Planet Hollywood

BRAVE NEW PLANET

words by > Christian Sylt

Robert Earl and Las Vegas are made for each other. Th e Orlando-based entrepreneur has placed some of the biggest bets in the hospitality industry, having been behind both the Hard Rock Café and Planet Hollywood (PH) restaurant chains. Like any seasoned player, he has had his losses, but now he is making perhaps the grandest gamble of his career.

This fall, the first Planet Hollywood Resort and Casino will roll out its red carpet to guests in Las Vegas. And Earl, 55, has no doubt that the time is right to launch a new phase in the history of the Planet.

Planet Hollywood’s history has more twists than a Hitchcock classic. It started 15 years ago when the curtain rose on the first ever Planet Hollywood restaurant on 57th Street in New York.

Its walls and ceilings were adorned with movie memorabilia including Sylvester Stallone’s boxing gloves from Rocky and Arnold Schwarzenegger’s motorcycle from Th e Terminator. Both stars were shareholders in the company and were sitting on a paper gold mine.

In 1996, Schwarzenegger and Stallone, along with Bruce Willis and Demi Moore, rang the bells at the Nasdaq stock exchange to kick off the first day of Planet Hollywood’s trading. Th en, one of the most frenzied buying sprees in the market’s history propelled its stock to well over $3 billion in just three hours.

The stars held stock in return for promoting the company and were sitting on nearly a billion dollars between them. It was a recipe dreamed up by founder Earl, and it made him an instant billionaire. “Th e celebrities felt comfortable with me, because I always made sure they weren’t overexposed,” he says. Th ey turned out to be one of the company’s biggest assets.

Planet Hollywood openings became akin to movie premieres, typified by the 1995 launch of the Beverly Hills restaurant that needed three blocks of Rodeo Drive closed off . Elton John was flown in to sing on the street as the business world watched in awe.

“It was one of the most intriguing buildings of a trademark in corporate history. We didn’t spend a penny on advertising,” Earl says. “Some people have criticized the amount the parties cost, but look how much other companies spend on advertising.” And it wasn’t the entertaining

expenses that brought the Planet crashing down. Rapid expansion followed the Nasdaq listing and ballooned Planet from 22 restaurants in 1995 to around 80 a few years later. More openings made it tougher for celebrities to attend the restaurants and spread the brand too thinly. Earl had his worries.

Star power gave the firm its fame, and Earl admits, “Th e price/earnings multiple we traded at was insanity.” He adds that, to meet Wall Street’s expectations, the company had to announce new openings. And though they could have sustained several brands, Earl had just one. It soon became diluted.

As the restaurants’ novelty wore off , repeat business nose-dived. Customer numbers fell by 2% in the first year on Nasdaq, and the following year by 11%. Over expansion sent Planet Hollywood $156 million into debt by 1999 and into Chapter 11 the following year. Its stock, which peaked at $32, was worth about 75¢ when trading was halted.

Chapter 11 allowed Earl to walk away from creditors, but the company’s own celebrity got the better of it as Planet Hollywood became one of America’s most talked-about bankruptcies. It was at the core of the themed entertainment sector collapse that also sent under chains such as the supermodel-owned Fashion Café.

Amazingly, Earl never sold any of his own shares, even when the stock peaked.

This kept the market stable but cost Earl millions.

He stuck with the company and brought it back to life with $30 million invested by his family trust and Asian backers in return for 70% of the shares. But as he came out of Chapter 11 in 2000, he soon hit the downturn following September 11, which sent PH back into bankruptcy.

Determined to see a happy ending, Earl scaled PH down to the 18 restaurants currently in its stable, and celeb shareholders Stallone and Willis have remained on board from the beginning. Th e main event is just around the corner.

“Opening a PH branded casino in Las Vegas has been a goal of mine for years,” says Earl. Just six months aft er the second bankruptcy, he got his opportunity. Using money from Starwood Hotels and vulture fund Bay Harbour Management, Earl bought the ailing Aladdin Resort and Casino for $635 million. Th e deal saw Starwood managing the hotel and taking 15%, with the remainder split between Earl and Bay Harbour.

