The Tesla Effect: Reno Finds a New Economic Driver

Since the end of the Second World War, the casino industry has been the driver of Reno’s economy. But not anymore; now an electric car is set to become the economic driver in Reno. The local casino industry has been on a long slow slide for 25 years. The chief culprit is Indian gaming in Washington, Oregon, California, New Mexico and Arizona. Besides Indian gaming, conventional gaming has expanded into Mississippi, Missouri, Illinois, Indiana, Iowa, Colorado, South Dakota, West Virginia, Louisiana, Michigan and just about every other state in the nation. Before Indian casinos and the legalization of casinos in other states, gamblers came from every state in the country to stay and play in Reno. In the ensuing years, the number of casinos has declined as fast as the gaming revenues declined.

The city has tried very hard for twenty-five years to diversify, but it had been difficult to replace gaming until Tesla, Amazon and Apple discovered Reno. When Tesla said it wanted to build the biggest factory in the United States and employee 6000 people in Reno, the nation took notice. Nevada’s Governor Brian Sandoval helped bring Tesla to Reno by negotiating a billion-dollar tax break and other incentives for the electric car maker. Tesla had made a contest of its choice for a location and pitted four locations against each other. With Governor Sandoval’s help Reno was selected over those other locations. Almost immediately other companies began looking at Reno. Commitments from other national and multi-national firms to move here came quickly on the heels of Tesla’s announcement.

The excitement and the momentum generated by the Tesla announcement changed Reno’s destiny overnight. The recession ended for the city, employment has increased and so has consumer confidence and that means increased consumer spending. The biggest shift is happening in real estate. Housing prices have started to recover from recession levels and commercial real estate, including hotels, is really heating up. Hotel chains are looking at Reno again for the first time in 25 years. The city is attractive because of the high-tech industry that is rapidly developing here. Firms are sending people to investigate opportunities and individuals are coming to look for jobs. Other people are coming just to see the excitement. That brings me around to the sale of the Siena Hotel.

Grand Siena LLC said it has entered an agreement to sell the eight-story, 214-room property along the south banks of the Truckee River for an undisclosed price, with the deal set to close “sometime this summer.” …”The new owners’ plans include a multi-million-dollar renovation and a partnership with an internationally recognized hotel and resort brand.” Bill O’Driscoll, Reno Gazette-Journal, 5-6-15

The Siena Hotel in downtown Reno will soon have its seventh owner in its 60-year history. For most of those years it was the Holiday Hotel. It was never terribly profitable; still it managed to hang on as ownership passed from one investor to the next. In 1999, it sold to Barney Ng who put $80 million, more or less, of his father’s money into converting the old Holiday into the modern Siena. Barney envisioned a hip, classy property catering to Silicon Valley dot com millionaires. Unfortunately for Mr. Ng, the dot bubble burst and the dot com millionaires disappeared in puff of smoke just as the Siena opened. The next 10 years were painful for Ng and the Siena. It went into bankruptcy and was sold at auction for the second time for $3.9 million. That was four years ago; now it will get a new start.

This time the Holiday/Siena will not be a casino, although it probably will have some slot machines operated by a third party licensee. The property will get a new name and finally get the chance to be what Barney imagined, a trendy, classy, boutique hotel filled with young techie-types preparing to change the world with their technology and innovation. For the casino industry it will be a bonus – good rooms without a competing casino.

In fact, that is apt to be one of the major bonuses of the Tesla effect. Reno can expect more people to move here. That will raise the average household income and increase the disposable income spendable in local casinos. At the same time, tourism is likely to increase. There will be more hotel rooms, but fewer slot machines competing against each other. And as a footnote; CEO Elon Musk is touting his batteries for houses and businesses, not just Tesla cars. Tesla took $800 million in orders for batteries in the first week after Musk’s statement. The 5-million-square battery factory in Reno may not be big enough the day it is finished. There is a new driver in town and he/she is driving a battery powered car and living in a battery powered house.


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May 2015
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