GAMBLINGCOMPLIANCE: ‘Right-Sized Reno’ Finds Its Place In The New Nevada

Once a gambler’s paradise, Reno fell on hard times years ago as northern California’s Indian casinos kept more people gambling closer to home, and then the Great Recession forced the region to get serious about reinventing itself.

Over the last decade, northern Nevada has worked to diversify its economy, moving away from its dependence on gambling to include industries such as technology, manufacturing and distribution.

But economic development officials, analysts and casino executives believe the gaming industry still plays an important role in the region’s economy.

“The gaming industry here has right-sized itself,” Gary Carano, chairman and CEO of Eldorado Resorts in Reno, told GamblingCompliance.

“It’s healthy,” Carano said. “Gaming was the dominant part of our economy for years. It’s not that way now and it will never go back to that era.”

In the last couple of years, the construction of Tesla Motors’ $5bn gigafactory and other technology projects have been credited with having a positive effect on the economy, especially the housing and job markets.

“The economy is doing well,” said Mark Nichols, a professor of economics at the University of Nevada, Reno.

“Unemployment is lower and businesses are starting to have a difficult time filling job openings. Generally, there’s an upbeat attitude. Maybe, we are getting a little overheated in our housing market.”

The Biggest Little City In The World

Today, Reno supports 13 commercial casinos. The downtown Reno casino corridor along Virginia Street includes Atlantis Casino, Eldorado Casino, Silver Legacy Casino, The Nugget and Monarch Casino.

Carano said Eldorado expects to benefit from its recent investment in downtown Reno.

The gaming company began 2016 owning seven casinos, after it spent $72.5m to acquire MGM Resorts International’s 50 percent share in the Silver Legacy Resort & Casino and all of the assets of Circus Circus Reno.

“These acquisitions have given us the opportunity to market to a new customer coming to Reno,” Carano said. “And compete more in the locals market.”

The company’s three Reno properties comprise almost 32 percent of the hotel rooms in the market. Carano said his customer base is 20 percent locals and 80 percent from northern California.

At the Atlantis, which is owned by Monarch Casino and Resort, it’s a similar story with a slightly different demographic.

David Farahi, Monarch’s chief operating officer, told GamblingCompliance that 55 percent of his business is locals, while 45 percent comes from out-of-market customers.

Even with a larger local customer base, Farahi said his resort is seeing more gaming revenue, which he attributed to locals having “more money in their pockets” to spend.

Farahi said the property attracts a middle class and upper middle class clientele. He said the Atlantis casino was able to attract higher end customers because of ongoing reinvesting in the property.

Carano said the Eldorado is connected with the Silver Legacy and Circus Circus via above-ground covered walkways, allowing the company to operate the properties as a single entity.

He said Eldorado would operate 4,100 rooms, more than 20 restaurants, lounges and nightclubs, along with 300 table games in downtown Reno.

As of December 31, 2015, there were 604 places in Washoe County, which includes Reno, to gamble. But the city has lost a few casinos in recent years.

Reno has also seen non-gaming hotels find success as neighbors to casinos.

For example, Fitzgeralds Casino-Hotel, which was transformed two years ago into the non-gaming Whitney Peak Hotel, closed in 2008 after 30 years on the Reno gaming map.

Meanwhile, renovations also have also begun to convert the former Siena Hotel Casino in Reno to non-gaming Renaissance Hotel. The construction is expected to be completed later this year.

Carano said the midweek stay at a non-gaming hotel has been very popular, especially with Tesla and other tech executives. He said the Whitney Peak has “been doing very well.”

Carano stressed that Eldorado Resorts also offers a non-gaming experience.

“We continue to tweak our offerings,” Carano said. “The non-gaming amenities are key in our industry. Everybody has slots, blackjack, but the key is to reinvest in your non-gaming amenities.”

Reno’s Efforts To Attract Millennials

But Carano admitted that the casino floor is also ripe for innovation to attract a new clientele — which is code for millennials.

