The reason for the 8.1-percent or $40-million annual increase in a Rhode Island casino is because, Harrah's says, of better amenities, including a spa.

01:00 AM EST on Tuesday, March 22, 2005

BY SCOTT MAYEROWITZ
Journal State House Bureau

PROVIDENCE -- Harrah's Entertainment has increased its projections for how much money will be gambled each year at its proposed West Warwick casino.

The amount of revenue the Las Vegas-based company expects to draw each year grew by more than $40 million in the last few months.

These latest estimates were tucked away in a presentation made last week to reporters on the latest casino drive.

When asked how the revenue estimates jumped $40 million in just a few months, Harrah's said it was because of more and better amenities at the casino. With a more attractive casino, the argument goes, people will stay longer and spend more money.

Last May, when Harrah's executives testified in the State House in support of their casino project, they said the casino would generate $453.6 million in its first year of operation, $478.8 million the next year and $504 million in the third year.

However, in last week's presentation, all those numbers increased by 8.1 percent -- about $40 million a year.

Jan L. Jones, Harrah's senior vice president for communications and government relations, attributes the increase to the expanded "size and scope of the project."

Since May, Harrah's has increased its proposed capital investment in the casino from $600 million to $650 million.

However, there is no major change in the size of the casino outlined in the latest presentation. Both last May and last week Harrah proposed a 115,000-square foot casino with 3,000 slot machines and 100 table games, a hotel with 500 rooms, 55,000 square feet of ballroom space, five food and beverage facilities and 5,250 parking spaces.

Instead, Jones said, there will a larger and higher quality spa -- a $35-million expense alone -- different restaurants and a push for better entertainment.

"If you bring in higher amenities, then you anticipate longer room stays, larger gambling budgets," Jones said. "So much of what drives revenues in these properties is just not gaming. That's why Lincoln [Park] can't compete with Foxwoods and Mohegan Sun."

Jones said that the spa at the Bellagio Hotel & Casino in Las Vegas earns $40 million a year by itself.

The push for more amenities is a direct response to the latest round of expansion plans at the colossal Foxwoods Resort Casino in neighboring Connecticut.

Last summer, Foxwoods completed a $300-million expansion that added slot machines, restaurants -- including a Hard Rock Cafe -- and 2,100 extra parking spaces to its sprawling complex.

Last month, Foxwoods announced plans for another $700-million expansion that would add an 825-room hotel tower, a 5,000-seat theater, 1,500 more slot machines, 45 more table games and more shops, restaurants and convention center space.

Foxwoods is responding to $1-billion expansion in 2001 at neighboring Mohegan Sun, which almost doubled the gambling space, added dozens of stores and high-end restaurants, a 1,200-room hotel, an indoor mountain under a planetarium dome, a 10,000-seat arena and an 85-foot waterfall.

Mohegan Sun brought in celebrity chef Todd English, a Michael Jordan's Steak House and opened several brand-name stores including Brookstone, Swarovski, Godiva Chocolatier and Yankee Candle.

The larger planned investment in West Warwick by Harrah's, "is directly a result of what they are doing at Foxwoods," Jones said. "There is no question about it."

In fact, Harrah's could quickly go well beyond the $650-million first-phase plans if the state and West Warwick approve of such expansions.

"I would expect that you would look at further expansion very quickly," Jones said, "but you want to try to be a good neighbor."

There is one more change in the materials Harrah's is using to sell its casino proposal. A chart depicting the ownership/organizational structure of the casino has changed significantly. But Jones says that change means nothing. During last May's Senate hearings, ownership became a major issue.

Harrah's CEO Gary Loveman testified at the time that his company would own the casino, giving a share of the revenues to the Narragansett Indian Tribe. After a certain number of years -- the figure has shifted from 18 to 20 years -- the tribe would be able to buy the casino from Harrah's if it had enough cash.

During the May hearings, Sen. J. Michael Lenihan, D-East Greenwich, asked Loveman why Harrah's needed to cut the Narragansett Indians in on the revenues when the casino will be entirely owned by Harrah's.

"Other than the fact that this polls better with the Narragansetts in the mix, why is it important to you to have the Narragansetts as partners in this proposal?" Lenihan asked.

Presentations to lawmakers at the time showed an ownership chain with Harrah's Entertainment Inc. owning 100 percent of Harrah's Operating Company Inc., owning 100 percent of Harrah's Narragansett Casino. The chart then had an arrow pointing to the side with a revenue sharing agreement for the Narragansett Indian Tribe.

Last week's presentation, has both the tribe and Harrah's at the top of the chart as "members" in the organization that will provide casino services to the state.

When asked about the significance of the change, Jones only said: "There's not a change in the ownership structure. It's a Power Point presentation."