Gaming analysts suggested the move will work for Harrah’s both now and later. For now, the expansion will help Harrah’s answer strong results by the competing Borgata. For the future, it will defend Harrah’s as Pennsylvania prepares to roll out slot-machine-only casinos in the next few years.

This is the second major expansion announcement for Harrah’s since the company acquired Caesars Entertainment for us$ 9 billion in June. In August, the firm said it would spend us$ 370 million to buy the Imperial Palace on the Strip.

Focusing on Atlantic City, it will add a 172,000-square-foot retail and entertainment complex, including a spa, nightclub and an indoor swimming pool. A new buffet and restaurant will be added and thr existing buffet will be converted into extra gambling space, adding 400 slot machines and 20 table games.

The expansion’s centerpiece will be a 964-room hotel tower that will increase the capacity at Harrah’s Atlantic City by nearly 60 percent. The entertainment and retail center is expected to open by the end of next year; completion of the new hotel tower is expected by mid-2008.

Harrah’s is joining an entertainment-retail rush in the Eastern gaming market. Borgata, a joint venture of Boyd Gaming and MGM Mirage, stepped up the market with its casino, which opened in 2003. The Tropicana added retail shops last year; Caesars is now building shops.

Bear Stearns gaming analyst Joe Greff said Harrah’s has experienced a strong return on investment in Atlantic City. "We also believe the project has defensive benefits as the upgrade will help differentiate Harrah’s Atlantic City property from less amenity-filled slot parlors in Philadelphia in 2007 and beyond," Greff said.

Legg Mason gaming analyst Steven Wieczynski, said Pennsylvania, which may add up to 65,000 slot machines starting in 2007 at stand-alone casinos and racetrack casinos, could challenge Atlantic City casinos. CRT Capital Group gaming analyst Steven Ruggiero added: "We view this move as a positive for both Harrah’s and Atlantic City as it will add more quality public space and needed hotel rooms."

Carlos Tolosa, the eastern division president for Harrah’s, said the expansion will let the casino capture a growing demand for Atlantic City hotel rooms. Wall Street investors seemed to view the announcement as a positive. Harrah’s shares rose us$ 1.04, or 1.58 percent, Thursday to close at us$ 66.96, on the New York Stock Exchange.