In 1983, the movie Flashdance was a hit at the box office. Michael Jackson was at the top of the Billboard charts with his album “Thriller.” Jane Fonda’s Workout Book was on the best-seller list. Millions of Americans were glued to their television sets watching J.R. and Joan Collins in the nighttime soaps “Dallas” and “Dynasty.” I had more hair—which is not necessarily better hair. We hardly recognize ourselves from 20 years ago, but we see how far we’ve come.
Twenty years ago, this state created the Nevada Commission on Tourism, which began the annual tradition of reviewing the state of its biggest industry in a public forum called the Nevada Governor’s Conference on Travel and Tourism. Milestones like these encourage reflection on the past and a look to the future. While my previous speeches at this conference typically have given you an annual update on the gaming industry, in recognition of this 20-year anniversary I wanted to expand my talk a little and take a journey with you back to 1983 to show you just how much the gaming industry has evolved in the two decades since the commission was created, as well as discuss what we can look forward to down the road.
Just as it’s difficult to believe we once listened to bad music, watched trashy television, and sported big hair and long sideburns, today it’s hard to imagine the gaming industry as it was in 1983. Commercial casinos were operating in just two states—here and New Jersey, and there were no Indian casinos. Today, 10 other states besides Nevada now have legalized commercial casino gambling, and Native American casinos are in 29 states. Twenty years ago, lotteries were in 17 states plus the District of Columbia. Today, they are legal in 40 states plus the District of Columbia. In 1983, horse racing was legal in 28 states. Today, pari-mutuel wagering can be found in 42 states. Back then, the term “racino” didn’t even exist. Today, racinos, or slots at the tracks, operate in six states and are contemplated for several more in 2004.
While the gaming industry was uneasy at first with the idea of competition, nationwide gambling expansion actually hastened the evolution of gaming in Nevada, making it a net positive for the state. Twenty years ago, we had casinos. Now, our casinos are megaresorts with world-class dining, shopping, entertainment and accommodations catering to travelers, vacationers, gamblers and conventioneers. What has this meant for this industry and this state? In 1983, 12.3 million visitors came to Las Vegas. Today, that number is almost three times greater, at more than 35 million. Gross gaming revenue has jumped from $2.6 billion to $9.4 billion. Hotel room capacity in Las Vegas has increased from just over 50,000 rooms to more than 125,000 rooms, with new towers opening at Bellagio, Caesars, Mandalay Bay, the Venetian and Wynn Las Vegas. Twenty years ago, the largest hotel had about 3,000 rooms, but now the largest hotel has 5,000 rooms.
While some experts believe that the challenge from Native American gaming in California will adversely affect certain areas of the state—primarily northern Nevada and downtown Las Vegas—these areas more recently have begun to respond with new ideas to differentiate themselves from the competition.
Some areas, however, risk making the same mistakes that northern Nevada made initially in the face of competition. A few months ago, I warned North Las Vegas about limiting growth at the expense of economic development. You need to manage growth; you cannot stop growth. Growth and quality of life are not mutually exclusive. As the second fastest-growing city in the nation, North Las Vegas has a tremendous opportunity to position itself for the future.
One equally positive consequence of expansion is that more Americans now experience gambling firsthand and have grown to accept it. As the AGA’s annual survey showed, acceptability is at its highest level in years, with 85 percent of Americans saying casino gambling is an acceptable entertainment option for themselves or others. That number climbs above 90 percent when the same question is asked of adults under age 40. This finding—that young adults are the strongest supporters of casino gambling—is very significant and bodes well for the future of our industry and the state of Nevada.
The growing acceptability of casino gambling has caused a change in the cultural landscape in this country. Twenty years ago, it would have been hard to imagine blue-chip companies such as Delta Air Lines, DreamWorks, Ford Motor Company, the NBC division of General Electric, Levi Strauss, PepsiCo and Time Warner featuring gambling in their advertising campaigns—but that’s just what’s happening today. As Al Merrin, vice chairman and executive creative director at BBDO Worldwide in New York, explained: “The idea that gambling is more acceptable now, more of a mainstream activity, helped a lot” to inspire a plot with a gambling theme for a new PepsiCo commercial for Lay’s potato chips.
