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August 23, 2014

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Gaming summit turns upbeat

Gaming leaders acknowledged short-term concerns Tuesday about an over-supply of hotel rooms in Las Vegas, but offered an upbeat assessment of the industry's longer-term future here.

Their views were bolstered by the state's latest gaming report, which showed a sharp jump in casino win in October, as well as by a new study refuting reports linking casinos and crime.

Meanwhile, Venetian hotel-casino developer Sheldon Adelson delivered another blistering attack on Culinary Union officials while telling attendees at the American Gaming & Lodging Summit of his plan to build the world's largest resort.

Adelson accused Culinary leaders of pursuing "scorched-earth tactics and a dues-driven agenda" while "trying to line only their own pockets." He vowed he wouldn't negotiate with unions before hiring the new resort's employees.

The latest gaming-win figures and speeches by top gaming executives helped reverse the somber mood that marked Monday's opening of the three-day summit presented by Bear Sterns & Co., Lionel, Sawyer & Collins, and Casino Journal Publishing Group at the Las Vegas Hilton.

On Tuesday, the Gaming Control Board said gaming win jumped 8.1 percent statewide in October from the year-earlier month. Even though a strong win by sports books fueled the increase, the fact it occurred in the midst of slower visitor-volume growth was heartening to gaming executives.

So were speeches by Circus Circus Enterprises Inc. President Glenn Schaeffer and American Gaming Association Chief Executive Frank Fahrenkopf.

Schaeffer acknowledged that visitor demand has lagged room supply, causing concerns about market saturation.

"But Las Vegas is about the future," he said. "Temporary dislocations of supply won't foretell the next decade on the Las Vegas Strip.

"The megastore is about to become something greater yet -- the entertainment hyperstore," he said. Bellagio, Circus' Project Paradise, Paris and The Venetian "will be the most talked-about buildings in America."

"For all the world, in 1997 the Strip looks like real estate development gone wild, like a return of the '80s in other sectors. There's now more than $4 billion in construction underway or in planning, roughly the sum of the Strip's entire cost to date.

"The pleasant news about this bulge in development is that, unlike most real-estate development, gaming has a tendency to achieve decent results even in soft markets.

"New buildings clearly don't find themselves begging or going empty on the four-mile Strip, which is the scourge of oversupply elsewhere," he said. "In this off year, returns on total investments on the Strip still exceed those in most of the hotel industry, which is enjoying an historic upcycle. Businesses that can come out all right in tough times tend to be dramatic winners in good times."

Because of their prime locations and spectacular properties, Mirage Resorts, Hilton Hotels, MGM Grand and Circus are good long-term investments for "the next many years, not for a single blip or point in 1999 or 2000," Schaeffer said.

"Franchises last and fads pass. What these buildings and asset neighborhoods or clusters stand for is unique value in American or international resort culture. And as a consumer category, resort culture is about to take off."

The fuel for that takeoff will be "the greatest spenders of world history -- the baby boomers," he said. "Leisure spending alone in the United States might amount to 15 percent of the economy within the coming few years.

"The best thing about baby boomers as a consumer audience is their inherent insatiability. They want to live forever ... and they want to spend everything they've got. This is the generation, as one financial observer puts it, whose last check will be to the undertaker, and they expect it to bounce."

Noting that the average casino customer on the Las Vegas Strip is 49 years old, Schaeffer said, "Somebody's turning 49 in America every eight seconds from today until the year 2013.

"They're not principally gamblers, they're entertainment consumers instead. So in Las Vegas we're tinkering with the design standard of our entertainment product."

Studies indicate the No. 1 goal of consumers is to "have more fun," he said, "so our design standard in Las Vegas will become 'have more stuff that's fun.'

"Nobody anywhere is getting the same thing any better than you can in Las Vegas."

Rising expectations will benefit Las Vegas, Schaeffer said, quoting Ben Franklin's observation that "a luxury once sampled becomes a necessity."

The result will be to design buildings for 50-ish Baby Boomers, including "more broad-based entertainment content, expressed in fancier boxes that formerly specialized as casinos" and fill a vacation day with entertainment, dining and retail experiences that supplement gambling activities.

"When we attract this age wave to our few unique buildings in this town, we'll have established a sustainable, potent uptrend," Schaeffer said.

