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Howard Stutz

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Harrah's Reveals Spanish Casino Plans

1 Dec 2005

By Howard Stutz

SPAIN --If it's Wednesday, then it must be Spain.

Harrah's Entertainment Chairman Gary Loveman racked up the frequent flier mileage in November, concluding the month by announcing the company plans to co-develop a Caesars casino resort in the master-planned El Reino community of Ciudad Real, 118 miles south of Madrid.

The announcement capped a month of international development activity for the world's largest casino operator.

On Tuesday, Harrah's said it signed a memorandum of understanding with Slovenia's largest casino operator to develop a luxury casino resort in Nova Gorica, Slovenia. Earlier in November, Harrah's announced plans to enter the Bahamas, signing a letter of intent with Baha Mar Resorts and Starwood Hotels to create an 1,000-acre destination beachfront resort.

In all three developments, which total almost $3 billion in investments by Harrah's and its partners, the casino complexes will be the largest of their kind in each particular country.

And Loveman has the company's sights trained on one additional international project, one of two potentially lucrative casino locations in Singapore.

In an interview Wednesday from Madrid, Loveman said there is a marked change in international gaming attitudes, especially in Europe. Casino customers are desiring more of a Las Vegas-style, all-inclusive resort experience rather than the traditional small and intimate setting.

Most European casinos, he said, offer limited services.

"I think this project (in Spain) and the projects we've announced show that international customers are attracted to the Las Vegas resort setting," Loveman said. "These projects are all in important markets where there isn't a high-quality gaming experience."

The projects offer an avenue for Harrah's to bring the Caesars brand, which the company purchased in June as part of its $9 billion buyout of Caesars Entertainment, into international jurisdictions. He said, however, Harrah's was still assessing whether to use the Caesars theme in Slovenia, which borders Italy and is expected to draw upon a large Italian customer base.

Loveman said the three projects, which include casinos, upscale hotels, golf courses, spas, retail, entertainment and other amenities, could all be under construction at the same time next year.

"After the merger, we set aside the organizational resources to create a unit of people dedicated to building new Caesars projects," Loveman said.

In Singapore, Harrah's is hoping to land the casino-resort contract in the Marina Bay district with its partner, Keppel Land, a Singapore-based real estate developer. Loveman said if the company doesn't win the bid for that site, it will bid on a second Singapore project.

Loveman said the recently announced international projects will play a role in showing the Singapore government that Harrah's is committed to international development.

"(Singapore) is a beneficial byproduct, but that's not the primary reason behind these developments," Loveman said. "These are terrific business opportunities for the company."

Harrah's will finance the international projects differently than its domestic projects, Loveman said. And with partners, the company won't be responsible for the entire project.

Wall Street seemed somewhat supportive of the deals. Shares of Harrah's traded up as much as $1 higher for part of Wednesday's session on the New York Stock Exchange. However, Harrah's ended the day lower at $68.07, off 45 cents, or 0.66 percent.

Deutsche Bank gaming analyst Marc Falcone said the international investment is low risk with limited capital but offers a high return that includes increased brand awareness.

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