Thursday, March 20, 2003
Copyright © Las Vegas Review-Journal

Tribal gaming will devastate Reno casinos, report says

American Indian tribes will more than double the number of slot machines they operate in Northern California in the next few months, "devastating" Reno's gaming industry, a new Deutsche Bank report says.

Adding more than 5,000 slots to the stiff regional competition will scorch prospects for the gaming industry in the Reno area.

"With the operation deadline under the (existing) compact(s) nearing which requires tribes to have operations started by June 26, 2003, we expect approximately 5,250 new slot machines ... to be operational by the beginning of the third quarter 2003," Deutsche Bank analyst Andrew Zarnett said.

That includes 1,900 slots at the $215 million Thunder Valley Station casino, the United Auburn Indian Community casino to be managed by Station Casinos. It is located about two hours from Reno and is set to open in July.

It also includes 1,600 slots at the River Rock casino, which the Dry Creek Rancheria Band of Pomo Indians intends to open in April, about 1,250 slots at the Hopland Sho-Ka-Wah Casino set to open this summer and 500 slots that have been added with the expansion of Cache Creek.

Compact renegotiations may also allow for additional slots per tribe, which are currently capped at 2,000.

The surge in slot machine availability, combined with the improved quality of Indian casinos together will be "devastating in time for Reno," Zarnett said.

Gaming expert and University of Nevada, Las Vegas professor Bill Thompson said the surge in slots will adversely affect Northern Nevada disproportionately compared with the south.

The new machines will more than double the number of slots already operating in Northern California casinos.

By comparison, there are about 15,000 slot machines operating in the Reno market.

But Thompson said with the increasing number of slots in California, people who just want to gamble will find alternatives rather than drive over the mountains to Nevada.

"Reno has the disadvantage of relying on driving Californians a lot more than we do (in Las Vegas). The people who want to gamble will find alternatives in California," he said.

The San Francisco/Sacramento area is the primary base for generating gaming customers in the Reno market, Zarnett said.

"Clearly, there is tremendous potential for (the number of slot machines in) that market to grow if Gov. Gray Davis is successful in negotiating new compacts with the Indians," he said.

Compounding the problem for Northern Nevada, the Indian tribes will generate substantial added revenues, which they will reinvest in their facilities if Davis renegotiates the compacts to allow more slots, Zarnett said.

"That will mean a lot more hotel rooms, and that's what will kill Reno," he said.

Historically, Reno has relied on the drive-in, overnight market in California to drive its gaming industry, Zarnett said.

UNLV's Thompson said the Reno area may still be able to benefit from mitigating circumstances.

"The new casinos in California will be creating new gamblers and Reno can get some of the spillover benefit. Overall, it'll still hurt," he said.

Also, however, Reno has a benefit over Southern Nevada because it is not looked down upon by the business community worldwide as is Las Vegas, Thompson said.

"That's part of the reason Las Vegas doesn't attract nongaming businesses and Reno does," he said.

"There are a lot of people moving from Southern California, businesses are relocating and housing prices are going up, all of which means Reno isn't headed for a major depression," Thompson said.

However, Reno has already started feeling the effects of the competition.

In 2002, the number of visitors to Reno decreased to 4.9 million, down 2.3 percent from 2001 when the number of visitors also declined 3.5 percent.

Also, Reno's 2002 gaming revenues dropped to $534.8 million, down 9 percent from 2001 when revenues fell 3.9 percent.

The widespread expansion of California's Indian casinos following the passage of Proposition 1A led to falling visitor numbers and casino revenues in 2001 and 2002, Zarnett said.

TRIBES WITHOUT CASINOS

Tribe (casino)	Location	Status	Slots
Dry Creek Rancheria (River Rock Casino)	Geyserville	Under construction	1,600
United Auburn Indian Community (Thunder Valley Station)	Roseville	Under construction	1,900
Buena Vista Rancheria of MiWuk Indians	Ione	Under construction	2,000
Shingle Springs Rancheria	Shingle Springs	Under planning	2,000
Total			7,500

Source: Deutsche Bank