Elsewhere: Las Vegas: A Double Game

In the past year about 40 million tourists have visited the gaming capital Las Vegas, and have contributed a total of $39.4 billion to the city budget. Five years ago 35 million tourists who spent $31.4 billion visited Las Vegas. Here for already more than 10 years the hotels in the city, on average, are filled 93 per cent, and on Fridays the queues for a taxi at McCarran international airport can total 500 people and more. What forces tourists to come to Las Vegas again and again?

Gold desert

Las Vegas arose due to a mistake: in 1829 a caravan heading to Los Angeles went astray. Mexican Rafael Rivera found an oasis among the sand. In 1855 the settlement Las Vegas was formed by the Mormons of Salt Lake City. The remains of a fort constructed at the time are still kept to these days; now they are a part of the National register of historical sights. The actual city Las Vegas (Spanish for The Meadows) was formed in May 1905.

For a long time the city was known as the main point for re-fuelling and parking railway trains. However the state of Nevada even since the old days and not without reason was considered free - hasty weddings and wagered brutal fights were permitted. The specific point in the development of the gambling industry was in 1915 when the assortment of gambling was expanded and the first automatic gambling machines were established in the city. The prize was paid in an equivalent good, and also cigars and alcoholic drinks. On May 19, 1931, in the territory of the state of Nevada gambling was officially permitted.

It is remarkable that the initiator of a new method to replenish the regional budget was Nevada’s Tobin, who never played casino. He considered that using money from gambling it was possible to construct many new schools (this is very characteristic, today teachers in Nevada are one of the first to fight for increasing taxes on the income of gambling.) In 1940 there were about 9,000 players, and in 1960 their number had increased to 64,000.

Significant new buildings

From the middle of the 1970s the city landscape began to undergo significant changes: primitive hotels in bungalow style began to be replaced by modern high-altitude buildings. This process proceeds to this day.

Las Vegas has arisen practically from an empty space. Incidentally, new constructions in Las Vegas are also built on empty spaces. Even if it is necessary to demolish a quite normal, but simply obsolete building. In Las Vegas there is no concept of "late completion of a project." It seems that the city plays with its image, changing it with the same speed as pictures in a kaleidoscope. "By my own free will, I initially would place an explosive at the base of a new construction,” Clark Ronald, head of the department of development of Linn county playfully notes. “It is a pity the fire inspection service would not allow that." In this way, on the fragments of the morally worn-out Dunes Hotel, the famous Bellagio hotel-casino was constructed. Dunes Hotel operated for 38 years, from 1955 to 1993. It became famous for the first topless show Minskys Follies in 1956. In 1993, Dunes Hotel was demolished and on its place the construction of the huge Bellagio hotel-casino complex begun. The complex has been constructed in the style of a Tuscan village. It has an artificial lake with an area of 3.4 hectares, widespread buildings at the front, and more than 1,000 "singing fountains," the jets of which reach 73 meters, a magnificent botanical garden and exclusive ceilings executed by glass-blower Dale Chihuly.

In 2004, 900 additional rooms, new boutiques and restaurants, and also exhibition halls measuring a total area of more than 5,500 sq.m were opened at the hotel. In addition Bellagio became a rather popular hotel for business tourism: here large international conferences and award ceremonies take place, the business center is equipped with the latest word in technology. Bellagio is not only a casino-hotel, but also a huge cultural center. Here the remake of the film Oceans Eleven was shot. "Why did we choose the Bellagio?” asks the producer of the film Jerry Weintraub, “because it is the best hotel in Las Vegas. It is the most magnificent and most significant hotel in the city. Aside from that we filmed when its owner was Steve Wynn, my dear friend. Prior to that I had already filmed in The Mirage hotel which also belongs to him, therefore he had an idea of how we work, and trusted me with the reputation of the hotel. Even though we robbed it (according to the script). It actually happened that prior to the start of shooting Wynn sold the hotel to Kirk Kerkorian, also a long time friend of mine. So our plans did not fall apart".

The King of Trumps

However the main support for Las Vegas has always been gaming. Probably, not everybody understands that in the last several months the city’s population has had inconsistent sentiments. Two initiative groups have simultaneously addressed the authorities with demands to increase the tax on gaming (it is currently 6.75 per cent in Las Vegas). One of them is headed by the president of the Association of Education of the State of Nevada Lynn Warne, and another by lawyer Kermit Waters. The teachers are fighting for an increase in the tax on gaming in the state of Nevada to 9.75 per cent. The lawyer is less realistic; he thinks the tax should be raised to 20.2 per cent. He says that this figure is supported by participants of a survey carried out by Zogby International and regional judge Don Chairez’s initiative. Five hundred and seven people took part in a telephone survey. The question was: "Do you support the tax on income from gaming offered by Waters of 20.2 per cent or offered by the Association of Education of the State of Nevada of 9.75 per cent?" Waters' initiative was supported by half of the participants of the survey, and 43 per cent supported the "merciful" variant offered by the teachers.

