How Las Vegas can re-emerge as world’s top gaming locale

Experts say we should imitate Houston by attracting technology firms

A dark rain cloud hangs over the Las Vegas Strip, April 8, 2009.

Las Vegas, hammered by the Great Recession much the way Houston was devastated by the oil bust after several boom years, can retain its position as the center of the gaming industry if the state’s policymakers invest in intellectual capital.

Bo Bernhard, executive director of the International Gaming Institute at UNLV, explained how Las Vegas grew from a railroad water stop to the top destination resort in the United States in a keynote presentation to the National Council of Legislators of Gaming States.

The organization’s three-day winter meeting at the Rio is being attended by about 100 lawmakers and regulators from 21 states, a Canadian province and Washington, D.C. Representatives of several Indian tribes that operate casinos also are attending.

Bernhard said that once gaming became a global industry, international competitors — most notably Macau and Singapore — saw their gaming revenue grow and threaten Las Vegas’ dominance of the industry. Macau casinos collect about six times the amount Southern Nevada’s get, and Singapore is a threat to push Las Vegas to the No. 3 position, even though it has only two casinos.

Bernhard said, in retrospect, most economists knew Las Vegas couldn’t sustain its growth trajectory through the 1990s and 2000s and that a crash was on the horizon. But Las Vegas can re-emerge as the dominant player if the state is successful in attracting technology companies that would support the industry.

That’s what happened to Houston and now it is home to some of the top engineering resources in the country when its oil industry restructured. While many companies established overseas offices, about 70 percent of the oil industry’s top companies maintained headquarters in Houston.

The same thing is occurring in gaming. While Macau and Singapore are expanding, some of the key companies in those markets — Wynn Resorts, MGM Resorts International and Las Vegas Sands — are still based in Las Vegas.

“Maybe we’re looking at yesterday’s metrics to look at tomorrow’s productivity,” Bernhard said. “We’re looking at stats that our grandfathers fell in love with without paying attention that the world has changed.”

Bernhard said the new generation of gaming consumers and industry employees are well connected with technology and focusing on them should benefit the gaming in Nevada in the future.

“What happened (in the oil industry) is that research happened and science happened,” Bernhard said. “MBA-ization happened and prospecting became a science. It used to be a 10 percent hit rate (in oil prospecting). It’s now 50 percent and I understand in some instances it’s over 90 percent. How? Intellectual capital.”

The opening day of the NCLGS conference also included an overview of the $700 billion U.S. gaming industry. Some of the highlights:

• Internet gambling. Former Florida Sen. Steven Geller said public policy and perceptions about Internet gambling is as muddled as ever been because of conflicting legal rulings and interpretations. Geller said the federal Wire Act addressing wagering over the telephone has been the standard for online gaming, but several pieces of legislation, including the Unlawful Internet Gambling Enforcement Act, have confused the public and several Internet gambling company executives have been arrested and prosecuted for violating federal laws. Geller said a 2011 legal interpretation of the Wire Act from the Justice Department has enabled states to offer intrastate Internet gambling. Nevada has licensed several companies to offer Internet gambling within its borders.

• Casinos. Kevin Mullally, a former Missouri gaming regulator, explained Nevada’s two-tier regulatory system and how it’s been more successful than New Jersey’s similar system because there’s a clear delineation of responsibilities for the Nevada Gaming Commission to set policy and the state Gaming Control Board to enforce it. Mullally said one of the biggest issues facing states with commercial casinos is establishing tax policies. He said Illinois nearly destroyed its casino gaming industry by raising the tax rate on gross gaming revenue from 31 percent to 70 percent. The move discouraged companies from investing in that state. Nevada’s tax on gross gaming revenue is 6.75 percent.

• Responsible gaming. Keith Whyte, executive director of the National Council on Problem Gambling, urged lawmakers to fund compulsive gambling prevention programs. Whyte said while only 2-3 percent of the gambling public — about 6 million people, including 500,000 underage players — suffer from compulsive gambling disorders, there’s a $7 billion cost absorbed by state criminal justice and social programs. He said 80 percent of the public believe gambling is morally acceptable and 22 percent know someone who has experienced addictive gambling behavior, 70 percent believe the state government is responsible for addressing the issue and 78 percent say states should allocate funds for problem gambling treatment. Whyte said every dollar spent addressing problem gambling issues saves $2 in social costs. Connie Jones, director of responsible gaming for International Game Technology, said in Canada, gamblers who play slot machines get reminders on their machine screens about how long they have been playing, truths and myths about problem gambling and will ask a player whether he or she wants to cash out.

• State lotteries. While lottery ticket sales represent only 8.5 percent of what Americans spend when they gamble, lotteries are high profile because they’re usually conducted by states and often involve large prize amounts. Online gaming is the critical issue facing the lottery industry as proponents seek to allow online sales of lottery tickets. They face issues similar to advocates of online poker legislation, but several states are pressing to legalize intrastate ticket sales, but want federal legislation to be able to sell tickets across state lines.

• Parimutuels. Ed Martin of Racing Commissioners International acknowledged that parimutuel wagering is a dying industry, but track operators are attempting to rebuild it by seeking legislation to legalize sports wagering at tracks in addition to getting permission to install slot machines at “racinos.” Horse racing handle has fallen from $16.1 billion in 2002 to $10.8 billion in 2010 while greyhound racing handle has fallen from $3.5 billion in 1990 to about $750 million in 2010. Horse racing revenue to the government peaked at $780 million in 1975 and in 2010 is down to $173.7 million. Greyhound racing revenue to the government peaked at $239 million in 1989. It hit $17.1 million in 2010.

• Tribal gaming. Two panelists explained how states have established gaming compacts with Indian tribes to allow casino gambling on reservation land. Compacts can set geographic and time parameters for exclusivity on certain games. An ongoing issue is whether fees negotiated in compacts are a form of taxation, since tribes can’t be taxed by state and local governments, and whether local governments can collect fees.

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