Thursday, September 18, 2003
Copyright © Las Vegas Review-Journal

Bosses expound on expansion

Spread of gambling seen as best way for operators to lift future revenue

Design engineer Larry Higbee, right, of AC Coin and Slot, talks Wednesday with potential customer Stan Lewinski at the Global Gaming Expo at the Las Vegas Convention Center. Lewinski is an executive with Island Resort Casino, a tribal property in Harris, Mich. Photo by John Gurzinski.

The name of the game in casino development is proliferation, insiders and analysts said Wednesday at the Global Gaming Expo in Las Vegas.

The spread of gambling is the best hope Nevada-based operators and slot machine manufacturers have to boost revenues and profitability in the next few years, they said during the expo at the Las Vegas Convention Center. The show concludes today.

Although recent efforts to expand gaming largely fizzled, governors and state legislatures are again pushing to legalize gambling in new jurisdictions and liberalize regulations where it is already legal.

Still, Chuck Brooke, vice president of International Game Technology, warned that the industry is captive to the political process, but said legislative and initiative petition action are "very dynamic right now."

The new driving force is job creation, with elected officials focusing on the continuing failure of the economy to generate added employment opportunities.

"With unemployment numbers up, the job creation element is beginning to manifest itself again," said Steve Rittvo, president of the Innovative Group.

Mandalay Resort Group President Glenn Schaeffer said: "(Given economic conditions) the most important thing anyone can do is create jobs, even though most politicians don't know it."

He added that the jobs casinos create "are not fast-food jobs," but "jobs you can grow in and support a family," underscoring the arguments lobbyists are pushing in state legislatures.

Rittvo said three arguments generally are made in favor of expanding gaming: generating new tax revenues, creating new jobs and expanding tourism.

Now, for the first time since the 1990s, the issue is becoming the number of new jobs that will be created, he said.

American Gaming Association President Frank Fahrenkopf said it is important for the industry to pitch the jobs argument, and that chances are good it will be as effective as in the early 1990s.

"When governors and legislators look at the jobs created then, they will see a tremendous impact on local economies," he said.

Rittvo said Maine, Maryland, Kentucky and Pennsylvania are most likely to pass measures to expand gambling late this year or early next year.

Chuck Atwood, chief financial officer at Harrah's Entertainment, agreed that those states are the most likely prospects, and said casino companies will keep the ball rolling because "the pearl is worth the dive."

Efforts to expand gaming stalled in 2002 and 2003 because too many fingers got into the pie, analysts said.

"A lot of states became victims of too many fingers in the cookie jar. Too many entities tried to grab part of the opportunities and that muddied the water," Merrill Lynch vice president David Anders said.

The result of the late lobbying entries was that coalitions that had been successful in building support for gambling fell apart over objectives.

In particular, Las Vegas-based gaming companies started lobbying late in the game for profitable gambling operations, while local politicians had been focused simply on generating tax revenues and rebuilding horse breeding businesses and race track operations, they said.

However, Rittvo said it is misleading to paint too dismal a picture of gaming proliferation in 2002 and 2003.

"If you look at expansion in existing states (this year), gaming increased 20 percent in Louisiana, two tracks opened in Florida, two new licenses are being considered in Missouri, California has new tribes entering and Arizona has a new (Indian) compact," he said.

That expansion was the functional equivalent of legalizing gambling in two additional states, Rittvo said.