Lake Tahoe casinos anticipate competition

A casino planned east of Sacramento along U.S. 50 could drain USD 75 million a year from Lake Tahoe’s South Shore economy, but casinos there plan to tap into new markets to buoy business.

„It is pretty clear that, for the community, it is definitely a threat, not just to gaming, but to tourism in general and many businesses in South Lake Tahoe — lodging, stores that survive and thrive on tourism,“ said John Packer, director of communications at Harrah’s and Harveys in Stateline.

The casino would save Lake Tahoe-bound gamblers out of the Sacramento area from 67 miles of driving over Echo Summit, which can be treacherous in winter.

Lakes Entertainment of Minnesota plans to develop and manage the casino for the Shingle Springs Racheria of Miwok Indians.

It’s a similar situation to the Thunder Valley Casino that opened off Interstate 80 in June 2003, giving gamblers a quick fix without having to drive over Donner Summit to Reno and Sparks. That casino had 1,900 slots and 100 table games, nearly exactly what is planned at Foothill Oaks.

Thunder Valley took the blame for putting Reno and Sparks casinos into a slump they only appear to be recovering from more than three years later. In May 2003, the month before Thunder Valley opened, Washoe County casinos reported USD 93.6 million in revenue.

This year, they reported USD 91.2 million, not quite back to the pre-Thunder Valley level, but up 3 percent from 2005 before the recovery. So far this fiscal year, the casinos‘ revenue is flat with last year.

Companies operating in the region with public stock still cite the casino as a drain on revenue during slow months.

„Casinos in Northern Nevada have dealt with the initial blow that came when California casinos, particularly Thunder Valley, opened,“ said Packer, whose parent company, Harrah’s, also has a Reno casino. „They have found different ways to work around it. Certainly, there was some loss in business, untracked casino play, but it has been offset for Harrah’s in our ability to use our database and Internet marketing to backfill where those losses occurred, to some extent.“

Harrah’s and Harveys at Tahoe could use the same strategy of direct marketing to Harrah’s registered gamblers nationwide and charter flights into Reno-Tahoe International Airport to replace business lost to Foothill Oaks.

„But the impact could be greater for those that depend more on retail players,“ Packer said. „The Lakeside Inn, Horizon and Montbleu don’t have the database of players that Harrah’s has. They are more dependant on the drive-up market.“

Recent investment

Columbia Sussex owns the Horizon in Stateline, and recently it bought the former Caesars Tahoe for USD 45 million and spent another USD 45 million redesigning it into Montbleu, debuting the new property this year.

„When Columbia Sussex bought the property, the business plan looked at that casino,“ Montbleu General Manager Patrick Bassney said. „We knew it was investing in a gaming market that was flat at best. We said let’s develop a destination resort. Let’s go after regular tourists that will come here and spend some money.“

That’s meant targeting a young, hip crowd, and people who visit the lake for skiing and other recreation.

„Tahoe still is a strong destination,“ Bassney said. „Heavenly has a master plan on the books that in the next few years will make them more of a destination ski resort. We go after the skiers in winter now, whereas in years past, the casinos didn’t care much for skiers, but now we love them.“

The new strategy involves upgrading noncasino amenities, such as the spa that will open this month, and stealth advertising.

Montbleu teamed with Vans apparel company to allow the company to film scenes for its „A Lucid Dream“ film project inside the casino. The Vans DVD was then distributed through snowboard magazines and provided an alternative advertising forum for the company.

„We had a lot of fun with it,“ Bassney said. „We are looking at different avenues of people to go after, not traditional casino gamers. We haven’t given up on them, but we know we need more.“

Redevelopment obstacles

The shift in marketing is a work in progress, but the cost of construction in the Lake Tahoe basin, coupled with strict environmental regulations, makes it hard to get a return on any investment in remodeling, Lakeside Inn President Mike Bradford said.

„That is one reason the casinos up here are so dated,“ Bradford said. „The costs are so much that when added to the flat gaming market affected by Indian gaming, the diminishing returns make it virtually impossible.“

South Lake Tahoe City Manager David Jinkens agrees.

„In part that has to do with the nature of this highly controlled, noncapitalistic regulatory system that makes it very difficult to grow here,“ Jinkens said.

Despite such regulations, the city has been redeveloping and plans to break ground on a new convention center next year.

„That will help,“ Jinkens said. „We are looking at neighborhood improvements. We are trying to loosen the land-use regulations, without hurting the environment, to diversify our economy.“

But those efforts take time, and the city might not have much left, although it will petition the court on behalf of the casino opponents when they file their appeal, he said.

„There are things we can control and things we can’t,“ Jinkens said. „If the courts support the big developer, we’ll have to live with it.“