The world of gaming has been facing its own unique challenges lately. Casino revenues have dropped dramatically, and convention business in the most popular of gaming destinations took a serious hit this year, battered by the dual blows of recession and public perception. M&C chatted with prominent industry leaders to find out what's in store in Las Vegas and elsewhere, and what the future of gaming destinations might look like.
M&C: Many casino resorts have an image of unbridled luxury and fun. Must that image be fundamentally altered now to attract meetings?
Gary Loveman: I think the message has to be refocused a bit. We still want people to think Las Vegas and casino resorts are fun places to go, and we'd like to think they're more engaging than some competing alternatives. But these facilities are terrific values for businesses that are seeking to drive a return from the investment they make in a meeting. We don't want to walk away from the notion that it's fun to come to these places, but we want to emphasize that it's good business.
Andrew Pascal: Luxury is a term that gets thrown around pretty loosely these days. We tend to think about luxury more in terms of the kind of experience we deliver. It should be completely fulfilling, in that all of our guests' expectations will be met, and in an environment that is very fanciful and unlike anything they can experience anywhere else. Has our consumer message for the leisure traveler somehow compromised our ability to capture the business and convention market? We could debate that, but the reality is you have a different message, and a different way of talking about who you are and what you do, to different customers.
Rossi Ralenkotter: Every destination markets its leisure amenities to help attract meetings and conventions, and Las Vegas is no different. The misperceptions about meetings and conventions are an industrywide issue, and we all need to work hard to make sure the facts about the impact meetings have on the economy are communicated.
Oscar B. Goodman: I think our advertising campaigns and the allure, neon and glitz of Las Vegas are still very attractive. At the same time, through our Las Vegas Convention and Visitors Authority, we have begun an ad campaign to remind people that Las Vegas is the best place to have a business meeting. You come to Las Vegas and work hard during the day, and at night you can go out and have a great meal or see a world-class show. There is nothing wrong with that.
Alain Uboldi: Regional markets like ours generally have not developed the extravagant atmosphere that's made Las Vegas famous. In our markets, such as St. Louis, Indiana and Lake Charles [La.], we offer great high-end amenities for our best players, but that's a small portion of our customer base. For more mainstream guests, we offer championship golf, beautiful spas, great restaurants, retail and entertainment that are comparable to what you'd find at a quality nongaming resort.
Ray Neilsen: Although the U.S. economy continues to struggle, it will eventually rebound, and over-the-top luxury and amenities offered by many of the Las Vegas Strip properties will again be in vogue. Given the public's added scrutiny of business in these times of government bank bailouts and nearly 10 percent unemployment, the timing couldn't be better for organizations to meet at lower-profile, high-quality regional facilities.
M&C: In recent years, gaming destinations have made investments in dining, entertainment and retail, as the revenue balance has shifted away from casinos. Do you expect that shift to continue?
Keith E. Smith: Casino entertainment has evolved over the last 20 years from casino-hotels to multidimensional resort experiences with an array of entertainment amenities. Relatively speaking, our industry is very new, so it's difficult to say what long-term changes to that business model will come because of this recession. It's likely consumers are going to behave differently after the recession is over, perhaps taking a more conservative approach to how they spend their leisure time. We will need to take that into account in how we approach our business in the years ahead. People are still choosing to be active and social -- they're just not spending as much money during each visit.
Loveman: We think the shift away from gaming, unfortunately, and toward nongaming, is going to continue -- and that has a lot to do with the maturation of these markets and the continued investment we've all made in the nongaming side of the business. The area that's under the greatest pressure currently is room rates -- and it's really that, to a greater degree than entertainment, dining, spa, golf and the rest, that has put pressure on the business.
Uboldi: Our regional casinos have not shifted their revenue mix as heavily to nongaming as the major Las Vegas Strip casinos. At our regional resorts, nongaming revenues range between 12 and 25 percent, with the rest from gaming. Our position is not to shift our mix any more, as we think we have a good balance to ride out the current economy.
Neilsen: It's true that many Las Vegas casino resorts have invested heavily in noncasino amenities and were successful for many years in deriving an increasing percentage of their profits from these offerings. I think, however, Las Vegas' current performance is proving that, somewhere along the way, the race to have the glitziest, most luxurious, most expensive hotel/restaurant/nightclub/spa/exotic attraction got out of hand.
