Our concentration of resorts is cited as economic model

By Joe Schoenmann (contact), Jack Sheehan (contact)

Friday, May 2, 2008 | 2 a.m.

Las Vegas’ success in becoming a nexus of entertainment and gambling is a model that American cities would do well to emulate in other businesses, a new Brookings Institution report concludes.

The local “cluster” of entertainment and gambling, writers of the Brookings study say, typifies the regional connections among similar businesses essential for the United States to remain competitive internationally.

That conclusion is not a new one for A. Somer Hollingsworth, president and chief executive of the Nevada Development Authority. Las Vegas is so attuned to the idea of clusters, Hollingsworth said, that his decadelong mission to diversify the local economy is taking root, with the region forming clusters in at least two other industries, biotechnical research and alternative energy.

“I don’t know that we’ll ever have a cluster as solid and big as gaming,” Hollingsworth said. “If they stop growing, it’d be hard to catch up. But I think we’re seeing finally more of our local clusters developing. And over the next five to 10 years, these things will really start to happen.”

If the Brookings Institution, a Washington, D.C.-based think tank, gets its way, “clusters” will become a word as common as “taxes” to those in state capitols and federal governmental arenas. (Sun Editor Brian Greenspun is a Brookings trustee.)

Think of clusters as exactly what the word implies: concentrations of businesses. This doesn’t include small local coffee shops or hair salons, but major businesses that compete globally.

Brookings recently published two reports addressing how American businesses can compete more successfully in the world economy.

In “Clusters and Competitiveness: A New Federal Role for Stimulating Regional Economies,” Brookings authors rank Las Vegas seventh among the nation’s 100 largest metropolitan areas in terms of the presence of “strong traded cluster” — high concentrations of industries that compete worldwide.

“The concentration of casinos and entertainment facilities and their different manifestations defines Las Vegas,” said co-author Andrew Reamer, a fellow in Brookings’ Metropolitan Policy Program.

“Just the fact that all these casinos are right by each other, it allows for so many things. The customers don’t need to travel far to sample different options, and the geographic concentration of employers makes for a healthy labor market.”

Vegas as the Silicon Valley of entertainment or gambling? Reamer chuckles at the phrase but agrees.

“I imagine in Las Vegas there’s a whole subindustry of product developers, consultants and others who become a tool of knowledge transfer, working in several different venues, passing information from one to the other,” he said.

That concentration produces a more competitive Las Vegas — better entertainment, more visitor dollars, an ease of movement between jobs that allows workers to transfer from one place to another without needing to move their homes, and a simpler path to promotions and the higher salaries they bring.

Employees in cluster businesses also tend to earn more money than their noncluster counterparts; a maid at a Strip resort often is paid more than one at a nongaming hotel.

From 2001 to 2006, personal income in Las Vegas rose 58 percent, according to the U.S. Commerce Department, more than in Sacramento, (33 percent in the same period), Phoenix (42 percent) or Denver (23 percent).

The Brookings report calls for federal steps to support the growth and development of industry clusters across the country. These include creating an information center to map the location of clusters, and conducting research. It also asks for the establishment of a grants program “to support regional and state cluster initiative programs.”

Similar recommendations were made in another new Brookings report, “Boosting Productivity, Innovation, and Growth Through a National Innovation Foundation.” Among other things, it calls for the federal government to establish a National Innovation Foundation to provide grants for cluster development.

Some regions are way ahead of the game. California’s San Diego and Riverside counties, for example, established a cooperative entity that in 2006 issued a report on 16 clusters, along with ideas on how to foster and retain them.

Although Las Vegas doesn’t have such a program yet, it does have Hollingsworth, whose aggressive efforts to draw business to the region are paying off, he said, with two very nongaming industries — biotechnology and alternative energy — becoming significant players in the local economy.

“The Nevada Cancer Institute is up to more than 350 people, with 50 to 60 of the smartest men and women in the world, and working as a huge magnet for us right now,” Hollingsworth said. The 142,000-square-foot facility has another 101,000 square feet under construction and plans for an additional 100,000 square feet. By 2012, the NCI expects its faculty to grow by 80.

“Then look at the Lou Ruvo Brain Institute,” he said. “We are absolutely on the cutting edge and becoming known.”

In the alternative energy world, he said, Clark County is the nation’s second-largest producer of solar power. That growth is continuing, with a solar panels manufacturer building a 140,000-square-foot plant and another company that wants to produce 300 megawatts of solar power — likely to be sold to California — looking to locate here.

“We’ve just caught everybody off guard” with alternative energy, he said.

With about 250,000 miles of fiber optics underground here, he said, technology companies, including one from Canada relocating here, also are taking more interest in Las Vegas.

Hollingsworth admits convincing potential employers in business clusters the area wants to develop that Las Vegas is more than gambling isn’t easy.

A native, he tells this illustrative story: After taking his job at the Development Authority, he received a call from someone “from the outside” who asked what hotel he lived in and what hotel the caller should live in when he moved here.

“I couldn’t believe it,” he said. “I had no idea how the other side of the world looked at us. That has changed. But it’s not an easy sell.”