Can Reno change?
Under attack by Indian gaming, local casinos must get creative quickly or go bust
“All the people I know would rather come here than put on the chains and go to Reno,” Maxine, of Lincoln, Calif., snipes with the scowling frankness of a 71-year-old who likes to gamble and likes to speak her mind. Especially if the gambling didn’t go well, and she’s in a mood.
Maxine won’t give up her last name, but it’s not important. I know Maxine. You know Maxine. She’s the out-of-town, white-haired lady we sidestep whenever we venture inside a Reno casino on a weekend. Except this Maxine lives in a town—on the other side of The Hill—that now has its own casino. No need to battle Sierra rain, snow, slush or hours-long, inch-like-a-caterpillar traffic out of California to reach this slot-terhouse. What’s more, this casino is nifty, young man. Too bad for Reno.
“It’s old, and they haven’t kept them clean,” Maxine declares about Reno’s downtown and casinos. “It’s all dirty there. This one’s kept clean. You go to any restroom here, and it’s clean.”
There is an idea floating around that Reno gaming may face its demise in 10 years. Maxine considers that.
“They’ve been the only show except Las Vegas for a long time. If they get more games and entertainment here, it’ll be shorter than five years,” she snaps.
Her son-in-law, Marlin Proffer, from Norman, Okla., drawls a quip as fer-sure as a country lyric: “They get keno and dice here—it’s all over.”
Is Proffer prophetic? Are Reno’s casinos doomed? Or can they successfully adapt to the challenges of 21st century casino competition, including Indian resorts? At stake is not only the future of Reno gambling, but the prosperity of the entire region.
One way to foresee what our casino industry—economic engine of northwest Nevada and the trade that made Reno swank during its heyday (Harrah’s-Mapes-Sinatra-Liberace-The Misfits-Squaw Valley Olympics …) during the late 1940s to early ‘60s—will look like a decade hence is to stand outside the enemy’s gates, 119 miles from our downtown arch, and talk to players on a holiday weekend.
You’ve probably guessed where “here” is. It has a two-word, four-syllable geographic name with a masculine mellifluence and a cadence foreboding finality. And “here” lurks these days in the psyche of every able-minded Washoe Countyan with a vested interest in Greater Reno: Thunder Valley.
Ah yes. Oh no! Thunder Valley Casino. Tribal gambling. State-of-the-art. Off Interstate 80, near Sacramento. Siphoning the lifeblood of Californian tourists we so dearly need to sustain our local economy.
We Nevadans may smirk when we spy a white license plate with dark-blue letters/digits and “California” scrawled above in red cursive on a vehicle pulled over by the NHP on 80 or 395. But when those Golden State goldfish quit washing over the Sierra in sizable schools to feed our slots and bloat at our buffets, we all feel the pinch in the food chain. And we worry about increased taxes and decreased property values—and more poverty, crime and low-rent dramas causing problems for all.
And so, driving back to Reno from California on the Monday of the three-day Presidents’ Day weekend, I pull off at the Rocklin exit, just past this billboard facing eastbound 80: “Thunder Valley Casino, No Chains Required.” Ouch. It so happens there is a misty rain boding snow on the two-hour drive past Auburn and up through the forested foothills, winding into the gloomy Sierra, over Donner Summit and down through Truckee and the river canyon to the state line.
Through Rocklin to Lincoln, following arrowed signs ("Casino"), I pass cattle pastures and reach Thunder Valley. First and lasting impression: a grossly oversized hacienda with an adobe façade in hues of salmon, rust and off-white under a red-tile roof. No neon. No gaudiness. Earth tones conforming to Placer County code. All surrounded by 200,000 square feet of paved parking.
Surrealism kicks in when I walk to a periphery and gaze at the green fields stretching afar. This is no place for a casino. Then again, agricultural terrain has been insinuated upon for decades by highways and malls. The Truckee Meadows, verdant ranchland vanishing beneath housing tracts, business parks and strip malls, is no different.