Like an archetypal Hollywood hero, Earl came out on top. He can thank his endless charm and smooth smile for some of his success, but it’s his business savvy that stopped him from losing his shirt.

“Th e opportunity to purchase the Aladdin came at a very opportune time,” he says. Th e three-year-old casino had almost sent its owner, UK gaming group London Clubs International, into bankruptcy, and Earl snapped it up for half its construction cost. However, it is still down on its luck.

In 2005, the Aladdin lost $29.9 million on revenue of $306.3 million, despite an 18% increase in occupancy year on year to 98%. It had an Arabian theme that didn’t stand out against the crowd, so it needed a PH polish. Enter Earl and a $120 million makeover, re-branding it the Planet Hollywood Resort and Casino.

The hotel will have a 7,000-seat auditorium and 2,567 rooms filled with props such as beds from Basic Instinct. But it won’t stop there—a 114,000-square-foot casino, 12 restaurants, a 140-store shopping mall and even a $750 million tower of 1,200 time-share units will accompany the project. Earl sure knows how to make a grand comeback—but whether the Planet can live up to this billing is another matter.

“Our research confirmed the strength of the brand and of using the Las Vegas property as a very strong brand extension,” says Earl. He adds that the most crucial element to its hoped-for success is the atmosphere. “Th e feeling we create when our guests walk through our doors into our new vibrant casino.”

His aim is simple. “When we’re done, we should be in the same class as Mandalay Bay Resort, the Mirage and MGM Grand.”

Earl has big plans for PH casino hotels.
He has been looking for locations in Asia and Europe while bidding against four projects for a site in Philadelphia. “We are approached every day with new off ers,” he says. “Th ese huge casinos will be the main vehicle of Planet’s future.”

And the Vegas party will be the grandest. “This is my resurrection piece. Th e opening will be bigger than any movie premiere, with our name back in lights on the strip,” says Earl. He was already back to his old tricks in June by organizing Stallone’s 60th birthday party in his Vegas hotel. Stars such as Schwarzenegger, John Travolta and Tom Jones ensured plenty of coverage.

Earl’s ease with celebrity began at an early age. Born in London, he was exposed to the entertainment world from day one. His mother ran a dress shop and his dad was a tenor. As a child, he met stars such as Peter Sellers backstage.

Aft er studying hotel management and catering, Earl got his big break. He met an entrepreneur named Joe Lewis, who wanted to find more use for his catering halls, and Earl helped him turn them into theme restaurants to huge success. A site near the Tower of London became a medieval banqueting hall, and in 1986, he opened Orlando’s King Henry’s Feast dinner show. It marked Earl’s move to the US.

Moving to Orlando also saw Earl start building his own empire. He set up President Entertainment, which was later sold to leisure group Pleasurama— owners of the Hard Rock Café chain. Earl took over its management and added 15 outlets in five years.

It was in Orlando that Earl was approached by film producer Keith Barish with the Planet Hollywood concept. With Barish’s celeb connections and Earl’s business acumen, Planet Hollywood was born. Earl pocketed $30 million when he left Hard Rock, and now his wealth is estimated to be $400 million. But he isn’t complacent.

His other pet project is Earl of Sandwich, a chain of shops selling toasted sandwiches for $4.95. One of Earl’s partners descends from the eponymous Earl who invented the sandwich in 1762. Th e first branch opened in Disney World in 2004 and made $5.3 million in its first 12 months, and Tampa became home to the second site this year, with five more to come in Houston. Earl has targeted opening 300 branches and, to avoid Planet’s problems, is giving himself a good three years to achieve it.

Time will tell whether Earl’s casino will live up to its blockbuster billing but his place in the world’s business hall of fame is already secure.

While Robert Earl’s seemingly boundless energy and rock-solid resolution are tough to emulate, he says there are three tips every entrepreneur should follow:

“Find someone great to learn from fi rst. Don’t go off on your own fresh out of school—get some meaningful experience with a great mentor.”

“Stay focused on one industry, stick to developing your skills in one area and become an expert.”

“Forget time off. If you want to be an entrepreneur, it is a 24/7 commitment or it will not work.”