A City and an Industry in Transition

The casino industry has changed dramatically since the 1980’s when I worked at the Comstock Hotel and Casino.  In those days, Reno was a vibrant, growing and expanding casino market; it was the number three gaming market in the country after Las Vegas and Atlantic City.  The picture is very different today; most of the casinos from my day have closed up shop and the buildings have been repurposed.  The surviving casinos have one thing in common; they are now part of national corporations.  Those still open and operating are no longer tied exclusively to Reno or as Gary Carano said, “We don’t have all of our eggs in one basket.”  Carano is the CEO of Eldorado Resorts, which as of May 1, 2017, owns 19 casinos in 10 states. That corporation is a far cry from the Eldorado Casino that opened in Reno in 1973 with a few hundred slot machines and 282 rooms.

On May Day, Eldorado Resorts completed its purchase of Isle of Capri.  That purchase was the most recent in a string of mergers and acquisitions over the last few years including the Silver Legacy and Circus Circus in Reno in 2015, a merger with MTR Gaming in 2014 and an earlier purchase of Hollywood Casino in Shreveport, Louisiana.  In the process, Eldorado Resorts has risen to number six on the list of gaming corporations as ranked by the number of casinos operated.

Thirty-five years ago, the Carano brothers and I were competitors in the casino core of Reno.  There were over 20 casinos within the downtown area competing for the 5 million tourists who visited Reno annually in the 1980’s.  Each of us tried to differentiate our casino from the others with promotions, food specials and gaming tournaments.  The Eldorado concentrated on quality and targeted a more sophisticated table game and restaurant customer.  Except for Harrah’s, the other casinos targeted slot players.  The Eldorado introduced higher quality restaurants, higher limit games, upgraded hotel rooms and renewed with a more elegant décor.  Only Harrah’s competed directly with the Eldorado by offering comparable products.  Competing for those customers requires constant reinvestment. If everything is not well-maintained with the most up-to-date rooms, restaurants, slot machines and entertainment, customers go elsewhere. Long ago, Harrah’s threw in the towel as Reno was no longer worth the investment.  As to those other casinos, the slot players found a slot machine closer to home in an Indian casino.

The number of people visiting Reno has been decreasing yearly since the advent of Indian gaming.  As the number of Indian casinos in Washington, Oregon and California increased, the number of tourists coming to Reno dropped.  In 2017, that number is closer to 2 million than at the peak in the late 1980’s when nearly 6 million visitors came to town.  The result is easy to see; today there are only seven casinos where once there were twenty.  It has been clear for a long time, that if you have only one casino in downtown Reno, you probably will not remain in business.  There are exceptions in the greater metro area.  The casinos catering to local business in their immediate vicinity, such as the Atlantis, Peppermill and the Gold Dust West have done well over the years.  But Reno’s economy has also evolved.  It has moved being driven by gaming to an economy is built around technology.

The Reno casino industry has changed a great deal in the last thirty years, but the overall gaming industry has changed even more. The Eldorado succeeded by expanding into other markets.  It is the only successful strategy thus far for a downtown Reno casino; actually it is the only truly successful strategy in the country.   In today’s competitive environment, a casino company with an operation in only one jurisdiction faces a very uncertain future for several reasons.  A single event such as a flood, hurricane or regional recession can spell its doom.  Half of the casinos that have disappeared in Reno in the last 20 years did so as a result of the disastrous flood of 1997.  It was the proverbial straw that broke the casino’s back.

Additionally, there is an even larger threat, the gaming expansion in neighboring states.  An increase in casinos in adjacent states always reduces the base of regular customers.  That is what casinos in Pennsylvania did to Atlantic City and Indian casinos did to Reno.  The problem is not unique to Atlantic City or Reno; in 2017, no single jurisdiction can withstand significant expansion on its borders. The casino gaming industry is transitioning from a local into a national industry.  It is now dominated by a handful of major corporations.  Those corporations are the only ones able to survive the ups and downs of individual jurisdictions. They have ready access to financing and thus the ability to maintain highly competitive individual properties and to compete for licenses in new jurisdictions.

The Eldorado survived the decline of Reno and joined the ranks of the big guys.  It survived because it expanded, but also because in Reno it maintained its commitment to quality.  The Eldorado continued to reinvest here while the rest of us failed to do so.  Maybe it was because we did not have enough cash flow or maybe it was because our vision was too narrow.  Today, the Comstock has no casino, no restaurants and no retail, just condominiums. But, if you want to invest in Reno, I think there are even a few units available or you might buy some stock in Eldorado Resorts.

The Reno-based company closed on its acquisition of Isle of Capri Casinos, adding 12 more properties to its portfolio and creating a larger regional gaming business worth $1.7 billion. Eldorado acquired Isle of Capri for $23.00 in cash per share or 1.638 shares of Eldorado common stock. Eldorado first announced its plans to acquire the company last year. The acquisition adds to a growing portfolio for Eldorado Resorts that includes properties in Nevada, Louisiana, Ohio, Pennsylvania and West Virginia. In addition to its Reno Tri-Properties, which include the Eldorado, Silver Legacy and Circus Circus, the company also owns Eldorado Shreveport, Scioto Downs, Mountaineer and Presque Isle Downs.  The acquisition of Isle of Capri further expands the list to 19 total properties in 10 states, which now also include Colorado, Missouri, Mississippi and Florida. Jason Hidalgo, Reno Gazette-Journal, 5-2-17


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