Las Vegas Sun

December 20, 2014

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Gaming executives foresee a tough year ahead

RENO — Gaming industry leaders are confident visitors will return in greater numbers in 2011, benefitting hotels, restaurants and resort amenities, but they’re less confident about whether their casinos will see a similar increase.

“I feel good about the pricing environment and rates in ’11,” said Jonathan Halkyard, senior vice president and chief financial officer of Caesars Entertainment. “But it won’t even be close to what we had in 2007.”

Halkyard and three other industry leaders offered their opinions Wednesday on what’s ahead for the industry next year in a panel discussion on the last day of the two-day Governor’s Conference on Tourism.

“We endured the collapse of the meetings industry, and there are more rooms to fill,” Halkyard said. “Just about all that (the new room inventory) has been absorbed, but there’s little new supply coming on.”

The gaming side, however, isn’t as bright.

“It’s a little more difficult to predict what will happen with gaming, but it’s not looking great right now,” Halkyard said.

The reason is that most consumers have seen their net worth or those of close friends and family members plummet, he said. The downturn in gaming revenue correlates more with consumer net worth and what has happened to the housing market than today’s unemployment rate, he said.

“We’re going into ’11 cautiously, but as far as gaming is concerned, I think we’re in for more tough sledding,” he said.

Panelist Ryan Sheltra, general manager of the Bonanza Casino in Reno, said that for Northern Nevada, gaming is more closely correlated with unemployment.

“It’s been an absolute bloodbath up here,” Sheltra said. “2011 is going to be all about survival.”

Sheltra said that when state lawmakers convene in February, they shouldn’t look to the gaming industry for a tax increase.

“The state coffers are empty and the Legislature is going to go somewhere to pay for (government programs),” he said. “But gaming isn’t the place to go for it. We can’t handle it.”

Sheltra said the cost of rising health care benefits mandated by President Obama’s health care plan would triple his expenses.

“Maybe Caesars can afford that,” Sheltra said, looking at Halkyard. “But smaller operators can’t handle it.”

Sheltra said his company is seeing consumers make fewer trips and spending less. That, he said, ties directly to unemployment, specifically the downturn in the construction industry.

None of the panelists believes their companies will do much hiring in 2011.

Panelist John Farahi, the co-chairman and CEO of Monarch Casino Resort, which operates Reno’s Atlantis Casino Resort, said tribal casinos in Northern California are continuing to take their toll on Reno properties.

Tribal properties, he said, are developing more amenities that lure San Francisco Bay area residents away from Reno. He urged conference attendees to support California Sen. Dianne Feinstein’s bill that would make it more difficult for Indian tribes to develop off-reservation urban casinos as has been proposed in San Francisco.

Tribes have an advantage against commercial gaming enterprises because they don’t have to pay taxes, he said.

Asked about their stances on proposals for Internet gambling, panelists said they worried that online casinos could represent more tough competition if they’re legalized.

Halkyard clarified that he thinks federal lawmakers may look favorably at online poker rooms but not full-blown Internet gambling.

But Farahi warned that once online poker is approved, it could be difficult to prevent other online gambling from being approved, especially if it generates tax revenue.

On other topics, panelists:

• Agreed that technology is “the great equalizer” between small and large casino companies, and all of them hope to use social media channels to build market share.

• Opposed a proposal to approve a state lottery for Nevada, saying it would amount to the state government competing with the state’s largest industry at the worst possible time.

• Agreed that efforts to market to China and Latin America would be productive in the long haul for local casino companies. Panelist Bill Hughes, director of marketing for the Peppermill Resort in Reno, which hosted the conference, said his company is developing solid relationships with San Francisco’s Chinatown community.

• Agreed that gaming companies need to work together on common problems, though they have a reputation for fighting with each other. Sheltra cited the opposing viewpoints on the Las Vegas Strip for a publicly funded arena backed by Caesars Entertainment and opposed by MGM Resorts International.

In another session at the conference, Patricia Rojas, vice president of government relations for the U.S. Travel Association, gave an update on the Travel Promotion Act, which was signed into law in March and is designed to generate a fund from visa application fees matched by the tourism industry to market the United States abroad.

Rojas said the governing Corporation for Travel Promotion has met twice and is preparing to hire an executive director to begin advertising by 2012.

Rojas said Stephen Cloobeck, the chairman and CEO of Las Vegas-based Diamond Resorts International, has been named chairman of the new travel promotion corporation.

The corporation is likely to target Brazil, India and China as prospective countries to market to because they have the greatest potential for providing new visitors to the United States.

Rojas said operating inefficiencies, poor customer service and a lack of communication skills have hampered efforts to improve the visa waiver process.

She said part of the marketing effort would include improving that process. Would-be travelers are discouraged from coming to the United States because securing a visa is so onerous, she said.

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  1. I wonder what the commentator Mr. Halkyard meant when he said that all of the new room inventory had been absorbed. Is the hotel occupancy rate back to pre-recession levels? I thought all of the hotels were having trouble filling their rooms given the increased competition.
    One minor factor that may negatively impact airport visitor numbers is the controversial new security full-body screens and intrusive pat-downs. The extent of the impact won't be known until next month, because so many flights this month were already booked prior to the new procedures. My wife is adamant that we won't fly until those violations of our person are discontinued.