Strength through diversity

Expanding the Northern Nevada economic base and creating more non-gaming attractions in the Reno/Lake Tahoe area may benefit some gaming industry companies.

Conversely, to the degree to which a stronger economy is forged, it will likely cause some marginal gaming entities to fold their tents.

Ken Adams, a Reno-based gaming analyst, and Dr. Thomas Cargill, a University of Nevada, Reno economics professor, both see the area's future economic strength coming from non-gaming businesses.

"Station Casinos is bringing in Bass Pro Shops and one of their Outdoor World superstores," he says. "They know how to pull revenue from areas other than slot machines and gaming tables. A lot of people from outside our area will want to check it out. It will be a major draw for that location.

"When Cabela's opens its retail outlet in Verdi, they will bring in four to six million visitors each year. Gaming is only bringing in about 3.5 million. And out by the Sparks Marina at the new Legends shopping complex, you're going to have Scheels opening up there.

"If you triangulate from Verdi to Sparks to South Reno, you will have the three largest outdoor suppliers in the country," he says. "These recreation and adventure-oriented businesses will bring in more tourists than gaming could ever hope to draw. The thing is this also brings great opportunity to savvy gaming operators."

Cargill sees an opportunity for a few quality destination-type resorts that could be matched up with other non-gaming businesses.

"Gaming would be just one of the revenue sources," he says. "Cabela's is a prime example."

Cabela's will be sited on 38 acres of land adjacent to the Boomtown Hotel and Casino purchased from Boomtown's parent company, Pinnacle Entertainment.

Adams says the biggest problem over the years for Reno area casinos is they have relied far too long on revenues from slot machines.

"If you look at the Vegas operators, their revenues come from several sources," he says. "They have enormous revenues from their hotels and they make more money off their food and beverages than we do in Reno. They have other retail rents from which they derive revenues.

"Steve Wynn even has a Ferrari dealership inside his new hotel. There are also a lot of new nightclubs in Vegas where there is no gaming whatsoever, and they are generating a lot of revenues there.

"In Reno, slot revenues pay for everything. If you don't believe that, just take a look at the Nevada Gaming Abstract. Clark County gaming operators derived less than half of all revenues from gaming itself. They earned more from room, food and beverages than did Washoe County, and they generated more revenue from that category called 'other' than we did."

Smart casino operators, Adams says, will become more like retailers with a wide mix of product that can change over time as the buyer's tastes change.

"The answer for casino operators, especially downtown, is to find other revenue streams," he says. "If they don't, the marginal ones won't survive."