Harrah's Cherokee Kicks Off Next Phase of $633M Expansion, Despite Lackluster Gaming Market

With the recession in full swing, fewer people are taking chances at the gaming tables, but that is not stopping the Eastern Band of the Cherokee Nation from moving forward with its $633 million expansion of the Cherokee Casino & Hotel in Cherokee, N.C. Tribal leaders just broke ground on the 532-room hotel segment of the property's massive upgrade.

Located 50 miles west of Asheville on 37 acres just outside of the Great Smoky Mountains National Park, Harrah's Cherokee is presently being subjected to a master plan that, as originally projected, is on target to reach completion in 2012. The development endeavor calls for the addition of a 3,000-seat events center, a 16,000-square-foot spa, restaurant and retail space, new parking facilities and a third hotel--the luxury tower on which ground just broke. With the new hotel, Harrah's Cherokee will be the site of the largest number of hotel rooms in North Carolina. Additionally, the existing 75,000-square-foot gaming floor will be renovated and enlarged to 150,000 square feet, a project that will wrap up in 2010. Turner Construction is serving as the general contractor.

"Despite the economy, the expansion will position the property in perfect position--ahead of the competition--when the economy rebounds and we can welcome new customers anxious for world-class entertainment, accommodations and service," noted Principal Chief Michell Hicks of the Eastern Band of Cherokees in a prepared statement. Currently, the Harrah's Cherokee project ranks as the largest hospitality expansion in progress in the Southeast, and one of the largest in the country.

Those who can plan for the eagerly awaited economic turnaround are doing so, but it's a small club. "A lot of casino companies have been very conservative with capital; a lot have been reducing debt load and buying back debt," said Jacob Oberman, director of Gaming Research & Analysis for real estate services firm CB Richard Ellis Inc.'s Global Gaming Group. "People are cleaning up their balance sheets, so doing expansions is contrary to that. And some companies couldn't do expansions if they wanted to."

While there are no guarantees for the handful of casinos that are currently expanding or in development mode, Oberman believes the plan for Harrah's Cherokee is a good one. "The hotel makes a lot of sense," he said. "There are a couple of factors working here. For one, they're looking to induce players to come to the casino with incentives. Second, for the people who are already coming to the casino, if you give them an upscale room, they will be inclined to stay longer, and the casino can usually get a person to spend twice as much if they stay for a night."

The new hotel, larger casino and other new amenities will also allow Harrah's Cherokee to expand its reach. "This is also a good move to get people to come from farther away, like Atlanta," Oberman added. "Atlanta is a fertile market for them. It's about 150 miles away; you could even do a day trip. People have a choice of going to the Gulf Coast, so this is a way for Cherokee to compete with the Gulf Coast.

"I think they did their analysis and building the hotel tower is probably going to be a very good return on investment."

Source: Commercial Property News