Bond refinancing gives casino room to expand

By Liz Benston

Monday, Nov. 3, 2003 | 11:04 a.m.

For a property with a small casino floor, a mere 657 rooms and roughly 1,200 parking spaces, the Hard Rock's influence extends far beyond its off-Strip location in the shadow of the city's megaresorts.

That influence is particularly felt on concert nights, when customers seeing rock concerts at The Joint take up spaces for hours, leaving casino-goers and other visitors driving around looking for a space to park.

"I think there are times, especially on weekends, when (concert goers) displace other customers," Hard Rock Chief Financial Officer Jim Bowen said.

Come January, the Hard Rock hopes to alleviate the problem when it opens about 400 new parking spaces at a cost of about $4 million.

The expansion, which will take the garage from six to eight stories and a total of about 1,600 spaces, will be well worth it, Bowen said.

"We're very much a late night place," he said. "At 10:30 (p.m.) people are still parked for a concert and others are just arriving."

The garage expansion has been talked about for years but was put into motion in May when the Hard Rock Hotel Inc. refinanced its bonds and raised about $25 million to spend on expansion projects the next two years.

Recent additions include a 5,000-square-foot high-roller suite and a lingerie store. The property will be closing its Baby's nightclub after the first of the year and expects to open a new club by June.

Financing also is available to add convention and meeting space at the Hard Rock -- a prospect that has already been discussed with investors, Bowen said. More recent plans call for roughly triple the company's estimated 6,000 square feet of meeting space, Bowen said.

Its sexy, rock 'n' roll atmosphere notwithstanding, the property's proximity to the airport and the Las Vegas Convention Center makes it a popular spot for business travelers.

"Our group business is tremendous," Bowen said. "We don't have enough meeting rooms for a lot of business travelers that stay here."

While a convention center lies in the property's future, more hotel rooms are still under consideration, he said. If built, the rooms would go atop the new convention area. In 1999 the resort completed a major expansion, adding more than 300 rooms, several restaurants, conference facilities, and the pool.

The expansion projects aren't a reaction to an announcement by the Palms hotel-casino to build a second room tower to accommodate demand, he said. The Palms and the Hard Rock are two smaller, more intimate hotel-casinos that compete for the same customer demographic -- the hip, young rock-and-roll crowd that frequents The Joint at Hard Rock and Ghost Bar at the Palms.

With the tower addition, The Palms will add about 300 rooms to the more than 400 rooms it already has. The Palms master plan calls for some 2,000 rooms to eventually be built.

The Hard Rock will probably never have more than 800 rooms -- a limitation driven by space and also by the desire to maintain the scale of the property, Bowen said.

"It would make more sense after we build another tower, if we wanted, to build another property in another location," he said.

Executives discussed prospects for the meeting space and the rooms during a conference call last week to discuss the company's third-quarter results.

The company reported third-quarter profit of $1.9 million, about the same as last year's quarter. Revenue jumped 10 percent to $37.2 million and cash flow climbed 24 percent to $9.8 million.

While casino revenue was flat, hotel, food and beverage revenue showed double-digit increases.

"Hard Rock is still the preeminent brand in the market and our numbers indicate that," Hard Rock President Kevin Kelley said in a conference call with investors last week. "We have to be mindful of all the new product coming online here (in Las Vegas). We have to prepare ourselves for that. We're looking very hard at expansion opportunities here on the property."

The company is also pursuing opportunities to expand the Hard Rock brand, though Morton is "very selective" about such deals, Bowen said.

The company is talking to an Indian tribe about operating a Hard Rock-theme casino, executives said during the conference call. Executives would not name the tribe. About three other Hard Rock-theme casinos are in operation nationwide but don't involve Morton, who sold off rights to the name in certain areas.

"The tribe ... we're more serious with doesn't have a (state) compact. Given the political flux in California that's probably a longer-term opportunity," Bowen said.

The parking garage expansion could have an immediate effect on business, he said.

When shock jock Howard Stern hosted his radio show from the Hard Rock last month, "hundreds of cars" were turned away for lack of parking, he said.

More parking could also help surrounding businesses such as Hamburger Mary's, a restaurant that faces the south of the Hard Rock across Harmon Road.

"We applaud it. (Lack of parking is) always an issue," Andy Barrett, who owns that Hamburger Mary's, said. "It's a good possibility that we have lost customers."