Downtown LV casinos vulnerable to Indian gaming

Robert Macy

Friday, Feb. 11, 2000 | 11:06 a.m.

The evolution of Indian casino gambling in California could cost the Reno/Sparks area $232 million in revenue growth through 2004, a new Wall Street report says.

Downtown Las Vegas would also be heavily impacted, according to a report released Thursday by Bear, Stearns & Co.

The report estimates a 23.4 percent decline in revenue growth -- $155.3 million -- for downtown Las Vegas by 2004, with the Reno/Sparks area experiencing a 21.6 percent decline.

The Las Vegas Strip would fare the best, experiencing a .6 percent decline or $33.9 million, according to the report.

"Casino gaming in California could prove to be a real challenge for many casinos in Nevada," predicted Jason Ader, casino analyst for Bear Stearns.

California voters are expected to approve the creation of Native American casinos when they go to the polls in March.

Ader said California is a major feeder market for Nevada casinos, providing 35 percent of the state's gambling revenues.

"If people in California get the option to gamble in their own back yard, it is less likely they will be willing to cross state lines to go to a casino," Ader said.

The report said Laughlin could experience a 15.8 percent decline, with a 15.4 percent dip among Lake Tahoe properties. The Las Vegas market overall is projected to drop 3.6 percent, with North Las Vegas declining 10.4 percent and the Boulder Strip 5.5 percent.

The Las Vegas Strip would not be hurt as badly because it offers "a totally different experience," Ader said.

"People come here to be entertained, not to get a quick fix at the slots or the tables," said Ader, who was in Las Vegas for the American Gaming Lodging & Leisure Summit.

Ader said the year 2004 was used in the survey because it was "a reasonable amount of time to get the California casinos built, up and running."

He predicted more than 100 casinos will be developed among 57 tribes in California, siphoning off a significant number of the estimated 9.3 million people who gamble in the state.

Ader said most of the California casinos would likely fall in the $30 million to $100 million range, similar in size and style to casinos catering to the local market in Las Vegas.

"Don't look for a Bellagio," he said, referring to the $1.6 billion resort opened on the Strip by Mirage Resorts Inc. in October 1998.

The analyst said it would be "interesting to see what strategies these casinos develop to try to hang onto their customer base."

He predicted some casinos may offer special incentives to gamblers who have California drivers licenses.

Ader said more casino companies will seek to tie in with California tribes, offering them the financing and expertise they are currently lacking. But he suggested tough sledding for some Nevada companies who contributed millions of dollars in a failed bid to defeat Proposition 5, the Indian casino ballot initiative that was approved overwhelmingly by California voters.

"If you did support Prop 5, you're not in their good graces," Ader said.

In a panel discussion earlier Thursday, leading casino executives offered mixed views on the impact of Indian casino gambling in California.

"There are still a lot of people in California who don't come here," said Scott LaPorta, executive vice president and chief financial officer of Park Place Entertainment Corp.

Colin Reed, chief financial officer of Harrah's Entertainment Inc., disagreed. He said surveys show 45 to 47 percent of the households in California currently participate in some type of casino gambling and "you won't see that many more customers because the penetration is so high."

Robert Baldwin, president and chief executive officer of Bellagio, said the California casinos will be a threat to Laughlin and Reno but less so for Las Vegas. As for the overall impact on the state, Baldwin said "That's one of the realities of the business."