Modest Nevada gaming growth foreseen

Tuesday, Dec. 3, 2002 | 11:17 a.m.

CARSON CITY -- Nevada's casino industry should continue to rebound in the next two and one-half years but there are some pitfalls ahead such as a possible war and the explosive growth of gaming in California.

That's the opinion of economic experts who feel growth in personal income, a rise in population and expansion of gaming properties on the Las Vegas Strip will help the gaming clubs bounce back from the 2001 terrorism slowdown.

Glenn C. Christenson, executive vice president and chief financial officer for Station Casinos Inc., says the Southern Nevada economy has not recovered from Sept. 11 but it has stabilized. And he predicts growth of 4 percent next year for the company that owns eight local's hotel-casinos in the Las Vegas area.

In a letter to the Economic Forum, Christenson said, "We are particularly excited about what we think are strong growth catalysts in the local market with the groundbreaking at Le Reve, the continued construction of the Venetian tower, expected development of a new tower at the Bellagio, the ongoing development of convention/retail space and a new high-rise tower at Mandalay.

"These developments should fuel job and population growth in Las Vegas, which should result in increased revenues," he said.

The economic forum, which forecasts tax collections for the state, is predicting that gaming taxes will increase 3.2 percent this fiscal year to $572.5 million and then grow by 3.7 percent next fiscal year and by 4 percent in the following fiscal year.

One of the unknowns, economists say, is the expansion of Indian gambling in California. Russell Guindon, deputy fiscal analyst for the Legislative Counsel Bureau, reported there are an estimated 43,138 slot machines in California. And new negotiations will be held next year on increasing that number. At present Nevada has 185,643 slot machines.

Guindon said the tribal clubs have been able to buy "high-end slots" and have been able to get financing to build bigger and better casinos although "They will never replicate the Strip or downtown Reno casinos."

Mark Nichols, associate professor of economics at the University of Nevada, Reno, is more cautious about the future of gambling.

"It is not clear whether the opening of a new property, Le Reve, by Steve Wynn (scheduled for 2005) will create sufficient excitement to significantly increase growth in gaming revenue."

He said Le Reve may be a double-edged sword because people may postpone trips to Las Vegas waiting for the casino resort to open.

And Indian gambling in California, Nichols said, is becoming more competitive. He expects the number of slot machines authorized for tribes to increase and "many tribes are expanding their temporary casinos to full scale resorts complete with hotels, spas, restaurants, horseback riding, golf, etc."

"California could easily become a market with $10 billion in annual revenues, possibly surpassing Nevada. Indian gaming at that level will clearly have a negative impact on growth rates in Nevada, even on the Las Vegas Strip," Nichols said.

Gaming revenue in Nevada in 2001 totaled $9.3 billion.

Keith Schwer, director economic research at UNLV, predicts a modest 2.9 percent increase in gaming revenues in 2003. He said out-of-state competition will increase; travel may be affected due to terrorism, war uncertainties and a slow national economy in the first half of next year.

James Diffley, group managing director of the economic forecasting firm of Global Insight, said "The biggest risk to Nevada is explosive growth of casinos" in California. They are getting "more and more sophisticated," he told the Economic Forum Monday.

Economists told the Economic Forum that war might temporarily disrupt travel to Nevada. But they said a war with Iraq would be short and the Nevada economy would quickly rebound.