Reno is Heading Down a New Path – Will Others Follow?

One of the ways we measure the health of the casino industry and track its trends is with the monthly casino/gaming revenue; each state with casinos releases the monthly revenue numbers separately and in different formats.  The state reports paint a picture of the state of the industry for the previous month in that state.  The monthly gaming figures are released in Atlantic City on the tenth of each month. The numbers for November 2013 were great, that is compared to last year when the casinos were closed for a week due to Hurricane Sandy.

Nevada does not release its numbers quite so predictably, especially now that the state seems bent on catching up with the rest of the industry.  Until this year, Nevada reported, not the immediate past month, but two months prior, leaving Nevada out of sync with the rest of the gaming world. The state is now correcting that and getting in sync with the rest of the country.  For the last 7 years, the Atlantic City casinos have been on a steady decline, except for anomalies like this past October and November.  Nevada on the other hand has been up and down from month to month, the fluctuations in Nevada are driven by the economy, while in Atlantic City they are driven more by competition than the economy.

When we say Nevada, we really mean Las Vegas and when  we say Las Vegas we really mean the Las Vegas Strip; the Strip generates the vast majority of the state’s gaming revenues.  The rest of the state is affected both by the economy and external competition.

That is certainly the case for Reno and all of northern Nevada.  Reno has been on a constant decline for at least seven years – with only an occasional upswing for one month – and the results in Reno are driven more by competition than the economy, just like Atlantic City.  In fact, Reno has been in decline so long that the gaming industry has changed dramatically. The 2013 version of the gaming industry is almost unrecognizable when compared to the 1985 version.  The high point for Atlantic City was 2006, for Reno it was about 1986.  Thirty casinos have gone out of business and many of the buildings have been either torn down or converted into other uses.

Two recent stories from the Reno Gazette-Journal illustrate just how much change has taken place in Reno.  Two casinos that have been closed for years are getting ready to begin a new existence.  The Virginian, which closed in 2004, and the former Primadonna Club, which closed in 2005, are set to change.  Both casinos, in their day, represented the old Reno casino world.  They represented a Reno without external competition and a Reno in which investors had a great deal of confidence.  But that was a very long time ago.  The Primadonna was built by Ernie Primm 50 years ago; the Virginian is not as old, but it too was built before Indian casinos and the competition Reno now faces.

The Virginian in downtown Reno is literally getting a new lease on life following its sale to The Siegel Group.  The Siegel Group paid $2.38 million for the property… represents the second high-profile acquisition of a downtown property by The Siegel Group this year…The redeveloper is still working on plans for the building, but will make an announcement once it nails down the details, said Michael Crandall, senior vice president of The Siegel Group. The 16-story, 125-room property closed in 2004. Jason Hidalgo, Reno Gazette-Journal, 12-8-13

Jeff Siri’s Casino…will sport a “South Beach-style” facade when it opens, as planned, next spring…Inside, the 150-slot operation will include a bar offering more than a dozen flavors of daiquiris and decor with art deco statues and varied lighting — all of it appealing, Siri said he hopes, to a younger, late-night crowd. He also foresees Siri’s Casino attracting daytime tourists walking the Virginia Street corridor. But the nighttime attraction is key, he said, as a lure for the movie theater complex on First and Sierra streets as well as audiences leaving the Knitting Factory Concert House. Bill O’Driscoll, Reno Gazette-Journal, 12-8-13

The developer Siegel has not said what the Virginian will become; it is new to Reno and has purchased other downtown properties with the intent of reinventing them.  Siegel sees a new downtown; it can imagine a new future partly because it is untainted and unencumbered with Reno’s past.

 “The Virginian is such a great property and we’re excited to bring it back to life, turn the lights on, and create some jobs after it’s been shut down for so many years,” Crandall said. “We’re also extremely pleased with how the community has welcomed us back … so we don’t plan to slow down. We’ll continue to keep growing in Reno.” Jason Hidalgo, Reno Gazette-Journal, 12-8-13

Jeff Siri is not like that; he has lived in Reno his whole life and has worked downtown for 30 years.  He knows the history, but more importantly he knows the current realities.  The Primadonna is going to be a casino – sort of.  Jeff Siri is the CEO and owner of the Club Cal-Neva and former CEO of William Hill in Nevada.  Jeff is going to be operating only 150 slot machines with a bar and a restaurant – the food will come from the Cal Neva.  With today’s slot technology Jeff will be able to operate his casino with very low overhead and no debt.  He plans to cater to two different audiences –the tourists walking between casinos on Virginia street during the days and in the nights, a hipper, younger audience walking between entertainment venues.

“It’s been dark there for so long.  We’re opening up a closed property, bringing a little life back to downtown. We’ll even change the color of the lighting outside. For UNR games, we could do blue. Valentine’s Day, pink. St. Patrick’s Day, green.” Bill O’Driscoll, Reno Gazette-Journal, 12-8-13

It is not a “Warren Buffet” business model, no billionaires to be made, but it is a safe and sure business model for a changing Reno. Of course there are still some traditional casinos in Reno; the Peppermill and the Atlantis are very successful and they could compete in any market  But, there are no new thousand-room casino/hotel/resorts in Reno’s future – they all belong to Reno’s past.  Reno’s future does include casino gaming, just a different version.  So there are your choices, turn the old casinos into something totally different or reengineer the casino model to fit a totally different world.  Reno does not make a good model for Atlantic City; but it is a good model for studying life after the booming go-go years of limited competition.  Like Reno, Atlantic City too, will be forced to reengineer itself.  And Atlantic City is not the only place that will be forced to change because of the increased competition; others will follow Reno’s lead. With more and more competition on the horizon and the continually decreasing revenues, change is as certain as death and taxes.


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