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Arnold M. Knightly

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Harrah's to take over Planet Hollywood

18 Jan 2010

By Arnold M. Knightly

LAS VEGAS, Nevada --Harrah's Entertainment will take over management of Planet Hollywood Resort's hotel operations at midnight tonight while the gaming giant continues to work on buying the property.

Harrah's will replace Sheraton Operating Corp., a subsidiary of Starwood Hotel & Resorts Worldwide, which signed a 20-year management contract for the hotel in 2004.

Harrah's will operate the 2,496-room hotel tower as well and take over some of the property's food and beverage operations. The management agreement does not include the newly opened 1,201-room PH Tower, which is owned by Westgate.

Planet Hollywood's rooms will not be offered in Harrah's customer reward system, Total Rewards, at this time.

Planet Hollywood will continue to operate the property's casino.

Harrah's Chairman and Chief Executive Officer Gary Loveman said the company is continuing discussions with Planet Hollywood and its lender group to take ownership of the resort.

"We continue to work on a plan that would allow Harrah's to own and manage the entire casino-resort property," Loveman said in a statement. "In the meantime, we are pleased to take on the management of the Planet Hollywood hotel for the current owners."

In a memo to employees Friday morning, current co-owner and Planet Hollywood founder Robert Earl said it will be "business as usual for all of us, enhanced by the Harrah's executive team and the tools and skills they bring to further improve our property."

He emphasized in the memo that he will continue to have a role at the property. Hotel operations will be overseen by the management team of Bally's and Paris Las Vegas, which borders the 35-acre Planet Hollywood on the north.

Harrah's Regional President Marilyn Winn gave up her duties overseeing the Rio on Jan. 1 in anticipation of taking over as Planet Hollywood president later this year. Joining Winn from the two properties will be Steve Opdyke, vice president of hotel operations; Shawn Ritchie, vice president of food and beverage; and David Hoenemeyer, general manager.

The management changes will not affect the employment status of current Planet Hollywood employees, Harrah's spokeswoman Jacqueline Peterson said. She referred questions about the status of Sheraton's managers at Planet Hollywood to Starwood.

Starwood has not returned inquiries for comment.

Starwood will continue to have a minority ownership stake in the resort, reported at 11.39 percent on Sept. 30, according to a Starwood memo.

Two top executives at Planet Hollywood Resort, however, left in December. President and CEO Tom McCartney and Thomas Recine, senior vice president of property operations and food and beverage, departed for similar positions at Tropicana Las Vegas.

The addition of the Planet Hollywood rooms gives Harrah's 22,866 rooms on the Strip across nine hotels including Caesars Palace, Rio, Harrah's Las Vegas and the Flamingo Las Vegas. Competitor MGM Mirage control nearly 41,000 rooms across nine hotels and CityCenter.

Harrah's has been trying to acquire Planet Hollywood Resort through a debt purchase since last year.

The company has been negotiating to acquire more of the resort's $860 million debt, which is in default. In September, Harrah's controlled nearly $140 million of the debt. In November, the operator filed applications with the Nevada Gaming Control Board seeking approval to acquire Planet Hollywood Resort.

The resort is owned by a partnership between Earl and private equity firm Bay Harbour Management.

Planet Hollywood's majority owners defaulted on a management contract in the third quarter by failing to pay Sheraton $3.7 million in fees, a November filing with the Securities and Exchange Commission shows.

Lenders took over the property's finances the same month, according to a November filing with the commission.

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