Thunder Valley is a California urban-sprawl version of a Las Vegas neighborhood casino, guided by Nevada know-how. The Fertitta brothers—Frankie “Three Sticks” (Frank III) and Lorenzo, CEO and president, respectively, of Palace Stations, Inc.—have built on the legacy of their father, Frank Jr., who started in 1976 with bingo and a bit of casino gambling aimed at Vegas employees getting off shift.
Frank Jr. knew firsthand what the black-and-whites wanted: He himself toiled as a dealer after arriving from Texas. Catering to locals was intuitive genius! His sons have forged a string of eight neighborhood casinos in Clark County that brings in nearly $1 billion a year and employ 10,000 people. The brothers’ specialty is making the casinos friendly and inviting to nearby residents. A Station property, in addition to slots and table games with attractive limits, features fast-food restaurants and movie theaters. The Fertittas sealed a seven-year contract to manage Thunder Valley for the United Auburn Indian Community for 24 percent of the net and a couple points of the joint’s cost.
Can’t blame Frankie and Lorenzo for jumping across the state line. It was inevitable that tribal casinos would materialize next door. After President Reagan signed, in 1988, the Indian Gaming Regulatory Act—granting federally recognized tribes the right to make gambling compacts with states—casinos sprouted up in more than 20 states. Gaming was hailed as “the new buffalo,” Native Americans’ first big economic opportunity in two centuries. (No wonder that, by 2001, the number of tribes had grown 23 percent, to 337, with a couple-hundred more groups seeking federal recognition.)
California has 54 Indian casinos now. Eleven of the 13 NorCal operations are small; but two—Cache Creek Casino Resort, 42 miles northwest of Sacramento, and Thunder Valley Casino—each rakes in more than $250 million a year in positive cash flow.
Here’s what that means for casinos east of the Sierra:
• Betting dollars going elsewhere. “Gross gaming win"—wagers minus payouts—wilted in Washoe County in the second half of 2003, following Thunder Valley’s opening. The win from July through December was down 4.2 percent over that period in 2002; in first-half 2003, it was down only 0.3 percent.
• Washoe casinos’ recovery thwarted. Washoe slots and games won $1.01 billion in 2003, down 2.4 percent from 2002, in a drop-off begun in 1997. Reno’s take was shrinking before Thunder Valley erupted, but the hemorrhaging was being stanched.
• Tribal casinos grow the market—for themselves. California resorts have increased the market of all gamblers, a potential boon for Nevada, but more tribal properties could swallow the new business. World-renowned gambling scholar William Eadington, director of the Institute for the Study of Gambling & Commercial Gaming at the University of Nevada, Reno, notes that if Washoe’s casinos dropped off “only” $120 million in gambling win in the past three years, while the five largest northern California tribal casinos were generating more than $1 billion a year, the California properties increased the population of the region’s gamblers. However, California tribal casinos have experienced a 300 percent growth in gambling win in the past five years, and Thunder Valley is probably generating more than $400 million per year in gross revenue (nearly 40 percent of Washoe’s casino industry).
• Four more competitive NorCal casinos loom. The Lytton tribe in San Pablo, north of Richmond, will likely sign a compact with Gov. Arnold Schwarzenegger, Eadington says. The Graton Band, in Rohnert Park, has contracted with Station Casinos. The Shingle Springs Tribe, near Placerville, is compacted. The Ione Band, in Plymouth, on Highway 49, has designs. “They’re all competing for Reno’s traditional drive-over market,” Eadington says.
• Annual visitor totals drop. Reno-Sparks Convention & Visitors Authority counts show declines each year, from 5,073,842 in 1999 to 4,865,485 in 2003. The prime feeder market is shrinking. In 2002, 59 percent of visitors were from California; in 2003, 44 percent.
• Cumulative impact of gambling loss is lethal. While gambling taxes (licenses, fees) and room taxes represent a few percentage points of the general-fund budgets of the county, Reno and Sparks, thudding revenues reverberate through the whole economy.