However, chief editor of regional newspaper Review Journal Ed Fogel notes that the results of a survey carried out by the newspaper in October of this year differ considerably from the research of Zogby International. The respondents supported the teacher's initiative by the ratio of 3 to 1. Only 39 per cent of the respondents supported Waters' offer whereas half of those questioned expressed opinions sharply against it.

Waters thinks that his initiative will bring an annual additional income to the treasury of $2 billion. Meanwhile, according to the Counsel of Control over gaming, in 2006 the total profit from enterprises of the industry was $2.1 billion. Waters does not trust these figures. "In other states they [participants of a gaming] pay taxes at a rate of 30-50 per cent and withdraw money from there to build casinos here,” he considers. It is senseless; let them pay the normal average tax here too."

President and chairman of the board of directors of MGM Mirage Terry Lanni attended an annual lunch with representatives of the structures for development in the state of Nevada (Nevada Development Authority’s Annual Luncheon) to make a speech before 800 guests. Though the speech was given in one of the casinos belonging to MGM – the Bellagio, it was far from a royal speech. In Lanni’s opinion, the reason the economy of the state of Nevada is in chaos is because the wrong system of taxes, at the basis of which lies gaming tax and sales tax. However, the authors of the petitions have their own expectations. The Association of Education of the State of Nevada thinks that additional income to the budget of $250 million a year will provide funds for the maintenance of public schools and increase the salary of teachers. Humane teachers suggest applying the raised tax to only those casinos with incomes that exceed $1 million a month.

Lanni fights for the introduction of a scale tax to business as a whole, concerning all spheres of business. "The time has come to establish a tax for businesses, which each large company receiving profit on activity in the state of Nevada should pay," he explained. Having invested $33 million in the development of the central part of Las Vegas, Lanni thinks that he can give such advice. There were a lot of people concerned about this question – the speech was interrupted with applause five times.

However Las Vegas Development Authority president Summer Hollingsworth has announced that she considers such an offer as only one of the possible solution to the budgetary problems of the state.

The tax problem in the US varies from state to state. Lanni fears that Nevada may turn into Illinois, which currently has one of the highest sales tax in the country (8 per cent). A top-manager from an average level from Chicago, who asked for his name not to be mentioned in the press, notes: "I am very glad that me and my family live in the suburbs. We come across those draconian taxes which operate in the city less.”

It is obvious that MGM Mirage, which is financing the construction of the new city center - CityCenter for a total cost of $7.8 billion and owns 15 of the largest casino-hotels in Las Vegas, may considerably suffer from such tax initiatives. However a precedent for changing the budget from the incomes of gaming is already available. In 2003 the tax on gaming was increased by 0.5 per cent. "Each time there are new needs, participants of gaming come to the negotiation table,” says Lanni. “However we hope that representatives of other kinds of business will show an understanding in this question. Unfortunately, each time, our expectations are deceived. For 75 years gaming has been contributing its share to the development of the city. We continue to do this, but we think that the time has come for representatives of other kinds of business to do what they can to help."

Lanni’s position is supported by other gaming participants. Vice president for public relations at Boyd Gaming Rob Stillwell calls Waters' petition "simply a bad idea."

The budget and plans

The Budget in Las Vegas can be well combined. This autumn for the fourth time the city fourth has been successively awarded the prestigious award of the Association of Financial Workers from the US government for the best presentation of the budget for the 2007-2008 tax year. (The association includes 16,000 financial workers from all states of the USA.)

To receive such an award the city budget should satisfy the principles (directives) of the effective budgetary presentation accepted in the country. Directives, in turn, are developed to reveal how much the budget of this or that settlement is a political document, a financial plan, and as a guide to actions and means of communication. The budget of Las Vegas city has been recognized as "professional" at every point.

From the documents given to Vedomosti by the department of forward planning for the Clark County, it is visible that Las Vegas is not going to stop on what it has reached - the number of casino-resorts will grow every year. The city is focused on the realization of large scale, high budget projects.

Undoubtedly, the main project in the next few years will be the new CityCenter which is being constructed between the Bellagio and Monte Carlo hotel-casinos. The developer of the project is MGM Mirage. It plans to put the complex into operation by the end of 2009. Leading world architects Foster and Partners bureau, Daniel Libeskind, Rafael Vinioli, etc, have united their efforts to work on the prestigious project. There will be six skyscrapers (height of 183 meters), of which 557,000 sq.m will be retail, exhibition and gambling areas and more than 7,850 hotel rooms and resort residences with a total area of more than 1.5 million sq.m.

