Harrah's plans $1B expansion of Las Vegas Caesars

LAS VEGAS — Gambling giant Harrah's Entertainment Inc. announced a $1 billion expansion Thursday for its flagship Caesars Palace hotel-casino in a bid to compete with a wave of new megaresorts planned for the Las Vegas Strip.

The company plans to build a 665-room tower called Octavius, three pool villas for high rollers, add an extra 263,000 square feet of convention space and upgrade 512 of its oldest rooms.

The expansion, which adds a sixth tower and will bring the room count to 4,013 by early 2009, is the most expensive for the 41-year-old property at the corner of one of the Strip's most famous intersections.

"When people come here, they will still feel like they are at their father's Caesars Palace, but they'll also feel that they're at the Caesars Palace for the new generation," said the property's president, Gary Selesner. The expansion, which comes after.

Shareholders agreed in April to be bought by private equity firms Apollo Management Group and Texas Pacific Group for $17.1 billion, shows the new owners' continued appetite to spend more capital. In May, Harrah's announced the first phase of what will be a $1 billion Margaritaville Casino & Resort in Biloxi, Miss. Harrah's Entertainment is the world's largest gambling company by revenue and second-largest on the Las Vegas Strip, where it also operates the Flamingo, Paris, Ballys, Rio and Harrah's hotel-casinos

Caesars' expansion will allow the property to raise room rates in line with a raft of upscale, multibillion-dollar megaresorts planned for the Strip, Selesner said.

They include Las Vegas Sands Corp.'s $2.6 billion Palazzo set to open by the end of the year and the Wynn Resorts Ltd.'s $2.1 billion Encore scheduled to open in 2009. The $7.4 billion CityCenter mixed-use project planned by MGM Mirage Inc. is targeted for late 2009, and the $4.8 billion Echelon development by Boyd Gaming Corp. is set for late 2010.

"We think we've put together a program and a package that will now allow Caesars Palace to compete with whatever is coming down the line," Selesner said.