Analyst: Coming ‘second economy’ will boost Vegas

Jennifer Robison

Friday, Jan. 25, 2002 | 11:11 a.m.

Las Vegas' fortunes were built on the resort industry.

But Richard Lee, a respected real estate analyst with First American Title Co., said the city's future success must come from other sources as well -- from a "second economy" whose full potential has yet to be tapped.

"It's not about gaming anymore," Lee said in a speech Wednesday at Preview 2002, an economic forecasting seminar. "This is more than just a typical gambling town. We're becoming the gourmet capital of the world, the retail capital of the world, the entertainment capital of the world."

Lee said 80 percent of Americans now live within a two-hour drive of a casino, so it's imperative that Las Vegas continue to expand its economy beyond gaming.

Data from the Nevada Gaming Control Board support Lee's contention that Southern Nevada is drawing tourists who are as interested in fine dining and shopping as they are in gambling.

For the fiscal year ending June 30, 2000, the latest year for which figures are available, gaming revenues in Clark County were just under 52 percent of hotel-casino revenues.

Total revenues for the hotel-casino industry in the county that year were $14.5 billion; about $7.5 billion of that came from gaming. Visitors' food and beverage expenditures accounted for roughly $2.5 billion in revenues, while $2.8 billion in revenues came from hotel rooms. Other revenue sources -- including retail -- accounted for $1.7 billion of hotel-casinos' total take.

But Lee's visions for the second economy extend well beyond diversification in the hotel-casino business.

Though many local developers decry the Bureau of Land Management as a land-hogging entity that's creating an artificial land shortage in the Valley, Lee called the BLM and other federal entities major contributors to the second economy.

"There are more than five state and federal parks surrounding the Valley. Those parks attract 7.9 million out-of-state tourists each year. When we talk about the second economy -- the economy outside gaming -- that's what we mean," he said. "There are 7.9 million people coming here (to visit resorts and casinos) and staying two days longer to tour area parks. They help keep hotel rooms full."

Lee also cited the film industry; he said it brought $154 million in filming projects to the state last year.

The dot-com boom and bust largely bypassed Southern Nevada, but Lee said state-of-the-art technology will be key to many facets of the Valley's economy in coming years.

And though a perception has long existed that Las Vegans have to leave Southern Nevada to find cutting-edge health care, Lee said state-of-the-art health care is already a vital part of the second economy.

"Steinberg Diagnostics has (positron emission tomography) scanners that can pinpoint cancer, measure brain function and see how well your heart is working," he said. "There are only a few of these scanners in the country -- and we have them right here in Las Vegas."

With five hospitals being planned locally, Lee said the Valley could capture an increasing share of talented doctors.

"We're one of the few cities in America that's building new hospitals," he said. "Most cities are overbedded. That gives us a chance to put state-of-the-art facilities here. In the future, Las Vegas is going to be a state-of-the-art city that's going to attract a lot of new-generation doctors."

The Nevada Test Site and its Yucca Mountain project are more controversial, but the second economy is already apparent there, Lee said.

"The test site is probably the world's largest industrial park," he said. "There are many, many things going on out at the test site -- Yucca Mountain is one of them. But we're also seeing alternative energy sources being explored at the test site, and companies are also (test-) launching low-level communications satellites with recoverable rockets there.

"Mark my words. Someday, people will come to Las Vegas and stay here three days, and also take an extra day to spend in space while they're here."

Lee said the significance of the test site extends beyond the research and development happening there.

"People who work out there have advanced degrees," he said. "You talk about the second economy, well, (workers at the test site) make a salary that's twice the average of people employed in Las Vegas.

"If Yucca Mountain happens -- and I'm not saying it will or it should -- it would be a $60 billion project. It would be the largest public works project in the world."

On gaming, he said the Ritz-Carlton at Lake Las Vegas is one project that symbolizes "the more upscale feeling we're starting to get in all our Las Vegas developments," Lee said.

Also ripe for development is what Lee called the South Strip -- an area along Las Vegas Boulevard that spans from McCarran International Airport to Henderson. In addition, Turnberry Associates is likely to build a London-themed hotel onthe Strip, and as soon as a site is selected, a 400-foot Ferris Wheel will reside on the Strip as well, he said.

"We may not be getting ready to build a whole lot of hotel rooms, but we're going to build some unique things that are going to make it so compelling for people to come here.