes no apologies. "That's what Las Vegas is all about," he says.

Barr is backing up his ads with serious capital investment. A new $95 million Colosseum that features long-running shows by C?line Dion and Elton John opened last year. In July, a $21 million "Roman Plaza," including an amphitheater, will be unveiled. And Barr is spending $289 million on a hotel tower and $76 million for additional meeting space that should be ready next year.

Customers like what they see. "We've been everywhere," says Michael Daniele, a 49-year-old lawyer from San Diego, enjoying a cigar and a bottle of champagne with his wife and friends at Caesars Palace's Seahorse Lounge on a recent Friday afternoon. "It's classy without taking itself too seriously."

"A HODGEPODGE"

The changes seem to be working financially as well. Although Caesars doesn't get a cut of ticket sales from C?line Dion's shows -- those go to the promoter -- Barr says the casino does more business, some $170,000 more, on the 200 nights a year she performs. The average room rate was up 65%, to $348 per night, in the second quarter, according to the brokerage firm Fulcrum Global Partners. That rate of increase bested the Strip's other high-end properties. And in April, Caesars Palace reported its most profitable quarter ever, with revenue rising 41%, to $172 million, and cash flow increasing 74%, to $47 million.

Still, Barr has a ways to go. Return on investment is low, just 6%, compared with an average of 13% for other properties on the Strip, according to UBS Warburg's (UBS) Robin M. Farley. And some investors don't believe Caesars Entertainment knows quite what to do with all those other casinos and hotels. "I talked myself out of buying it," says San Francisco money manager Frank Husic. "It's still a hodgepodge of assets."

Barr is hoping to ease those worries by differentiating the casinos with sharply defined marketing and attractions. Caesars Palace is trying to lure high rollers with higher betting limits. Television ads for the Paris in Las Vegas sell it as a romantic getaway, while the Flamingo, across the street from Caesars, is party central. In December it opened a branch of singer Jimmy Buffett's Margaritaville restaurant chain, where -- several times a night -- a comely waitress is shot out of a volcano into a giant margarita glass.

The casinos in Las Vegas are just part of Barr's revitalization. He has signed a deal with Gordon Group Holdings to build a $145 million mall on a pier his company owns across from the Caesars in Atlantic City. And he is looking to manage new casinos in California and Minnesota, which would get the Caesars name. Maybe not everything that happens in Las Vegas has to stay there.

By Christopher Palmeri in Las Vegas


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