Thursday, September 02, 2004
Copyright © Las Vegas Review-Journal

THE STRIP: Aladdin takeover is official

Planet Hollywood boss meets staff after Strip casino's sale finally closes

Aladdin President Mike Mecca, left, and Planet Hollywood Chief Executive Officer Robert Earl talk about their first day as the owners of the Aladdin on Wednesday. The long-awaited sale of the hotel-casino to Earl's investment group closed around 3 a.m. The new owners plan to spend $500 million renovating the property. Photo by Clint Karlsen. Robert Earl had reason to smile at the Aladdin on Wednesday. Earl's investment group, which bought the hotel-casino in a U.S. Bankruptcy Court sale more than a year ago, was finally in charge. Photo by Clint Karlsen.

A new day dawned on the Aladdin on Wednesday when a Planet Hollywood-led investment group took control of the troubled hotel-casino and launched an ambitious $500 million plan to resurrect the $1.4 billion resort.

Planet Hollywood Chief Executive Officer Robert Earl and Aladdin President Mike Mecca spent most of the day meeting and celebrating with employees, after the long-awaited sale finally closed about 3 a.m.

"This is a big deal for me," Earl said. "It's a brand resurgence for me. I've had the best-known name on Wall Street, and we think it can be applied here."

The first step in resurrecting the 4-year-old Aladdin involves stabilizing what has become a profitable operation, Earl said.

In July, the most recent month for which data is available, the 2,567-room Aladdin turned a profit of $3 million on revenue of $21.7 million. Earl said it has been operating at 97 percent occupancy with an average daily room rate of $109, but it has been serving mainly as a "dormitory" for competing Strip properties because of the absence of amenities.

Earl's partnership was the successful bidder for the Aladdin in a U.S. Bankruptcy Court sale more than a year ago, offering $637 million. It won final regulatory approval for the deal late last month when the Nevada Gaming Commission approved licensing the group.

The second step in establishing the Aladdin as a Strip powerhouse will focus on a $100 million construction project that Earl expects to kick off in next year's first quarter.

Earl is bringing in a new partner to reconfigure the Theatre for the Performing Arts and build a new showroom.

He also plans to add a 1,200-unit, 2,000-room apartment complex on the site, bringing the total ticket for improvements to $500 million.

University of Nevada, Las Vegas professor Bill Thompson, who specializes in gaming studies, said the commitment of investment funds to the property is important to Las Vegas.

He said the Aladdin has been a disappointment only because an attractive property in a great location has been allowed to languish without an ownership group that could correct the design and operation problems that led to its bankruptcy petition three years ago.

"This is great. I didn't know they were committing so much money. Apparently we have a new owner with deep pockets who can do the right things with the property," Thompson said.

Earl said the biggest problem with the Aladdin is that it has been seen as a bed bank for visitors rather than an entertainment destination attracting traffic flows from its neighbors.

"It needs a wider array of restaurants, bars, night clubs and entertainment, a normalized casino floor and an attractive property from the outside that attracts nonresidents. These are going to be our driving forces for change," he said.

"I've always felt traffic motivation is my strength, my speciality and what (properties like this) need most," Earl said. "My position is I can't compete with the architecture at the Bellagio or Steve Wynn's new place, but we're going to make this a home of entertainment. We can create constant change and generate more reasons to come back."

The initial construction project will move the PF Chang's China Bistro, which stretches across the front of the property, and then build a grand entrance at the center of the property that will open onto the Strip, Earl said.

The Aladdin has been criticized for the absence of access from the Strip since it reopened in 2000.

The reconfiguration of the front of the property will also make it possible for the new owners to put up a 630-foot-high billboard promoting the hotel-casino and its entertainment offerings, Earl said.

The new owners will also reconfigure -- and normalize -- the entire casino floor and update its slot machine offerings with new devices from International Game Technology.

Las Vegas-based Klai Juba Architects is the architect for the initial construction project and Terry Dougall, of Pasadena, Calif.-based Dougall Design Associates, is the interior designer, Earl said.

The property will continue to operate as the Aladdin Resort and Casino during the renovation process, which is expected to be complete in early 2006, after which it is expected to be reflagged as the Planet Hollywood Hotel-Casino.

The joint venture partners involved in the property's purchase include Earl, Bay Harbour Management and Starwood Hotels and Resorts Worldwide, which will manage the property as a Sheraton hotel.

Earl said he and Mecca already are meeting with employees to see what morale is like and to gauge their interest in joining Culinary Local 226, which has claimed a majority of workers want the property unionized.

He said the new owners appreciate the union giving them some breathing time and said they will be in a better position after a month of operations to assess meeting with union representatives.