My father founded Ameristar, and he believed deeply that capital investment and operating the highest-quality facility in a given market was the best way to grow and to be profitable. But he was never out of control about it, and consequently, we've built or acquired beautiful properties, but not anything a market couldn't profitably support.
M&C: What can you do to help planners make a case for the value of meeting in gaming destinations?
Ralenkotter: Conventions moving to Las Vegas typically experience a 14 percent increase in attendance. Groups that come to Las Vegas can save money by not having to plan evening events, as the delegates like to experience our leisure amenities on their own. We have created an online toolkit for planners to access information and testimonials to help show their executives the value and good business sense of holding a meeting in Las Vegas. This information can be accessed at vegasmeansbusiness.com.
Neilsen: Most high-quality casino properties offer companies and organizations true one-stop shopping for their events. Many offer state-of-the-art meeting facilities, numerous food-and-beverage options and top-rate entertainment. And regional destinations can provide significant savings on transportation, room rates and other costs.
Linda M. Kassekert: In Atlantic City, I think you have to look at where we are located. Unlike Las Vegas, most of the people coming here are driving. We're within drive time for a quarter of the nation's population. We can offer a variety of experiences for the people coming here, and it's not just the casinos and the gaming. It's really a varied experience.
Uboldi: Fortunately, we've found that regional destinations have not been particularly affected because we offer a great value proposition, and our market approach is much smaller. We're not geared toward major conventions that can only be accommodated in Las Vegas or Chicago.
Pascal: Those conducting an event have to decide: "Where am I going to achieve the greatest impact with the time and money we're going to invest in hosting this?" And in answering that question, it's about maximizing participation, it's about ensuring that the content is delivered in way that has the greatest impact for attendees, and it needs to be done as affordably as possible. There's got to be real value. And I think if you judge Las Vegas, based on those criteria against any other market, we come out on top. It is the most accessible, it is the most affordable, there is the widest breadth of services, and there are more opportunities to create and build relationships.
M&C: Which destinations will fare best through the downturn and beyond? Do the smaller markets have an advantage?
Goodman: Not a chance. There is only one Las Vegas. Do you want to go to a place that is the minor leagues in terms of the amenities you need to conduct serious business? No, you want to go to Las Vegas, where you have everything you need to get a deal done, and then at night you can go out and have a good time.
Uboldi: It's hard to predict the future of Las Vegas or Atlantic City, but we believe regional operators like Pinnacle, Penn National and Ameristar are likely to do better overall than those destinations. Again, we offer great value, and we're closer to home for a lot of people.
Smith: In the current recession, regional markets are holding up pretty well. It appears some casino customers are choosing to visit gaming locations closer to home. But we think that's a short-term shift, not a long-term trend. As the economy recovers, there's no doubt Las Vegas and Atlantic City will return as leading destinations.
Loveman: Markets like New Orleans have been showing a lot of vitality. I think New Orleans is going to benefit from some of the business that's been withdrawn from Las Vegas. I think Lake Tahoe will benefit. Some of the Native American facilities in attractive locations around the country, like Northern and Southern California, might well benefit from this period, and, to some degree, Atlantic City.
M&C: What will the gaming market look like in the long term?
Uboldi: It's so hard to predict the future. We don't know how many new states might legalize or expand gaming, and we clearly don't know when the economy will recover.
Ralenkotter: Las Vegas is known for reinventing itself to remain a premier travel destination, and we are continuing to see that commitment. New properties, like Encore Las Vegas and M Resort, have recently opened, and new developments such as Fontainebleau and CityCenter are expected to open later this year.
Loveman: The level of capital brought into the industry certainly is going to slow down. Some of the largest projects in American history are either ongoing or recently completed in the gaming sector, so I think that's going to slow as the capacity is absorbed.
I think you will continue to see attractive nongaming features added across the country, whether it's a Native American place like Mohegan Sun, which has some beautiful nongaming amenities, or the traditional destinations of Atlantic City and Las Vegas. I think you'll see evolution in the gaming product itself, as the product becomes much more sophisticated electronically.
And then, finally, the great benefit of the gaming market, for those of us who are in it, is that it's a business that really is supported largely by people over 50 years of age. And the world, of course, is creating an unprecedented number of people 50 and older who have the resources and the time to be customers of ours. So that's a very good tailwind for us and for this business over the long term.