“Gaming means tourists,” says Darin Conforti, acting budget manager for Washoe County. “Tourists mean sales-tax dollars. People who come here generally buy things. Gaming also means jobs. Gaming declines, you lose jobs [gaming’s workforce shrank 3 percent in 2003]. A loss of jobs has a potentially more devastating impact than the loss of tourists, because people with gaming jobs live and work in our community and receive services. When they’re no longer contributing to the tax base at the same level, they’re likely demanding services at a higher level.”
• Plummeting win double-whammies downtown. Downtown Reno casinos have had their total taxable values cut by $107 million this year. Devaluation means less property tax money earmarked for downtown redevelopment. Catch-22: You must renovate to lure tourists but can’t if tourists don’t come.
Return to Thunder Valley. The $215 million resort (no lodging yet, but expect a summer expansion) employing 1,800 workers opened its big glass doors June 9. There are 75,000 square feet of casino floor, 1,906 slots, 100 tables, a high-limits area, an Asian parlor and a bingo room. Add seven bars, three full-service restaurants, five “quick-service outlets” (including Fat Burger and Starbucks) and a 500-seat Feast Around the World Buffet.
Ten months old, the gleaming Thunder Valley impresses this Renoite (there’s a little Maxine in us all). Earth tones, tile floors, towering chandeliers, flagstone columns. ("The look and feel of a Santa Barbara Ranch with a Mediterranean flair,” the press packet proclaims.) But there is an immediate familiarity: The same faces, behaviors and body types seen in Reno casinos are represented. After all, these are people who used to go to Reno. Californians from Placer, Sacramento and San Joaquin counties—all within 50 miles of Thunder Valley—herd into buffet lines and jostle on the casino floor (100,000 visitors guesstimated over this three-day weekend).
A heavy woman in a wheelchair slaps buttons on a slot. A quartet of men resembling linebackers gone to lard hunker at a blackjack table, stealing glances at each other’s hands and looking shocked when their miscalculations bust. A very short, elderly couple resembling William Hung’s grandparents stand side-by-side at a bank of nickel machines, dipping into their cradled change cups as if feeding small animals.
All races are represented. The jabber of English, Spanglish and undetermined tongues mixes into the general uproar, punctuated by a sudden, demented ping-ping-pinging, courtesy of IGT engineers. Of course, none looks like he or she is having much fun. Facial expressions betray stress and irritation at losing money. The usual.
The deafening chorus continues. Listen closely, you can imagine a voice buried in the river of noise:
“Who needs Reno?!”
Well, Californians and others used to need Reno badly enough to make the Biggest Little City in the World a premier destination. After Nevada broke ranks in 1931 with the other 47 states and legalized casino gambling, Reno’s wise guys and mobbed-up newcomers had a head start—and 15 years later, they capitalized on the post-War leisure-spending frenzy. Las Vegas didn’t surpass its northern sister until the mid-1950s. Reno hung stubborn, clinging to its faded past, until the proliferation of Indian gambling in the ‘90s.
But even a city that suffered without competent captainship through the 1970s and ‘80s can right its course. Today, even in a stormy market, the city on the Truckee has weathered roiling waves to a fair degree and is charting new routes to keep afloat. Three developments:
1. Reno no longer goes as gambling goes.
“Washoe County and all of the responsible civic and business leaders have foreseen the coming decline in gaming for the past five to 10 years and made concerted efforts to diversify the local economy,” county budget manager Conforti says. In 1992, 18.3 percent of local jobs were in gaming or hotel-casinos; in 2003, 12.9 percent. Construction jobs rose last year from 5 to 8.5 percent; professional business and services jobs grew from 7.5 to nearly 10 percent. Manufacturing, 6.2 to 6.7.
“The sky isn’t falling,” Conforti says. “We’re even diversifying with the kinds of visitors we’re attracting in conventions or for the ‘adventure’ experience.”
2. New tourist markets are being developed.
In fall 2002, the RSCVA embraced a slogan: “Reno-Tahoe: America’s Adventure Place.” Tourism officials trumpet ski slopes, Lake Tahoe, hiking, biking, golfing, kayaking on the new downtown course—plus galleries, theaters, history, fine dining. “Gaming plus.”
