March 2005
Gaming Destinations: A New Deal

As capital pours into established destinations and options for leisure gaming multiply, show organizers will soon see new benefits

By Patricia D. Sherman


The gaming destination landscape looks a lot different than it did just a year ago. Huge mergers and buyouts, vigorous growth in tribal gaming and changes in state laws have rearranged industry players and priorities.

For show organizers, the altered landscape promises new opportunities. An influx of capital into established destinations has added room and space inventory and attendance-building amenities. As leisure gamers have more options, properties are seeking non-gaming revenue, and show organizers are in a stronger negotiating position.

A least in the short term, these changes have brought a measure of uncertainty for destinations. “We’re just holding our breath to see how it all shakes out,” says Franklin Webster, President and CEO, Tunica, MI, Convention and Visitors Bureau (www.tunicamiss.com).  

Investing in proven markets    
The three players at the top of the industry have changed drastically and so has the investment focus.

“This year there were more mergers than ever before,” Wally Chalmers, Vice President of the American Gaming Association (www.americangaming.org), said in December at the Governor’s Conference on Tourism in Reno, NV. He expects the trend to continue, he added.

Buyouts last year left two casino giants in control of most of the gaming properties that host mid-sized to large groups in established meeting destinations — Las Vegas; Atlantic City, NJ; Gulf Coast and Tunica, MS; and Reno, NV.

Last July, Harrah’s Entertainment announced a $9.4 billion deal to buy Caesar’s Entertainment, creating the largest gaming company in industry history. Caesar’s and Harrah’s together operate 56 casinos, 28 each. The combined company will take control of 14 major hotels on the high-profile, ultra-desirable Las Vegas Strip, as well as properties in Atlantic City, Tunica, the Gulf Coast and Reno. Projected annual revenues are expected to reach $9 billion.

The Harrah’s announcement came just a month after the $7.9 billion MGM Mirage buyout of Mandalay Resort Group. The new company will have a decidedly high-end presence on the Las Vegas Strip with two of the biggest convention properties, Mandalay Bay and the MGM Grand, as well as Bellagio, The Mirage and Circus Circus. The company could have revenues of more then $7 billion, analysts say.

Also last summer, Boyd Gaming finalized a $1.3 billion buyout of Coast Gaming to take the third spot. The combined company has 13 hotel-casinos in Nevada, two on the Las Vegas Strip, as well as the new luxury Borgata in Atlantic City and properties in Mississippi.

Because the deals are not yet finalized, no plans for particular properties have been announced. Chalmers said one thing is certain, though: “These purchases reflected a move within the industry to concentrate capital investment in proven markets.” And as capital flows in, mature destinations are set to become even better values for show organizers.

Tribal Gaming: A bigger piece of the pie
Consolidations aren’t the only force changing the gaming destination landscape. Tribal gaming now accounts for more than one-fifth of all gaming revenue, according to the National Indian Gaming Association (www.indiangaming.org).  From fiscal year 1995 to 2003, tribal revenues more than tripled from $5.4 billion to $16.7 billion. Besides competing with established destinations for leisure business, tribal properties with upscale hotels and amenities and enough meeting space to handle small- and mid-sized events are appearing all over the country.

Officials at established destinations stress that they offer a different product than most tribal venues. Nevertheless, some destinations find they must adjust to the growth in tribal gaming. “We’ve noticed the impact of tribal gaming,” says Robert Enriquez, Executive Director, Sales, Reno Convention and Visitors Authority (RCVA, www.visitrenotahoe.com). As a result, the RCVA has increased marketing emphasis on groups. “Our objective is to build a base in meetings and conventions. Then our hotels can put transient business on top of that foundation. We hope ancillary revenue will replace some lost revenue from gaming.”   

Foxwoods and Mohegan Sun, huge tribal casino-hotel-entertainment complexes in southern Connecticut, were conceived as meeting destinations, as well as leisure gaming magnets. Foxwoods sees its group market as primarily small- and mid-sized regional association and corporate meetings with shows, says Joan Esneault, Executive Director of Resort Sales for Foxwoods (www.foxwoods.com). 

Mohegan Sun (www.mohegansun.com), however, is going after national and international groups, says Peter Bonell, Vice President of Hotel Sales and Marketing, with the ambitious goal of increasing group business by 50 percent in the next two years. Bonell is directly targeting national and international groups that have been to Las Vegas and positioning Mohegan Sun as an East Coat alternative.

States getting in on the action
Not only are the hundreds of tribal venues making gaming more convenient, state governments hungry for taxes from gaming revenues are exploring changes in their laws. Over time, the impact on the industry of relaxed state control may rival that of tribal gaming.

