The 2001 American Gaming Summit Looks at Industry's Future

An analysis of prospects for the gaming industry under the Bush Administration was the highlight of a discussion of federal issues at the American Gaming Summit held at the Bellagio Resort-Casino. Frank Fahrenkopf, Jr., panel moderator-president of the American Gaming Association, offered a perspective based on his 20 years of experience in Washington. Other topics: the effect of consolidation on the gaming industry, the future of small gaming companies, standardizing the regulatory process across North America, daily challenges faced by Las Vegas Strip operators; internet gaming; diversity in the gaming industry.

The Summit honoured MGM MIRAGE Executive Chairman J Terrence Lanni with a Lifetime Achievement Award. Keynote speakers included Senator John Ensign (R-Nevada), Henry Gluck, Co-Chairman Transcontinental Properties Inc., and Roy Ramm, Director, Compliance, London Clubs International. In addition there were 22 corporate presentations/seminars with discussions by 20 of the largest gaming corporations.

Thomas Gallagher, CEO of Park Place Entertainment, the world's largest gaming company, told members of the industry that any efforts to lobby federal and state governments must be above reproach. "The gaming industry has a number of key issues pending before Congress and several state legislatures." Highlighting problem gambling/under-age gambling, Gallagher said the way the industry approaches the political process will be closely monitored. "We need to ensure that our involvement in the political process is ethical at all levels, in every jurisdiction, with every company." He explained that gaming's credibility in the political process is its most important asset: "an asset that is too important to risk by conduct that places the industry's tactics and ethics in question." "When a number of jurisdictions considered casino gaming in the '80-s and early '90s, there were a lot of things that happened in trying to add jurisdictions and secure casino licenses. Gaming is the most closely scrutinized business in America." Referring to the new administration under George Bush Jr., Gallagher said: "It will be interesting to see how the tension plays out between the Republicans' traditional reluctance to have the federal government interfere with state matters and the faction of the party which believes gaming is morally offensive." He said that tax issues will be important at the state level. "The industry should be willing to work with other business to pay taxes when a legitimate need exists. Fairness is a two-way street. We can't be both the engine that drives growth and the sole funding source for the product of that growth." No new resorts are scheduled to open on the Las Vegas Strip over the next few years. As economic problems loom with fears of a recession, Jim Murrin, president-chief financial officer, MGM MIRAGE, quashed scepticism and assured everyone that Las Vegas is well protected: "Las Vegas has always done better than the naysayers expected. History is on our side." Murrin believes a downturn in Las Vegas could actually create opportunities for his company to build market share or make acquisitions, and the company he claimed continues to show strength, especially in the high-end business that allows it to keep high rollers playing at its tables for long periods, thus reducing the volatility of its high-end results. He emphasised continued economic benefits from the buyout of Mirage Resorts Inc. MGM MIRAGE has achieved $117m in annual cost savings after the merger. Murrin listed "a lot of toys," sold off: $230m in Mirage assets, including $150 m in art, $60m in real estate, $10 million aircraft. His plan is to focus on aggressive debt repayment (MGM paid down $528m in debt since merging with Mirage), and to build new properties, expand existing ones or acquire competitors. New developments are planned for the Broadwalk site near the Bellagio, and land near the MGM Grand and sites in Atlantic City. Bill Weidner, President, Las Vegas Sands Inc., owner of The Venetian, discussed plans for a 1,100-room three-sided tower that will be added on top of the Venetian's parking garage, to feature a lush courtyard in the centre. Weidner did not know total costs or timeframe for completion. "The Venetian is reliant on convention business. You might see a small change in convention business, but I don’t foresee any fundamental change ahead." Las Vegas hosts some 226 big conventions a year, the US and Canada have 4,333 annual conventions. Weidner is confident that the "free and independent travellers" are unlikely to give up their vacations to Las Vegas, especially at the high-end occupancy. He gave fourth quarter figures for the Venetian: an average daily room rate of $194, up from $178 a year ago. He said the Venetian planned construction of two art museums to house works from the Guggenheim Museum in New York, and the State Hermitage Museum in St Petersburg, Russia. Scott LaPorta, CFO, Park Place Entertainment, said investor jitters over Las Vegas are not justified. He claimed his company is "a prodigious producer of cash," and forecast it will produce $3 billion in free cash flow over the next five years. "We think we will expand in future quarters." He noted that no new resorts are scheduled to open on the Las Vegas Strip over the next few years, and therefore we should see demand growth outstrip supply growth. "Demand should continue to grow at the pace of the national economy, and could grow faster because of aggressive marketing by gaming companies and the Las Vegas Convention & Visitors Authority." Park Place Entertainment is looking at expansions, including two land parcels in Atlantic City, and continuing talks with the Mohawk tribe to develop a resort casino in the Catskills near New York City. Park Place has 15 acres of land adjacent to Caesars Palace on the Strip and this could result in the building of additional high-end suites and expanded casino space. LaPota explained the company's $2 bn in free cash flow over the next four years: one -third would be used to pay down debt, another one-third to buy back stock, and the final third to expand, either by acquisition or by expanding existing properties. Adam Fine, publisher-producer of the Summit, invited an impressive group of Strip Property Managers to speak during a morning panel about the daily challenges of running a Strip property. All were optimistic, despite a slowing economy and a halt in megaresort development. Rob Goldstein, president of The Venetian said: "We don't depend on gaming alone, there are diverse pursuits that attract people here: weather, golf, spa, dining, shopping." Hector Mon, president and general manager of the Tropicana, agreed with Goldstein that non-gaming revenue has become an important money spinner for many Strip resorts. "The interest in gaming is becoming less important. But the resorts need to promote amenities and add new offerings. Felix Rappaport, (former MGM Grand executive), now President and Chief Operating Officer of New York-New York, described last year's Britney Spears concert as "the most successful show of the year for MGM – grandparents and parents brought their children and stayed around to watch." Industry observers believe that the increasing dependence of Las Vegas megaresorts on nongaming revenue could cause some problems for the multibillion-dollar properties in an economic slowdown. Similarly, observers noted that the nationwide spread of legalized gambling throughout the 1990s could keep gamblers closer to home during the recession, rather than visit Las Vegas. Las Vegas has developed a mass of critical, must-see attractions and has the luxury of not being a regional destination. Reno is seen as vulnerable to California's growing tribal casino industry, and the panel suggested that Northern Nevada tourism officials should focus more on promoting Lake Tahoe as a resort destin