Lack of new megaresorts could slow Vegas growth

Scott Sonner

Thursday, Dec. 12, 2002 | 9:26 a.m.

RENO -- The Las Vegas Strip can expect only slow to moderate growth in the near future due primarily to the lack of new megaresorts, which fueled most of its success the past decade, an economist said Wednesday.

"Growth in visitation has been dependent on the amount of new tourism interests, including new casinos," said Bill Eadington, an economics professor who directs the Institute for the Study of Gaming at the University of Nevada, Reno.

But he said "there's not a significant casino project planned in Las Vegas the next three years -- between now and Le Reve," Steve Wynn's $2.4 billion project scheduled to open in April 2005.

"It's been a rather interesting hiatus in the largest gambling place in the world," Eadington told Nevada's 19th annual Conference on Tourism.

Eadington acknowledged the significance of Mandalay Bay building a new convention center and expansions such as those at The Venetian and Bellagio.

But those projects won't "substantially enhance the overall demand to visit Las Vegas," he said.

Casino assets on the Strip grew from $5 billion in 1990 to more than $20 billion in 2000 thanks to the opening of Mandalay Bay, Venetian, Bellagio and Paris, he said.

"Then the laws of economics kind of kicked in," he said, with a slowdown in the fall of 2000 followed by significant losses in the aftermath of the terrorist attacks Sept. 11, 2001.

"We've seen mixed signals about the recovery of the Las Vegas Strip," Eadington said.

"Wall Street analysts indicated it's actually been a bit of a surprise that Las Vegas has been as resilient as it has been the past nine months. But there's still some softness in the numbers for air travel and room rates ... and mixed signals on conventions.

Frank Fahrenkopf, the president of the American Gaming Commission, said he's been impressed with the way Las Vegas casinos have weathered the storm.

"Vegas got creamed for a long, long time," he said.

"Las Vegas probably felt it more than anywhere else in the country because it's a fly-in market -- about 50 percent of the visitors fly there.

"I think we're back pretty well, though there is still some softness midweek in Las Vegas," he said.

Eadington said casinos in downtown Las Vegas continue to struggle. Similar to Reno, it "lacks the ability physically to offer some of the same things big casinos on the Strip do."

Downtown Vegas and Reno also share perception problems about safety, cleanliness and lack of parking. Eadington said some of those perceptions are not accurate, but they exist just the same.

Over the past decade, downtown Vegas "has not tanked as badly as one might expect," Eadington added. "Laughlin in many respects is holding its own."

Laughlin and Reno share a problem in the form of a lack of capital investment to provide the "newness and freshness" casino customers are seeking, he said. Net income in Laughlin casinos has fallen from a peak of $110 million in 1994 to $20 million last year, he said.

The Reno area has made substantial public investments in tourism infrastructure in recent years, but private investment has not followed.

"Our customers say the product in Reno has not changed and we've been there before so why go there?"

At South Lake Tahoe, Eadington said he anticipates "a much broader recreation-based tourism" -- a "ski and sun market.

"Gaming may become less of a priority, which is not necessarily bad for tourism."