“It’s brand awareness,” Deanna Ashby, RSCVA executive director of marketing, says. “We’re really concentrated on the Western region and niche markets such as golfers, skiers, outdoors-recreation enthusiasts, and a little bit toward the arts-and-culture clientele. We’re going after the psychographic of the adventure tourist, who wants to go to Reno and Tahoe for the outdoor recreation and enjoy the same sort of adrenaline rush at our casinos.”
Concomitant with the expansion of the Reno-Sparks Convention Center and construction of the Downtown Events Center, and filling the calendar with Gen Y competitions (snowboarding, snowmobiling, kayaking) along with traditional special events, the RSCVA is luring more conventions and trade shows—the business traveler. Percentage of tourist fly-ins rose from 21 percent in 2002 to 32 percent in 2003, while drive-ins fell from 70 to 60 percent.
3. Our gambling industry is finally reshaping itself.
And the blueprint of many local properties a decade from now is … the Station/Thunder Valley-style locals’ casino.
“The re-engineering of Reno’s casino industry is well on its way,” says longtime Reno-based gambling consultant Ken Adams, whose Adams Report is read by casino execs coast to coast. “It’s not a downtown tourist industry anymore. It’s more regional. Baldini’s, Rail City, the Bonanza, Western Village, the Peppermill, Atlantis, Tamarack Junction, the Nugget, Boomtown, Gold Dust West, the Sands—all are out somewhere in the neighborhoods. Their business model is mixed local and tourist.”
Adams ticks off 16 casinos ("the Nevada Club … the Horseshoe … the Silver Spur …") that have vanished from downtown Reno since 1978, the last-gasp year when four large properties opened in the city and boosters proclaimed Reno was competing again with Vegas. Didn’t happen. Vegas remains an undisputed international destination. Reno casinos are fighting a regional war and preparing to tap the growing local population, swelling with retirees and California refugees.
Properties surviving downtown in 10 years will be only those with revenue sources outside downtown, Adams says: corporate-owned Harrah’s, Circus Circus and the Silver Legacy, and resorts with interests elsewhere (the Eldorado owns Tamarack Junction Casino in the south Truckee Meadows; The Sands Regency owns Gold Ranch Casino in Verdi and is buying Rail City in Sparks). “The rest of the properties in this area will be mixed models—either local or local and tourist.”
There will be more neighborhood casinos. “Reno is splitting between the north and south,” Adams says. “At each of those poles, it’s showing signs of developing real business or commercial centers. We just have to guess; if somebody can, they’ll try to take advantage of those trends, and the huge residential growth, by placing a casino as close to those growth areas as they can.”
Tamarack Junction—modeled (like Thunder Valley) on the laidback Station properties—opened in September 2001 on South Virginia Street just south of Arrowcreek Parkway, blending into the suburban area with its folksy name (the site once held a train depot), locomotive logo and wood-and-brick architecture with eaves and gables in red and gold high-desert hues. No neon. No obtrusive signage. (No table games or hotel rooms, either. Yet.) Tamarack Junction will nearly triple square footage to 60,000 by November.
Monarch Casino & Resort Inc., parent company of the ultra-busy, tourist-locals-mix Atlantis Casino Resort in south Reno, owns land to build a hotel-casino a mile north of Tamarack Junction. Atlantis’ archrival, the Peppermill Hotel Casino, may have designs for the south meadows, too. Then there are burgeoning northwest Reno, Spanish Springs and the north valleys.
“There will be casinos in that growth pattern,” Adams says. “It’s a popular form of entertainment. The controlling factor is, what will local legislation do to place restrictions on the type of gaming properties and locations?”
“There are a lot of hurdles,” gaming professor Eadington notes. Residents in 2003 shot down a proposed casino for West Fourth Street and McCarran Boulevard. Reno law says any new casino must have a 200-room hotel.
