LV gamers optimistic on convention possibilities

By Liz Benston (contact)

Friday, Jan. 10, 2003 | 11:20 a.m.

With the opening this week of the 1.8 million-square-foot Mandalay Bay Convention Center, Las Vegas will have more than 9 million square feet of convention space -- further burnishing its image as one of the nation's top destinations for business meetings.

Still, convention revenues account for less than 15 percent of the region's tourism business.

Las Vegas tourism chiefs say they want to increase that percentage to as much as 25 percent over the next couple of years -- a feat that could be possible through the addition of about 1 million square feet of meeting space and as many as 4,000 hotel rooms to accommodate business travelers.

"This is a partnership," said Manuel Cortez, president and chief executive officer of the Las Vegas Convention and Visitors Authority, an agency that promotes the city's resort industry and funnels business leads to convention centers and hotel meeting planners.

"We are able to attract new business because we have new space and hotel rooms," said Cortez, who addressed dozens of casino managers and other industry insiders at the American Gaming Summit in Las Vegas Thursday.

Convention-goers generated about $4.8 billion in non-gambling revenue for the local economy in 2001, up from $4.3 billion in 2000, the LVCVA reported. Last year's figures aren't yet available and the agency hasn't offered a forecast for this year.

Casinos have historically used conventions to fill hotel rooms during periods when tourism was slow. In recent years, however, operators have used group business meetings to increase overall demand for rooms, which drives up hotel rates, summit speakers said.

That's because Las Vegas has grown into a coveted destination for convention-goers, who typically spend more money and time in town than tourists on pleasure trips, the LVCVA said. Conventions in Las Vegas typically have higher attendance rates than the same shows in other cities, it has found.

New convention space will attract more visitors rather than cannibalize business from existing hotels, Cortez said.

The city continues to attract new shows from other cities, such as the Promotional Products Association International show, which will come to Mandalay Bay's convention center next week after 26 years in Dallas.

Also, more than 70 percent of meeting attendees return to Las Vegas each year -- a sign that people who travel for business come back for pleasure, he said.

While the LVCVA does examine a group's "gaming profile" -- the propensity of members to gamble -- it also passes on leads for groups that may not fit that category.

The city continues to attract groups that have refused Las Vegas before, including conservative religious and medical associations that dislike gambling, said Patty Shock, chair of the Tourism and Convention Department of the William F. Harrah College of Hotel Administration at UNLV.

"Our research indicates that people now come here who wouldn't have before because there are so many other things to do," Cortez added. "But there are still a lot of people out there who haven't been to Las Vegas yet."

The outlook on the Las Vegas casino industry offered up by summit panelists was upbeat Thursday despite several storm clouds on the horizon.

Wednesday, shares of Las Vegas casino companies plummeted 10 percent or more over lower earnings warnings by Mandalay Resort Group and MGM MIRAGE.

The companies cited lower-than-usual results over the holidays and pointed to more positive developments in the coming year. Still, some analysts believe that the economic troubles that have hit other business sectors have finally caught up with Las Vegas' powerhouse resort industry, which largely depends on consumers' disposable income.

Frank Fahrenkopf, president and chief executive of the American Gaming Association, the industry's chief lobbying arm, called the drop an "aberration" and said gambling's mecca is still holding strong amid a tough economy.

"The proven markets are still doing very well," he said.

In other states, critics are launching renewed attacks spawned by the potential expansion of legalized gambling after last year's elections -- especially the prospect of introducing slots at racetracks, casino executives and other summit panelists said.

Politicians, media outlets and other groups are perpetuating negative, and, in many cases, inaccurate stereotypes about casinos, they said.

A backlash against the spread of Indian casinos -- which are increasingly being pushed by marginal tribes for construction on non-tribal land -- also is hurting the image of the commercial casino business because many people don't understand the differences between sovereign, tribal casinos and their more heavily regulated counterparts in Las Vegas, Atlantic City and other major markets, panelists said.

"It only takes one scandal to taint the entire industry," said Nancy Todd Tyner, a Las Vegas-based political consultant.

"The good news is that (growth) will slow down. The bad news is that we won't see more regulations ... because of the sovereignty issue."

Other developments troubling Thursday's panelists included recently introduced legislation to ban Internet gambling and the prospect of a bill that would ban college sports betting.

Both Nevada senators, Democrat Harry Reid and Republican John Ensign, support federal bans on Internet gambling despite dissent among their casino constituents.

Still, "guerilla" politicians could use an Internet gambling ban to tack on other anti-gambling legislation that could hurt Nevada casinos, said James Ryan Jr., Reid's chief counsel.

"It could open up a Pandora's box," Ryan said.

Panelists scoffed at Arizona Sen. John McCain's efforts to introduce a bill to ban college sports betting, though they said such a bill is likely to be fielded in Congress this year. A ban won't stop illegal bets, while a legalized sports gambling system actually deters game-fixing and other illegal acts, they argued.

"It's going to be a battle of facts versus soundbites," MGM MIRAGE spokesman Alan Feldman said. "It's got such great soundbites. That it's all (false) doesn't seem to resonate."

Major Las Vegas casino companies, including MGM MIRAGE and Park Place Entertainment Corp., have hosted tours of Nevada sports books for members of Congress to dispel beliefs that casinos are run by shady characters, panelists said.

"We need a more aggressive media campaign about the benefits of gaming in general," Ryan said.

For all of its image problems, the casino industry is leagues ahead of other businesses in promoting financial responsibility, another panel of industry leaders concluded Thursday.

The passage of a federal, corporate responsibility bill in July has prompted all publicly traded companies nationwide to comply with new rules aimed at promoting greater oversight of company finances.

Nevada casino companies, already among the most highly regulated businesses in the world, are required to submit monthly financial data to the state and are subjected to regular audits by state regulators. Certain directors may also be licensed, which could subject them to background checks required of company officers.

Finding board members willing to submit to that kind of oversight is a challenge, panelists said.

Casino boards often seek people with financial, management and even legal expertise in the business. They may even want candidates with experience regulating casinos, leaving an increasingly small pool of applicants.

The oversight bill, known as the "Sarbanes-Oxley Act," contains so many uncertainties with regard to liability and oversight that it will make the search for independent board members "more difficult, if not impossible," said Mark Lerner, vice president and senior general counsel for Alliance Gaming Corp.

Recruiting board members will probably get easier over time as companies receive greater clarification of the rules, however, he said.

Park Place is one of the hundreds of companies that will be beginning its mandated review of independent board members to comply with the act.

The reviews will likely prompt replacements across corporate America, which will increase overall demand for independent directors, said Kim Sinatra, executive vice president and chief legal officer for Park Place.

"There's a two year phase-in period," she said. "But there's going to be a limited pool, so it's going to be hard."

Separately, Harrah's Entertainment Inc. Chairman Phil Satre received a Lifetime Achievement Award at the summit. He was honored for creating long-term shareholder value.