HARRAH'S CASINO LUCK TURNS SOUR WITH PROJECT IN THE CRESCENT CITY

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Weak marketing, a soft reception to gambling and a deal that saddled the partners with a temporary facility helped stack the deck against Harrah's Jazz Casino in New Orleans. So, while a riverfront casino was still under construction, the year-old enterprise landed in Chapter 11 bankruptcy protection last month.

"It's just too early to tell now" about fallout after the casino filed for Chapter 11 Nov. 22 in U.S. District Court in New Orleans, said Karen Von Der Bruegge, VP-brand marketing for Harrah's Entertainment Corp. and one of Advertising Age's Power 50 for 1995.

She said she wasn't sure what impact the negative publicity Harrah's is now receiving will have on future marketing.

The bankruptcy action put a halt to construction of the riverfront casino and closed the temporary facility at the city's Convention Center. Harrah's Entertainment Corp. is one of three partners in Harrah's Jazz Co. with New Orleans/Louisiana Development Corp. and Grand Palais Casinos. Harrah's last week said it would submit a motion to allow the temporary casino to reopen.

Banks became nervous over poor performance posted at the temporary casino and decided not to issue funding required to carry out completion of the new casino, said Nap Overton, analyst with Morgan Keegan Co., Memphis, Tenn.

"The bank's decision to cut off the loans had everything to do with Harrah's results in New Orleans," Mr. Overton said. "It was far below projections and was doing about half as much as planned."

Harrah's said it expects to write off the investment, which could cost stockholders as much as 60 cents per share.

"The good part is that New Orleans was a black cloud that has now gone away," said Mr. Overton. "News from New Orleans, which has been dominated by bad news regarding Harrah's, should be better in the future."

Mr. Overton confirmed Harrah's isn't the only gaming concern with problems in the Crescent City. Two riverboat casinos have met the same fate as Harrah's since June and a third, a Hilton Hotels Corp.-owned boat, is seeking to sell its interests and bring in a smaller vessel to dock alongside its hotel there.

Harrah's officials said tourists there stuck to traditional attractions. But, a New Orleans hotelier said Harrah's failed to market to New Orleans citizens.

One industry observer said Harrah's found itself in a position it didn't want to be in.

"They begged the city not to make them open a temporary casino when they won the license," said the industry observer.

But the company had to live with a lease negotiated by New Orleans developer Chris Hemmeter, who they later brought in as a third party.

"Everyone knew the temporary casino wasn't in a good location," the industry observer added.

And Harrah's spent little on advertising either in or outside of the city. Trahan, Burde & Charles, Baltimore, created ads with a Mardi Gras theme that ran in New Orleans on radio, TV, print and outdoor boards. Ads were also run in Harrah's other gaming markets, Las Vegas and Reno, Nev.

Harrah's next step is to renegotiate agreements with bondholders, and leases with the city and state in hopes of coming out with a favorable agreement which will allow it get back in the game.

"Harrah's, like everyone else, is having a hard time playing in Louisiana," Mr. Overton said. "But, this can be saved."

At the time of bankruptcy, Harrah's had $170 million of bank debt and $475 million of public debt.

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