Gaming expansion elsewhere lifts Las Vegas

Before the economy tanked and the Strip’s building boom went bust, the development of multibillion-dollar hotel-casino projects centered on Las Vegas.

Not anymore.

Consider these facts and events:

■ The most expensive single hotel-casino project on record is the Marina Bay Sands in Singapore, which opened in April 2010 at a cost of $5.5 billion.

■ Las Vegas Sands Corp. wants to replicate Macau somewhere in Spain at a cost of more than $22 billion.

■ MGM Resorts International, the Strip’s largest casino operator with 10 properties, expressed interest last week in building a $2 billion to $6 billion hotel-casino in Toronto.

■ Caesars Entertainment Corp., the Strip’s other major casino operator, is opening the Horseshoe Casino Cleveland on May 14, a casino in Cincinnati next year and is lobbying to build a casino on Baltimore’s waterfront.

■ Before Florida lawmakers got cold feet in February and scuttled casino legalization bills, Las Vegas Sands, Wynn Resorts Ltd., MGM Resorts, Caesars Entertainment and others had executives exploring gaming potential in Miami.

■ Massachusetts’ three gaming licenses have drawn interest from Caesars Entertainment, Wynn Resorts, MGM Resorts, Ameristar Casinos and Penn National Gaming.

■ MGM Resorts and Pinnacle Entertainment plan to build hotel-casinos in Vietnam.

Gaming expansion seems to be happening everywhere but Las Vegas.

And that’s not really a bad thing.

When The Cosmopolitan of Las Vegas put away the party favors from its December 2010 grand opening, development on the Strip dried up. With the economy in recovery, analysts advised that Strip operators concentrate on filling their roughly 150,000 hotel rooms and put aside thoughts of new projects.

Still, publicly traded gaming companies need to expand their markets or else they do a disservice to their shareholders. In a sense, Las Vegas-based casino companies are taking what was created on the Strip to other markets and bringing the profits back home.

The concept is what Bo Bernhard, executive director of the International Gaming Institute at the University of Nevada, Las Vegas, discussed in a study published last winter. He said gaming industry companies headquartered in Las Vegas can jump-start the economy by exporting intellectual capital to other markets.

Bernhard compared Las Vegas to Houston, which capitalized on its expertise in the oil industry by exporting industry knowledge to international markets, thus, returning profits to Texas.

Casino operators and slot machine manufacturers have developed a rich base of industry experts.

In the 1970s, Las Vegas and Reno were the country’s only gaming markets, before Atlantic City. The notion of casinos in every state was a mixture of fiction and fantasy.

But now gaming is more than just dealing and service jobs, and it has gone global.

Macau serves as a good example of this process. Casinos operated by Las Vegas Sands, Wynn Resorts and MGM Resorts account for roughly 40 percent of Macau’s roughly $3 billion in monthly gaming revenues. That figure could grow with the recent opening of the
$4.4 billion Sands Cotai Central.

“Macau didn’t take jobs from Las Vegas,” Bo Bernhard said. “Macau has actually created jobs in Las Vegas. Most of the major gaming corporations have Asian analysis departments. What this growth has done has made Las Vegas the corporate headquarters for the gaming industry.”

Bo Bernhard has suggested Las Vegas invest in educational programs to develop local talent that can handle the complexity of the industry’s future. Like many, he advocates that Nevada build upon its technology base and become the regulatory and corporate home for legalized Internet gaming in the U.S.

Longtime Las Vegans can be vocal in wanting casino companies to take care of business close to home before embarking on ventures outside the Silver State.

For example, should Boyd Gaming Corp. look elsewhere before doing something with Echelon? It will be four years in August since the company halted work on the planned $4.8 billion Strip development. Boyd Gaming continues to spend an undisclosed amount of money each quarter to maintain the fenced 87-acre Echelon site.

Also, financier Carl Icahn has done little with the Fontainebleau, which he bought out of bankruptcy in
2010 for $150 million.

The planned
$3 billion development was 70 percent complete when it ran out of money and construction was halted in April 2009. Icahn sold off the interior furnishings but the Fontainebleau sits as a hulking reminder of the Strip’s economic meltdown.

“It’s about the sophisticated deployment of capital,” Bo Bernhard said.

Obviously, Las Vegas gaming development is not yet a strategic market.

Howard Stutz’s Inside Gaming column appears Sundays. He can be reached at hstutz@reviewjournal.com
or 702-477-3871. He blogs at lvrj.com/blogs/stutz.
Follow @howardstutz on Twitter.