This is good news, of course, because it shows that casino gambling is now broadly accepted, mainstream entertainment. With only one in four American adults currently visiting casinos every year, coupled with the aging of the baby boomer generation, there’s still tremendous opportunity for growth in this industry. That is why the statistic I mentioned earlier—that 90 percent of young adults view casino gambling as an acceptable form of entertainment—is so important.
Despite our worst fears that gambling proliferation would compromise this state’s economic future, the gaming industry in Nevada has survived and in many cases thrived in the face of competition over the last 20 years. But what can we expect in the years to come? And what can we do to make sure the industry in this state is still strong for the 30th, 40th and 50th anniversaries of this conference?
It appears that next year holds much the same in store as 2003. Debates over gambling expansion that began in many states this year will continue into 2004. Arkansas, California, Florida, Kentucky, Maryland, New Jersey, New York, Ohio, Pennsylvania, Rhode Island are all potential battlegrounds. Most of these debates will focus on the legalization of slots at racetracks, not the destination resorts found in Nevada and the other 11 commercial casino states.
With many of these states turning to the gaming industry to bail them out of budget woes brought on by a weak economy, proposed tax rates have become disturbingly high. As Winston Churchill once said, “The idea that [government] can tax itself into prosperity is one of the cruelest delusions which has ever befuddled the human mind.” And yet, that delusion is playing out in many states today. Whether it’s a 70 percent tax rate in Illinois or even higher rates in prospective jurisdictions, these states will soon recognize that there is such a thing as killing the golden goose. Gaming companies already have begun to look elsewhere for growth, entering into contracts with Native American casinos and looking at international expansion opportunities in Great Britain, Macau and other areas. Nevada has the ability and the opportunity to welcome economic development that may be stunted elsewhere.
As casino and racino states begin to face both competition from within their states and from neighboring states, they will inevitably look to Nevada as a model and upgrade their product. Already, we are seeing that trend in Atlantic City, where they face multiple threats from existing racinos in West Virginia and Delaware, as well the possibility of racinos in Maryland, Pennsylvania and their own state. Atlantic City responded by raising the bar, with Boyd Gaming and MGM MIRAGE building the Borgata and Aztar, Harrah’s, Park Place and others making significant improvements to their existing facilities.
The question now is how will this state respond to efforts in other jurisdictions that aim to rival Nevada?
The answer should be more of the same. Nevada in general and Las Vegas in particular are adept at reinventing themselves—a characteristic that should serve the state well as it competes on a national, and soon-to-be international, scale. While it would be hard to match Nevada, it would be a mistake to become complacent.
Indeed, the gaming industry has been in a constant process of improvement, keeping up with customer preferences. Who would have guessed 20 years ago that nickel machines with television show themes would help drive industry growth? That our slot machines would become cashless and buckets of coins might become obsolete? Or that player comping and tracking would move beyond casual, back of the envelope calculations to become sophisticated, technology-driven Customer Relationship Marketing?
Similarly, in 2023 we may not recognize ourselves from 2003. According to a survey that was part of the first-ever FutureWatch series, conducted by the AGA and our trade show partners Reed Exhibitions as part of our annual Global Gaming Expo, 61 percent of industry insiders think casino resorts will continue to rely on property themes to about the same extent as they do today, while 39 percent of respondents said that the casinos of the near future would “somewhat” or “totally” move away from designs that are theme-based.
A majority (60 percent) of those whom we interviewed believe that new technology-intensive games will continue to gain market share. While the traditional reel machine does have a future, it will be in smaller markets or at lower-end properties.
More than three-quarters (77 percent) of the survey universe feel automation and technology would make the casino floor of 2020 look “totally” or “quite a bit” different than the casino floor of today.
Nevada has always been on the cutting-edge of these changes and must continue to differentiate itself and drive innovations that set it apart from the competition. From 1983 to 2003, the national gaming landscape changed significantly, yet this state, with the gaming industry as the spark, remained a global leader in travel and tourism. “Time is neutral,” Winston Churchill once said, “but it can be made the ally of those who will seize it and use it to the full.” Here in Nevada, I believe we have done just that—and will continue to do so.