nternally dubbed "Project Link," the plan calls for a collection of 20 restaurants and bars to be built along a winding corridor between the firm's O'Sheas and Flamingo casinos, on the east side of the Strip.
With a mix of "eclectic" and "mostly casual" restaurants and bars opening to the street, it's an attempt to create the kind of entertainment district that has developed organically in cities such as Los Angeles, Memphis and New Orleans yet is lacking on the Strip, with its enclosed, casino-centric zones.
The company declined to discuss the project's cost. To fine-tune the idea, Greg Miller, Harrah's senior VP of resort development, spent months studying pedestrian environments across the country, analyzing Strip traffic patterns and surveying customers. “Another casino didn't make a lot of sense," said Miller, who developed theme parks for Universal Studios before joining Harrah's five years ago. "It's tough to make that math work."
The Project Link strategy is perhaps fitting for a company that's known more for the marketing prowess of its techno-geeks than its resort building. It also appears prescient in this era of fiscal conservatism, with investors soured on the Strip's building boom.
Construction costs are high in Las Vegas, home of some of the world's largest and most complex structures. Harrah's executives, who assembled thousands of designs for future Las Vegas resorts before settling on Project Link, recognized that those costs could support only a high-end casino resort, which can command higher profit margins from marked-up amenities than a mid-market or low-budget hotel. Opening a new Harrah's resort would have potentially cannibalized business from Caesars Palace, the company's flagship.
Project Link would allow the company's money-making casinos on each side to continue operating as it builds the pedestrian corridor of multi-story, tenant-occupied buildings stretching back at least a block to the monorail line behind the properties.
At the end of the 1,000-foot pedestrian walkway, Harrah's wants to build a giant Ferris wheel similar to the London Eye and the Singapore Flyer. The wheel would tower about 600 feet, offering sweeping views, plush interiors and a slow ride.
Analysts said the concept makes sense — especially for a heavily indebted company that does not have experience building major resorts and caters primarily to middle-income Americans. "The idea of building big resorts is dead — for now," said Dennis Forst, a stock analyst with KeyBanc Capital Markets.
Jeff Voyles, an associate professor of casino management at UNLV and a partner with Globalysis, a gaming consulting company, said Las Vegas has long needed a Strip-fronting dining district like the one Harrah's is proposing, but gaming companies have been reluctant to invest in untried concepts. "This is a copycat industry. It took the Forum Shops for others to build malls and Sheldon Adelson for others to build major convention space," he said.
Struggling under more than us$ 20 billion in debt taken on when private equity firms Apollo Management and Texas Pacific Group acquired Harrah's in January 2008, the company has urged bondholders to swap their notes for new ones worth less money and with extended maturity dates, buying the company more time to survive the recession.
It may be a couple of years before Harrah's can finance even a relatively inexpensive project — unless the company finds equity partners, said Dennis Farrell, a bond analyst with Wells Fargo Securities. Even so, the attempt to capture pedestrian traffic that might otherwise walk on by is a wise move in light of this year's arrival of MGM Mirage's CityCenter, which is expected to take business from other properties and may create a new focal point for the Strip, he said.
The company has delayed the opening of its Octavius tower at Caesars Palace, with more than 600 rooms, until the economy, and hotel demand, improves.
Harrah's is still moving ahead with a previously planned expansion at Caesars Palace, including a 110,000 square-foot addition to its convention center, luxury pool-facing villas and an expanded Garden of the Gods pool area that will open this month and next.
Industry watchers widely speculated that Harrah's growth and expansion plans would slow under private ownership.
After private equity firms acquired Harrah's, the company maintained that bottom-line-oriented owners wouldn't dictate the company's development plans. Miller said the implosion-free strategy, along with plans for Project Link, were under way before Apollo and TPG entered the picture.
Miller's development team, which meets weekly to hash out ideas and fine-tune designs, spent years on several designs that ended up on the scrap heap. Among their ideas were a high-tech resort featuring interactive video walls, handheld concierge devices and spaceship-like pods to transport guests between floors, and a mega-resort anchored by an indoor-outdoor water park.
The whimsical designs, a departure from the sleek, themeless skyscrapers now taking shape on the Strip, excited Harrah's executives but would not have made much money, they concluded after an exhaustive cost analysis. Voyles, the casino management professor, said a future without implosions isn't a bad thing for Las Vegas.