"The Strip will not display equal prosperity for all years, but it's destined for better-than-average prosperity in most.

"The bears and bulls on our industry divide, rightly, on the short-term scenarios for capacity absorption, especially in Las Vegas over the next couple of years."

In the long run, though, properly executed resorts will succeed, even if the returns are lower than the area's first mega-resorts, he said.

The AGA's Fahrenkopf criticized gaming opponents who are "misinterpreting, manipulating and distorting facts about our industry," particularly in their contention that casinos breed crime.

As a result, the AGA asked former federal prosecutor and Illinois State Police Director Jeremy Margolis to study the issue. Margolis' study revealed there is "a negative correlation between major crimes against persons and property and the existence of casino operations," Fahrenkopf said.

"Many casino opponents used and misconstrued (FBI Uniform Crime Reporting) statistics by comparing pre- and post-casino Atlantic City crime rates without revealing that the average daily population had soared almost four-fold.

"In this way, the often-claimed 120 percent increase in crime that came between 1977 and 1990 wasn't credited to the relationship between crime and the increase in visitor population."

The evidence shows, he said, that "growth in the number of visitors to Atlantic City surpassed increases in crime to the point that the personal risk of victimization actually declined."

Law-enforcement authorities in several gaming jurisdictions reported that economic prosperity, lower unemployment and increased nighttime pedestrian traffic have worked to reduce crime, Fahrenkopf reported.

The Margolis study also debunks myths linking organized crime and gaming.

"Gaming is the most highly regulated industry in America, more so than the nuclear industry," Margolis said. "Regulation and oversight have prevented organized crime from participating in the industries. And I challenge the critics who contend that's not so to name one casino in this country that's controlled by organized crime."

Despite "twisting and misuse of statistics and Hollywood imagery and stereotypes, the faces show that gaming has had almost no impact on crime rates in established jurisdictions and in emerging jurisdictions, it's down," Margolis said.

He said Las Vegas fell from the No. 1 ranked crime rate in the country to No. 82 "at the same time the gaming industry was exploding." In fact, Las Vegas has a lower crime rate and is safer than other major American tourist locations.

Fahrenkopf said the study also disclosed that several theories and reports issued by gaming's critics are based on false information.

"The American Insurance Institute study was widely quoted as estimating that 40 percent of all white-collar crime is related to gambling," he said. "But guess what? There is no such organization and there was no such study."

Yet when the critics were informed of the facts, they continued to quote from the fictitious institute's fictitious study.

Venetian developer Adelson said Las Vegas has changed since he began visiting here years ago.

"Yesterday's dogma was that everything was a loss leader. The casino was the be-all and end-all, the raison d'etre for Las Vegas.

"But nothing lasts forever, and evolution is a course and direction prescribed by nature and compelled by competitors.

"When Steve Wynn created The Mirage as a physically themed property, he created a new genre for Las Vegas," Adelson said. "He took a giant step on the evolutionary road ... and what has happened since has proven that he was right.

"Every new property developed since then has adopted a physically themed posture, creating new reasons to visit, and visitor volume has increased accordingly.

"It's been a good start," Adelson said. "But these properties for the most part are still casino-centric, driven primarily by how many people they could force through their casinos, using the guiding principles of yesterday rather than of tomorrow."

It's time, he said, "to retire yesterday's old assumptions," which included small rooms with few amenities so customers would spend more time in casinos, and the belief convention business was counter-productive to gaming.

"For Las Vegas to become a comprehensive, multi-faceted destination resort, we need to develop a new set of principles to guide us."

They include providing visitors with large, comfortable rooms, upscale retail outlets rivaling those of Rodeo Drive and Fifth Avenue, elegant restaurants such as those in The Venetian, he said.

"Trade-show customers offer a recurring and predictable market. They pay premium for convenience and are willing to pay much higher room rates and have higher food and beverage and retail shopping budgets.

"The final assumption says that Las Vegas needs a go-along, get-along union policy. Like the other outdated assumptions, this policy is one that belongs to yesteryear."

Adelson said he can understand union animosity toward him personally.

"But it is unfathomable and inexcusable that they would sacrifice the whole city's future as a world-class resort ... solely to attempt to intimidate employers like me into signing contracts for workers I haven't even yet hired, to stop me from trying to give my future employees a chance to choose whether they want union representation."

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