As far as northern Nevada neighborhood casinos being big earners—well, Renoites are not quite as prone to betting as Las Vegans, Eadington says. “Las Vegas probably generates about $1,000 gaming revenue per capita per year. With a population of about 1.5 million, that creates a $1 billion locals market. If Reno had that much gambling, at a population of 350,000, that’d be $350 million. The per-capita spend in Reno is about half of that of Las Vegas.”
At the moment.
Maybe Northern Nevadans just need to get used to the idea of locals-oriented casino-entertainment complexes modeled (of course) on the Station casinos, with cinemas, fast-food restaurants and mall shopping.
“As Washoe County and this whole northern Nevada region grows, it’s going to be good for the local casino-entertainment complexes,” says Ferenc Szony, president and CEO of the Sands Regent, Inc., parent company of the Sands Regency. “That’s very much what’s happened in Las Vegas, if you look at the Stations casinos. As the community grew, the opportunity to provide that entertainment to the local market grew.
“I wouldn’t be surprised if the next large movie theater complex will be connected to a casino environment. It’s a segment of the future that I think is going to work. I do not believe that the tourist market for Washoe County is over. It’s definitely going to change.”
That change deserves support from ordinary residents who may see neighborhood casinos rise up in their backyards, Szony says. “People underestimate those of us in the industry. If we’re going to build something in a neighborhood, we’re going to build something that the locals will like, because they’re going to be our customers.”
Such thinking represents a historic switch, notes Nevada state archivist Guy Rocha. “Gamers and politicians used to say, ‘We’ll keep the taxes down, because people from outside the state will offset that cost to the state. The tourists will take care of that.’ The irony is that it is now the citizen who is paying more to essentially support the local economy and government, through gaming, versus paying more taxes. We’re not asking [locals] to pay more taxes. We’re asking them to gamble more.”
So bring on the neighborhood casinos.
I’m standing on the nippy, overcast first Wednesday of March a few steps from the Reno Arch, whose metallic silver starburst crown (spiffy, perhaps, when the span replaced a previous one in 1988) looks just tawdry now. The sidewalk stones are grimy. Scraps of paper blow about. Virginia Street in the heart of Reno has a depressing feel this afternoon.
Two middle-aged couples are crossing the street from Harrah’s Plaza toward Douglas Alley. They react skittishly when I approach, flashing my most disarming reporter-on-the-street smile. They’d just been panhandled. I show my press credential and wheedle an interview.
Ben and Nancy Rose and Wayne and Elizabeth Ludvickson are from Tulare, Calif., not far from Fresno in California’s Central Valley. They’re retired, enjoy the good life and have been vacationing in Reno for years. A downtown time-share keeps them coming back, despite three Indian casinos in the Fresno area, including the Las Vegas-style Chukchansi Gold Resort and Casino, opened in June with 192 rooms, 1,800 slots and Nevada-style headliners (Jay Leno! The Four Tops!).
Reno—for all its faults—remains a fun place to visit, the couples agree. “The River Walk is really nice,” Wayne Ludvickson says. “You’ve got some antique shops there. I don’t think gambling’s going to do it anymore.”
Suddenly, crudely, our interview is interrupted by the piercing, pulsating violence of a train passing yards away. “That’s one problem, right there,” Ludvickson says, pointing. Of course, the tracks are due to be lowered into a trench sometime in 2005 (only 36 years and nine Reno City Councils after the 1969 master plan).
Ludvickson expects three or four downtown properties to die off. But fellow Californians will continue coming to Reno, he says.
“We like to get out of the Central Valley and the pollution from the sprays—it’s agricultural country—and the traffic,” Nancy Rose says.
Many fellow Californians are cashing in equity on homes in their congested, tax-burdened state and migrating east to live, Ludvickson says. “We’ve even thought about moving here, off and on.”
The two couples understand that neighborhood casinos will crop up around growing Reno. Nancy Rose definitely would patronize a locals’ casino were she to move here. “It’s just a nice way to spend an hour or so, or not even an hour,” she says. “It’s fun!”
She moves her right arm as if playing a slot.
“Ching-ching!" Nancy Rose says. "Ching-ching!"