Dorothy Pomerantz, 03.03.03
Can Canadian crooner CÚline Dion bring the crowds back to Park Place's Roman-themed Caesars Palace?
Sandwiched on the strip between two Steve Wynn-built casinos, the Mirage and Bellagio, Caesars Palace somehow lacks the grandiose aura it deserves for having singlehandedly invented the high-roller market in Las Vegas when it opened 36 years ago.
Now the flagship property of $4.6 billion (2002 revenues) Park Place Entertainment (nyse: PPE - news - people ), Caesars has long since lost the cachet it once held, despite at least $716 million invested in the property since 1996 under three different owners, and a racy rep as the only place where women can tan topless. But even though Park Place's middlebrow Flamingo, just across the Strip, produces 12% more operating income on 36% less revenue, Caesars is the most prestigious gambling brand in Park Place's portfolio and can weigh heavily on overall results of the company.
Which has been on a cold streak recently. Although 2002's net income increased 10% to 53 cents per share, charges resulted in a whopping $821 million loss. The stock is down 47% from its $13 high last April. Not helping the company's image on Wall Street was the departure last fall of the chief executive, with the chief counsel close on his heels.
The new boss, Wallace Barr, is expecting a revival with the help of CÚline Dion, the Canadian diva best known for the syrupy "My Heart Will Go On" from the soundtrack of Titanic. Beginning in March Dion will anchor Caesars' new, $95 million, 4,000-seat theater, designed to look like the Colosseum in Rome. Dion's show will feature 60 backup performers under the multimedia orchestration of Franco Dragone, the director behind the slick Canadian circus troupe, Cirque du Soleil.
All this entertainment costs money, which is why Caesars will not get any proceeds from the tickets, with an average price of $125. Its only return is incremental spending from Dion's fans. Merrill Lynch analyst David Anders says that in order to meet its target of a 20% annual return from the theater, Park Place will have to extract $57 million from the expected 75% of the people who will buy tickets to the show but not stay at Caesars, or around $103 per person. That means a couple will need to spend over $400 in an evening. Park Place argues it can get the same return with just $50 per person. Anders is "ill-informed," complains a Park Place spokesman.
Oh, and Steve Wynn, who mercifully retired from poaching Caesars' high-end customers after selling out in 2000 to Kirk Kerkorian's MGM Grand, is back. He's building yet another high- roller palace, this time on the site of the old Desert Inn. The dice won't get any warmer for Park Place.