Brad Stone walks along the shiny marble floors of the
Venetian hotel-casino’s new $275 million tower smiling. He brags about the
spacious rooms that average $200 a night and the planned upscale restaurant
that will draw refined palates and thick wallets.
The executive vice president of the Las Vegas Sands,
which owns the Venetian, is talking about profit margins, hardly mentioning
table games and slot machines. In fact, visitors to the new hotel tower can
commit what was once considered a cardinal sin in Sin City - they can check
into the gleaming tower without ever passing through the casino.
This is the retooled Las Vegas, one in which casinos that
rely purely on gamblers to generate the majority of their profits are
dwindling. The new business paradigm focuses on hotel rooms, food, beverage
and entertainment.
“You are seeing a shift,” Stone said. “This town
has reinvented itself. You can come here and not gamble and have a great
time.”
During the past decade revenues for major casino
companies have been moving slowly from gambling to non-gambling sources,
evidence that Las Vegas is evolving into a bona fide tourist destination - a
sort of Disneyworld with vices.
Major gambling companies compete in trying to open the
hottest nightclubs and lure the finest chefs to run upscale eateries. They
seek headliners such as Celine Dion or the latest Cirque du Soleil
production to fill theaters.
“We have diversified within the travel and tourism
business,” said Keith Schwer, a professor of economics at the University
of Nevada, Las Vegas. “We have a portfolio of things to offer people
coming here other than gambling.”
The revenue evolution has been gradual but definitive,
Nevada Gaming Control Board data shows. In 1992, 61 percent of the revenues
generated from casinos in Nevada came from gambling. Last year, that figure
was 51.5 percent. The trend is even more pronounced on the Las Vegas Strip,
where last year casinos reported only 43 percent of almost $9 billion in
revenue came from gamblers. Ten years ago the figure was 56.7 percent.
The MRC Group Research Institute found in a recent survey
that the primary reason for visiting Las Vegas is entertainment. Only 17
percent of the visitors surveyed said they intended to gamble. The top
activities were sightseeing, pool lounging and shopping.
“It’s the evolution of gambling,” MRC chief
executive Jim Medick said. “It now opens up to a much broader market.”
The Venetian and other gambling corporations are pouring
their money into the lucrative, luxury all-suite rooms that seasoned
business-travelers demand. “You now have this incredible new revenue
sources and you now have these incredible new rooms,” Medick said.
“You’re able to capture the business traveler and the conventioneers.”
Las Vegas is the No. 1 convention city in the country. In
2002, 14.6 percent of the all visitors to Las Vegas were conventioneers.
Casino companies, such as Park Place Entertainment, MGM Mirage and Mandalay
Resort Group have diversified their business plans to cater to all types of
visitors, not just gamblers. The three companies control about 75 percent of
the hotel rooms on the Strip and intend to extend their dominance without
acquiring more properties.
The Venetian, with its 1,013-room, 12-story tower named
the Venezia, has helped lead the way in showing competitors that the money
is in hotel rooms. Stone said the Venezia’s all-suite rooms boast 70
percent profit margins.
The Mandalay Bay hotel-casino is building a $225 million
hotel tower with 1,125 rooms that’s scheduled to open later this year. The
Mandalay Bay hotel’s average room rate topped $200 in the first quarter of
this year, its highest-ever quarterly mark. The Bellagio hotel-casino, which
is owned by MGM Mirage, also is expanding, adding a $375 million, 925-room,
tower slated to open next year. Caesars Palace is considering a 1,000-room
tower that could cost $350 million.
Wally Barr, president and chief executive officer at Park
Place Entertainment, said the tower makes sense given the changes in Las
Vegas and customer expectations. Barr said Las Vegas had to offer more in
the way of restaurants and shows because of the proliferation of casinos.
The city needed a new sales pitch.
“Vegas had to have all the trimmings,” Barr said.
Marc Falcone, a gambling analyst with Deutsche Bank in
New York City, said charging for rooms carries the highest gross profit and
broadens the demographic of visitors. “The gaming revenue is flat, which
parallels visitor volume growth, but spending in the non-gaming area
continues to grow, which is a good thing,” said Frank Streshley, a senior
analyst with the Gaming Control Board.
Still, not all the casino giants have embraced the move
toward non-gambling revenue. Harrah’s Entertainment, for one, says it
hasn’t strayed from its original mission.
Harrah’s spokesman Gary Thompson said 89 percent of his
company’s revenues last year came from gambling. On any given day during
the week, Thompson said, more than half of Harrah’s rooms are
complimentary, attracting visitors who come to gamble with the lure of a
free room.
“The great attractions of Las Vegas are the must-see
amenities that our competitors have built,” Thompson said. “We have
opted to build strong relationships with players instead of building
billion-dollar edifices.” Harrah’s business strategy isn’t about to
change. “We are the most profitable casino company in the world,” he
said. “It does work.”
Ambassador
of Sri Lanka, H.E. S. Palihakkara, welcomes the many guests.
Secretary
of State of the Ministry of Tourism, Dr. Ramunujan, during his speech.
Rohan
Seneviratne (right) General Manager of Sri Lankan Airlines with his
assistant Ms. Ankuna.
Three
dancers of the “Channa-Upuli” ensemble enchant the audience.