Sunday, October 29, 2006

THE biggest bets in Las Vegas take place behind closed doors. In the private
high-rollers' suites, punters bet $1m a hand on blackjack while sipping
$5,000-a- bottle cognac. This month the biggest bet in town is being made
away from the slot machines and roulette wheels. It is being placed on the
boardroom table, not the card table; and the prize is in Britain. What
happens in Vegas is supposed to stay in Vegas; but Chuck Atwood is betting
£300m that his firm, Harrah's Entertainment Inc, the world's biggest casino
operator, can bring a bit of Sin City to the UK. Atwood, vice-chairman of
Harrah's, predicts that its 135p-a-share bid for London Clubs International
(LCI), which operates seven casinos in Britain and is opening five more,
will "close within a month". Harrah's already controls 34% of LCI after the
biggest shareholder, Genting International, the Malaysian gambling group,
agreed to sell its 30% stake to the Las Vegas firm last week.
Atwood expects the other LCI shareholders to follow suit in a matter of
weeks. He knows the bid will make him a hate figure among critics who waged
a furious campaign against the government's 2005 Gambling Act, which will
unwind the strict rules that have governed gaming in Britain for 40 years
when it comes into force next year. Atwood gave an assurance that Harrah's
was "responsible and respectable". Giving his first interview to a British
newspaper, he said that in gambling "as in almost every activity that human
beings engage in, some people do it to excess". But "there is no evidence
that gaming is predatory". He added: "The evidence is that casinos provide a
very rich entertainment option. They don't prey on people. They offer
fulfilling entertainment. There is no horrible social result. The social
result is people get jobs. That is a good outcome. We are a quality
operator." The public campaign against the gambling act forced ministers to
abandon plans for almost a dozen super-casinos and opt instead for one
super-casino, eight large casinos and eight small ones. Despite this,
Atwood, 58, believes Britain is the ideal new market for gambling firms.

"Britons gamble on everything," he said. "Gambling is probably more widely
available (there) than anywhere else in the world. Walk down any high street
and there are betting shops. You can gamble on the internet too.

"Brits gamble but they don't gamble in casinos. One reason is that there is
not much to do in British casinos other than gamble. We want to change that
by creating a nicer and grander experience."

Harrah's £300m bid for LCI is high. It was recently valued at only £230m,
and last year it made a £3.6m pre-tax loss. "There are those who believe
that we are being foolish, but we see value. We think it could grow by leaps
and bounds," Atwood said.

By combining Britons' appetite for gambling with Harrah's casino expertise -
it controls the Caesars Palace, Paris and Flamingo casinos on the Las Vegas
Strip - Atwood believes he can expand the British market fivefold. "About 3%
of people in Britain frequent casinos. I can see that growing to 10% or
15%."

Harrah's wants to export the style and success of modern Vegas casinos to
Britain. In recent years the big operators, notably Harrah's and its arch-
rival MGM Mirage, have used top acts, celebrity chefs, luxury-goods brands
and spas to turn their casinos into upmarket international resorts.

Outside the sandstone walls of Atwood's office at Caesars Palace, Sir Elton
John and Celine Dion fill the 4,000-seat Colosseum theatre; shoppers browse
the latest Dolce & Gabbana and Gucci collections in the Forum mall; and
foodies sit down to a £200-a-head dinner prepared by three-Michelin-star
chef. The big casinos now generate more than half their annual revenue from
non-gambling sources.

Harrah's wants to add new, Vegas-style entertainment to LCI's existing seven
casinos in Britain and its five planned new casinos in London, Nottingham,
Glasgow, Leeds and Blackpool. It will also bid for licences to operate the
17 new casinos allowed under the gambling act.

"As well as gambling, our plan is for an auditorium purpose-built for a
signature show, top-name chefs and branded stores. We believe that we will
offer such a good night out or weekend away that people will come whether
they are gamblers or not," said Atwood.

The firm plans to advertise and use direct marketing for the first time in
the British casino market. Ads are allowed under the new gambling act, which
also allows bigger casinos, unrestricted membership, larger jackpots, more
slot machines and liberalised licensing hours.

Harrah's wants to exploit its popular American Total Rewards loyalty
programme to attract visitors. The scheme - a Tesco Clubcard-style
rewards-for-points programme - tracks customers' gambling and spending and
allows Harrah's to come up with tailor-made special offers. The firm plans
to use the card to offer gamblers discounted trips to its British and Las
Vegas casinos. Executives are rumoured to be in talks with Virgin Atlantic
and BMI - the only airlines to fly direct from Britain to Las Vegas - to
offer gamblers discounted flights.

Harrah's executives were privately furious when British ministers watered
down their deregulation plans. Although the first battle to liberalise fully
was lost, Atwood insists the war is far from over. He predicts that, if
Harrah's UK investment creates jobs in depressed areas, pressure for more
and larger casinos will grow.

"We did not get our first bite. We got our second bite. But the first bite
might still be available," he said.

Harrah's may be the first Las Vegas gambling giant to invest in Britain but
it is not the only foreign operator moving in. Genting is set to open larger
casinos with entertainment and will compete with Harrah's for licences to
run the 17 new casinos. MGM Mirage, which controls the MGM Grand, Mandalay
Bay, Bellagio and Mirage casinos in Las Vegas, is also eyeing up
opportunities in Britain.

For Harrah's, the stakes are higher than simply becoming a lead player in
Britain. The LCI deal is the key to an ambitious expansion strategy. "We see
London Clubs helping us to expand on the continent and beyond. London will
be our European hub," said Atwood.

LCI already owns two casinos in Egypt and one in South Africa, and it acts
as a consultant to a casino in Lebanon. Harrah's will retain all LCI's
overseas operations and open new casinos. It is working independently on a
casino south of Madrid and another in Slovenia.