Among other large hotel-resort complexes, whose construction are at different stages of approval with the city administration, are the Tropicana Mega Resort (10,224 rooms), Shoma-38 Resort Hotel (6,300 rooms), Echelon Resort Hotel (5,280 rooms), Fountainebleau Resort Hotel (3,900 rooms), Quail Village Resort Hotel (3,820 rooms), and RJP LVI Resort Hotel (3,698 rooms).

As a part of the program of development it is planned to change the already existing cult hotel-resorts - The Venitian and Planet Hollywood. The Palazzo complex including a North Tower (196 meters) and Palazzo Condo Tower (193 meters) will be added to The Venitian. As a result, The Venitian will have 7,509 hotel rooms and residences and 186,000 sq.m of retail, restaurant and gambling premises.

As a result of reconstruction the Planet Hollywood complex will have a 52-storey tower (163 meters high) added to it, increasing the total capacity of the hotel-resort to 5,370 hotel rooms and residences and will add 93,000 sq.m of retail, restaurant and gambling space.

Other games

The well know American expression "What happens in Las Vegas, should remain in Las Vegas" is gradually losing its relevance. As Las Vegas, the most popular gambling place in the world, becomes more and more loaded, owners of casinos and hotels are thinking of alternatives. They are sure that they can open new, no less profitable gambling enterprises outside Las Vegas. There are a lot of examples. This autumn MGM Mirage opened a casino-hotel in Detroit (according to The Wall Street Journal, investments in the project totaled $800 million), in which the penthouse suite costs $3,000 per day. Another large developer of casino-hotels – Harrahs, is also not falling behind and in August of this year started the construction of a casino-hotel costing $700 million in Biloxi (state of Mississippi) and is working on the reconstruction of a casino in Tunica (in the same state).

Nevertheless clones of Las Vegas will invariably concede in something to their great ancestor. In Detroit, for example, a city of fans, bets on sports will be forbidden. And in Barona Valley Ranch Resort Casino, located in the American Indian reservation to the east of San Diego, alcohol is prohibited in the casino.

How can the boom in Las Vegas be explained? For many years all the visitors of the city have been precisely divided into two groups - a thin layer of "large players," using the VIP service, and a huge mass of "others," playing automatic machines, elbowing each other for a glass of free martini and thirsty for discounts on hotel rooms.

In the last decade the concept of a casino-hotel has actively changed. In the 1950s the main entertainment of hotel guests in Las Vegas was a show of nuclear mushrooms from the Nevada Testing Area. These days owners of casino-hotels open new restaurants, boutiques and malls, and SPA salons. And now travelers come to Las Vegas simply to get $2,500 hair extensions at the well-known stylist at Palms Casino Resort, Michael Boichuk, or to taste the 16-dish menu for $360 of French chef Joel Robuchon at the restaurant of the MGM Grand hotel.

"Unlike Las Vegas many regional casinos make profit exclusively from the gambling zone,” says David Katts, an analyst at CIBC World Markets. The additional possibilities of resorts always written in the last lines, simply force people to come from afar and for a longer period of time."

So, Reno, another city from the state of Nevada is trying to attract visitors by positioning itself as a place for extreme kinds of sports: sledge driving or snowboarding. The campaign began five years ago when in the vicinities of Sacramento (California), halfway from the main area of the coastal zone of San Francisco, a huge casino opened. Then it was necessary to close three casinos, and that, naturally, has lowered profits from gambling. Today the situation is changing in the best way – tourists are spending more money and more time in Reno although only about 12 per cent of tourists come to Reno to play.

Casino-hotels are increasing the price of rooms and are gradually stopping the practice of giving free rooms to inveterate players. According to the speaker of Authority, Mary Paoli, in 2006 the cost of rooms in hotels increased on average by 11 per cent (up to $76 per day), and 11 casino-hotels made the decision to expand.

Amazing things accessible to Reno visitors are the kitchen of the chef of two restaurants in the Grand Sierra Resort, Charlie Palmer, free-of-charge helicopter charters from the Eldorado Hotel Casino to the hillsides or Nightclub 210 North, where the minimum cost of a bottle of alcohol is $250. However Renault suffers from the absence of fashionable boutiques and so fans of the Chanel brand will have to drive to Las Vegas.

Casinos are also quickly developing the state of Mississippi, which suffered from hurricane Katrina. It is paradoxical, but the act of nature became a push to legalize casinos and has caused a whole wave of investments into Biloxi. In The Grand Biloxi Casino Hotel & SPA, the rooms are equipped with plasma TVs, and worn out equipment has been replaced with the newest sports equipment from Nautilus.

Another casino, The Beau Rivage Resort & Casino opened a golf course last autumn, which was designed by Tom Fazio. The city of Tunica became popular, as it did not suffer from the Katrina hurricane. The total proceeds of its nine casino-hotels last year totaled $1.25 billion, and it became the sixth gambling business market in size in the US.