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Gambling market saturation a growing concern

AP

CARSON CITY, Nev. (AP) – Analysts are concerned about Nevada’s latest casino win figures – showing the clubs won a record $7.57 billion last fiscal year but that’s up just 0.7 percent statewide from fiscal 1996.

On the Las Vegas Strip, the win slipped 0.2 percent. The disappointing results came despite a double-digit jump in room inventory and a 4.1 percent rise in visitor volume for Las Vegas during the year.

Downtown Las Vegas was up 4.5 percent for the year, but the Reno-Sparks area was down 2.2 percent – the first year-to-year decline there since 1971. Clubs on the Boulder Strip in southern Nevada were up 10.4 percent, but resorts on Tahoe’s south shore were down 7.5 percent.

”Las Vegas has a long history of phenomenal resistance,” notes William Eadington, director of the University of Nevada, Reno’s Institute for the Study of Gaming.

But Eadington said there’s reason for concern because of ”the fact the economies in California and the country as a whole are so strong, and the fact there’s so much new casino-hotel supply in the pipeline that will be coming on stream in the next few years.”

”If, in fact, market saturation is starting to show and all this supply is coming on line, it will create tremendous pressures on the properties on the lower end of the spectrum,” he added.

Shannon Bybee, an associate professor at UNLV’s International Gaming Institute, says the static casino economy stems in part from the industry’s effort to broaden its customer base and appeal to families.

”More people are coming to Las Vegas, but they are not necessarily gambling,” Bybee said. ”They are paying more for entertainment, food and rooms.”

Ehlers and Oppenheimer & Co. analyst David Wolf says airline economics are working against Las Vegas. He says airlines are earning less per seat mile on flights to Las Vegas and are allocating planes to more profitable routes.

”Visitor volume may be up, but it’s mostly highway traffic. And the best customers are the distance travelers who fly in the from East, the South, the Midwest for an extended stay,” he said. ”If you try to bring Southern Californians from the beaches to the desert in the middle of summer, you better be offering them a heck of a deal.”

Some Las Vegas resorts have been doing just that. Room prices have been slashed at several Strip resorts. But some still have seen occupancy rates fall far below historical norms.

”When a slowdown begins, it won’t go away overnight,” said Salomon Brothers analyst Bruce Turner. ”It’s going to be a tough summer. Hey, it is a tough summer.”

The 2.2 percent decline for Reno-area clubs was caused partly by heavy snow followed by disastrous flooding last winter. But experts said it’s also a sign of increasing competition from Las Vegas and from Indian casinos.

”We need to continue to reinvent and improve ourselves to keep ourselves attractive as a destination market,” said Antoinette DeVore, director of finance for Harrah’s Reno.

Don McGhie, Reno accountant and longtime casino industry researcher, said Indian casinos are ”a major, major problem” for Reno.

”Reno just doesn’t have the full product to go beyond gaming to attract people like Vegas does,” he said. ”We aren’t a full-product city yet.”

With the flat growth in Las Vegas, Eadington said ”the more disadvantaged of the Las Vegas properties … are going to start competing in a very Reno-like fashion, with much more cutthroat pricing strategies.”

That’s all the more reason for Reno to try to distinguish itself above other gambling destinations, he added.

AP-WS-08-12-97 1808EDT


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