He said the average Eldorado visitor is “still the 45-plus female with her husband, who plays slots and stays for two to three nights from the (San Francisco) Bay Area.”

Eldorado has seen an increase in the 25 to 35 year old customer, Carano said.

“They are not coming to gamble, but to experience the nightlife,” Carano said. “But guess what, our gaming revenues are up. So we continue to evaluate our offerings.”

Nevada has already changed its gaming regulations to allow for the introduction of variable payout slots in its casinos, paving the way for skill-based slot machines to live side-by-side with Wheel of Fortune or Blazing Sevens on the casino floor.

“Skill-based gaming is going to take some time,” Carano said. “Slot manufacturers at G2E (Global Gaming Expo) gave us a little taste of skill-based slots. That’s got a ways to go.”

Millennials, consisting of those born between 1980 and the mid-2000s, constitute the nation’s largest generation at one-third of the U.S. population. For most millennials, the primary things casinos offer — gambling in a large facility — is just unattractive.

Farahi said his property “certainly welcomes millennials, but it’s not our core business.”

“We are paying close attention to both things,” Farahi said when it comes to skilled-based gaming and e-sports.

He said skill-based gaming is not only for millennials, but there is a portion of Generation X that cares about it.

As for e-sports, Farahi said there could be something there for the casino to consider.

E-sports, or professional competitive video gaming, is set to become a $1.9bn industry by 2018, according to predictions by analysts SuperData, and some in Reno see an opportunity.

Carano said there is definitely an opportunity for northern Nevada casinos when it comes to hosting e-sports tournaments. He cited the success of the recent North American LCS for League of Legends tournament at the Mandalay Bay Events Center in Las Vegas.

The e-sports tournament attracted 3,800 fans on its first day and 6,800 on the second day.

“That’s what’s exciting,” Carano said. “We have the venue to have these e-tournaments. I’d be foolish not to explore the opportunity to host one of these events.”

It’s The Economy Stupid

Nichols said the gaming industry has found its place within the northern Nevada economy, but casinos are not experiencing a resurgence. He said gaming companies are “confident that things have bottomed out.”

“The gaming industry here has shrunk. It’s not going to come back to being the dominant industry. Revenue growth should be consistent with population growth,” said Mark Nichols, a professor of economics at the University of Nevada, Reno

Washoe County, which includes Reno, reported a 3.2 percent increase in gaming revenues last year to $776.3m, according to the Nevada Gaming Control Board.

Those numbers represent a 26 percent decline in revenues since 2007. Gaming statistics compiled by GamblingCompliance show revenues in Washoe County fell from $1.04bn in 2007 to $776.3m in 2015.

“Tourists are still part of this economy,” Nichols said. “But with businesses here like Tesla and Switch we are attracting a wider clientele.”

Nichols added that wider clientele includes millennials who are “skiing and rock climbing and staying at non-gaming hotels downtown.”

Predicting Reno’s Future

Despite Reno’s resurgence, few are expecting to see any significant expansion of the city’s casino sector.

Farahi noted that there are 15,000 hotel rooms in Reno, a number that should keep any new casino resorts from being built for some time in northern Nevada.

“That is a lot,” he said. “We still have a lot of over capacity. Last year, there was only $100m in EBITDA reported by all resorts combined, according to the gaming commission. We would need a serious recovery before it made sense for anyone to build a new resort.”

Currently, the building of any new resorts has been replaced with millions of dollars being reinvested in older casinos, as companies upgrade everything from rooms to restaurants to race and sports books.

“We are really excited about the economy,” Farahi said. “Five years ago, especially ten years ago, gaming and construction dominated the region’s economy. Now we have attracted manufacturing, distribution and high-tech jobs. These new jobs give us a more stable, viable economy. This is why we are very excited.”

“Who knows where this economy is going,” said Carano of Eldorado Resorts. “If this economy does what everyone thinks it will do … then I would think we would all be pretty happy.”

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