Jeff Vasser, Executive Director of the Atlantic City Convention and Visitors Authority (www.atlanticcitynj.com), dismisses the effect of tribal gaming on Atlantic City. “We only saw a blip when Foxwoods and Mohegan Sun opened,” he says. But changes in state gaming laws in Pennsylvania, Maryland and Virginia may keep some leisure gamers close to home, he says, with the potential to affect transient gaming business. He cites the Pennsylvania legislature’s approval last summer of a measure that allows for 61,000 slot machines, more than any state but Nevada. Other states, including New York, California and Texas, are discussing proposals to extend gaming that’s now limited or to legalize certain forms of gaming and wagering.           
        
Opportunity knocking
Show organizers are beginning to see the benefits of a real, although hard-to-measure, ripple effect. Here are some new cost-saving and attendance-building opportunities that have opened up for show organizers this year:

Atlantic City — A destination that seemed to be treading water through much of the 90s, Atlantic City has experienced a growth spurt in the past few years, adding 4,000 rooms and more than half a million square feet of retail, entertainment and dining. Established properties are making big investments in resort upgrades and expansions, says Vasser.

Mohegan Sun — With 100,000 square feet of meeting space to fill, including the region’s largest ballroom, the property is going straight to the show organizer’s bottom line, says Bonell. A new program guarantees groups the lowest room rates. “If the negotiated rate is higher than the lowest leisure rate at time of check-in, we’ll adjust the group rate downward to match it.”  

Foxwoods — The resort has opened two 18-hole golf courses and a luxury clubhouse for meetings and banquets, says Esneault. Food-and-beverage options have been expanded and upgraded. Additions include a food court, new restaurants and a four-diamond award. 

Gulf Coast — All 12 casino hotels have been built since 1992. Donna Tarasavage, Director, Sales, Mississippi Gulf Coast Convention and Visitors Bureau (www.gulfcoast.org), says the destination wants to increase its share of national group business with inexpensive meeting space, new inventory and additional activities.  The Mississippi Coast Coliseum and Convention Center is adding 200,000 square feet. The Isle of Capri Casino Resort has added 499 rooms and 34,000 square feet of meeting and exhibit space. The 306-room Hard Rock Hotel and Casino is scheduled to open this summer, and a Frank Gehry-designed museum complex will open this spring.

Tunica — The barely decade-old destination on the Mississippi River 30 miles south of Memphis features casinos and hotels. Now it’s catching up on attractions and amenities to appeal to groups. Additions include three new golf courses and a river boat for excursions and banquets. With changes in ownership of several resorts, Webster says he expects renovations and additional rooms to come onto the market in the next year or two. The town is also considering plans for a large meeting facility.

Reno-Sparks — The destination is going after more regional meetings and shows, says Enriquez, and the marketing emphasis is on value. The city is able to offer groups state-of-the-art meeting space at prices 30 percent to 40 percent lower than comparable cities with gaming, he says.

Las Vegas — Mammoth, ever-changing, Las Vegas stands alone. “This city has so much to offer, we don’t feel the effects of economic downturns or competition,” says Danielle Babilino, Vice President, Hotel Sales, Mandalay Bay Resort (www.mandalaybay.com). 

“We project a growth rate for group business of 8 percent to 12 percent this year,” says Chris Meyer, Director of Convention Sales, Las Vegas Convention and Visitors Authority (www.lasvegas24hours.com). Show managers benefit from the city’s massive national and international advertising campaign, he says, because it keeps interest high and spurs attendance.

“This city has the No. 1 position in trade show business, and we’re not about to let that go,” says Richard Harper, Vice President of Sales, MGM Grand (www.mgmgrand.com). “Properties invest hundreds of millions of dollars in product upgrade so attendees have a new experience every time they come,” he says.

This year more than $2.7 billion is going into new construction and expansion as 4,449 rooms and 560,000 square feet of meeting space come onto the market. The much-anticipated $1.8 billion Wynn Las Vegas, set to open next month, will offer 2,716 rooms.

Las Vegas has a dozen hotel-casinos with more than 100,000 square feet of meeting and exhibit space. The three largest — the Mandalay Bay, MGM Grand and Venetian Resort — are virtually destinations in themselves. Their size produces a synergy that offers show managers cost savings in a luxury setting, says Babilino. “When the show is over, attendees can go right to the amenities on property.”  

Consolidation of so many hotel brands into a few corporate hands will not decrease competition for group business, says Harper. “There’s too much one-upsmanship in this city.”