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Gaming’s future may be outside the casino doors

RENO — For an industry that has prospered since the Revolutionary War, gaming finds itself looking for ways to survive for another century or two.

A competitive, economically challenged and war-looming environment is forcing casino bigwigs to look elsewhere for support. That’s what top industry leaders indicated Wednesday on the last day of the 19th annual Governor’s Conference on Tourism at the Reno-Sparks Convention Center.

No other market portrays this quest for opportunity like the South Shore.



“Gaming will become increasingly secondary,” said Bill Eadington, professor of economics and director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno.

The region should look for ways to promote the South Shore’s natural resources as a draw for casino customers, Eadington said.




The challenges may be greater in 2003, as the U.S. threatens war with Iraq, economic recovery is slow-moving and airlines continue to sink financially, Eadington said.

American Gaming Association President Frank Fahrenkopf agreed, calling on a visionary spirit to help the Nevada tourism and gaming industries hold their own against a slew of needling factors on business. He told conference attendees he would like to see a marriage between Tahoe’s opportunity in selling its natural aspects and Las Vegas’ innovative spirit.

“One thing I’d like to see (on the South Shore) that I wish Reno would do is reinvent itself. I wish there was more of an entrepreneurial spirit,” he said, comparing the biggest little city to its southern neighbor.

“Reno-Lake Tahoe has so many advantages. The future of our industry depends on those natural resources,” Fahrenkopf said.

Vegas tourism was hit harder than Reno as a fly-in destination after the Sept. 11 terrorist attacks. But the fastest growing city in the United States has caught on to the benefits of diversifying its offering. Reno and Lake Tahoe could follow its lead.

He pointed to the big guns of gambling in Las Vegas, like MGM Mirage, to illustrate a trend in the evolution of the industry.

“Let’s face it, 65 percent of the revenue comes from the gaming pen. Fifty-five percent is non-gaming revenue. Why? They’ve diversified their product. People go for the shopping, restaurants and golfing,” he said.

He continued with other ideas Stateline may want to expand on, such as seizing an untapped resource by catering to local residents.

“It certainly should be considered,” he said.

The necessity of marketing hard and swift is pressing. No longer can the industry rely solely on the first image of gambling to attract customers; the lucky guy “standing next to the Playboy bunny, screaming at the top of his lungs: ‘all or nothing,'” Fahrenkopf said.

Players are increasingly hungry for more and more options.

“Racinos” – a cross between a horse track and slot machine casino — emerged in 1989 out of Prairie Meadows, Iowa, and represent “a growing phenomenon in the gaming business.”

“I think we’re going to see strong growth in this area,” he said, adding the predominantly East Coast enterprise generated $2.1 billion in gaming revenue in 2001.

Harrah’s Entertainment and Park Place Entertainment — which run Harveys/Harrah’s Lake Tahoe and Caesars Tahoe, respectively — have sought sites for the gaming hybrid in Council Bluffs, Iowa, and Dover Downs, Del.

Then, there’s the uncertainty of Internet gambling — now illegal as sports wagering. The question of the Internet’s viability as a venue could change as political climates are altered and spawn legislation.

One need only return to the evolution of Indian casinos — once characterized as the nemesis of the industry but now viewed as a formidable competitor — that represent challenge and opportunity.

Indian casinos have come a long way since the early bingo parlors that sprung up two decades ago in California and Florida. In the land of gators, federal opposition threatened to shut down the facilities in the early years. In 1987, a landmark ruling recognized the rights of the tribes to operate such facilities without federal or state regulation, or taxation. A year later, Congress passed the Indian Gaming Regulatory Act that requires a compact between the tribe and the state.

Fast forward to today, as the expansion of Indian casinos in California and Arizona present added pressure to compete for the tourism dollar. But their growth fails to show “the end of the world,” Fahrenkopf said.

Harrah’s, for one, has learned to embrace the growth of its counterparts — in some instances choosing to join them, not beat them.

Jim Baum, corporate director of development, told conference attendees to fight “is a futile battle” showing the expanded operations by Harrah’s as it jumped into the market that generated $12.7 billion in gaming revenues last year at 290 casinos across the nation.

Harrah’s most recent project opened in August, turning a desert lot in northeast San Diego County into a mirage of paradise and excitement.

Since Proposition 1A sealed the fate of the industry enterprise, California is predicted to account for 42 Indian casinos taking in $5.9 billion by 2006.

Baum took aim at the sluggish economy and the Silicon Valley meltdown as more of a factor on its drop in mainstay casino business than the popping up of Indian facilities. He notes they introduce newcomers to gambling.

Appealing to the audience, Baum equated Indian gaming’s role to the slow progression of someone’s skiing ability.

“You start on the bunny hill,” he said.

And the advanced slopes and tables are in Tahoe.

Susan Wood may be reached via e-mail at swood@tahoedailytribune.com


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