Purchase Could Mean End Of Imperial Palace Dynasty

Whenever someone asked me recently what I thought would be the next hotel on the Strip to make a date with a wrecking ball, I went with the usual suspects: the Boardwalk, the New Frontier, the Stardust, the Tropciana or perhaps even the Riviera.

I usually left the Imperial Palace off that list. Just goes to show that not even so-called Las Vegas experts are right 100 percent of the time.

Harrah's Entertainment announced a $370 million deal last week to purchase the Imperial Palace, which is right next door to its flagship Harrah's hotel and casino. Although no formal plans were announced, it seems like the surest bet in town that Harrah's will knock the place down and start over, perhaps as early as 2006.

Harrah's has been on a buying spree lately in its bid to stay competitive with Vegas' 800-pound gorilla, MGM Mirage. The company purchased Caesars Entertainment last year in an unprecedented deal worth more than $9 billion, making it largest gaming company in the world.

But in Las Vegas it was solidly in second place, with six Sin City casinos (Harrah's, Rio, Caesars, Flamingo, Paris and Bally's) paling in comparison to MGM Mirage's nine (Mandalay Bay, Luxor, Excalibur, New York-New York, MGM Grand, Boardwalk, Bellagio, Mirage and Treasure Island).

A couple of weeks ago, Harrah's snapped up the Bourbon Street Hotel and several adjacent properties on or near Flamingo Road, just off the Strip. The purchase of the Imperial Palace gives it an almost continuous line of casinos from Paris on the south to Harrah's on the north, with only the Barbary Coast (owned by Boyd Gaming) standing in the way.

Before you can ask, the answer is yes. While everyone is denying it publicly, the chances that Harrah's is not trying to buy the Barbary Coast are next to zero.

The Imperial Palace started life in 1960 as the Flamingo Capri, a non-casino motel built as a lower-cost alternative and overflow hotel for the neighboring Flamingo, which was probably at the height of its popularity at the time. It was purchased in 1971 by Ralph Engelstad, a local businessman who got a gaming license for the property and opened a casino in 1972.

Engelstad oversaw massive expansion of the Capri throughout the 1970s and in 1979 decided to establish it as a brand of its own by renaming the hotel the Imperial Palace.

Always a controversial figure, Engelstad, who died in 2002, was fined $1.5 million in 1989 for hosting April 20 "birthday parties" for Adolph Hitler at the Imperial Palace. He owned one of the largest collection of Nazi memorabilia in existence, which was kept at the hotel (out of view of the public of course), but by all accounts his fascination was purely a historical one and not a philosophical one.

Engelstad's widow, Betty, and a family trust gained control of the hotel after his death and vowed to keep the place a family-run business. This, more than anything, was what kept it off the radar of casino-implosion watchers like myself. Although I always figured the family would sell it off eventually, I thought it would be well after the hotels above had been knocked into the history books by a wrecking ball.

So what will become of the IP, and when? Since the deal to purchase the hotel will be complete in late 2005, most analysts see 2006 as the most obvious timeframe for closing and demolishing the hotel. Since the IP is privately held, there are no indications on how much (or little) the hotel and casino actually makes, but most believe it will probably wind up being a money loser in its existing form for Harrah's, so it's doubtful it will keep it open for much longer than it has to.

But it's when we look at the future that I start disagreeing with the major analysts, most of whom believe Harrah's will use the property to build a new Strip resort, possibly using the Horseshoe brand it gained with the Binion's purchase in 2004.

The problem is that the property just isn't big enough to build the kind of flagship property Harrah's would want for the Horseshoe name, which will most likely go to a revamped Bally's.

Instead, I think it will use the property to expand Harrah's, which is limited in its ability to grow right now by the neighboring properties. I envision a new Harrah's on the Imperial Palace land, with the existing Harrah's being revamped and integrated into it in a second phase.

Of course, that's pure speculation at this point, and I'm wrong a lot.

But one thing is almost certain: The Imperial Palace will be no more.

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