Stateline gaming industry struggles likely to continue into the new year

Continued declines in revenue, layoffs and closure punctuated Lake Tahoe's gaming industry in 2009.

And 2010 may not be much different, according to those familiar with Nevada casinos.

"It's definitely going to be a challenging time and, if things don't improve, you will see more closures," said David Schwartz, the director of the Center for Gaming Research at University of Nevada, Las Vegas. "They're really in for a fight."

Former South Lake Tahoe mayor and casino employee Tom Davis put it more bluntly. Davis was one of 27 people laid off from MontBleu Resort Casino and Spa in November. He worked more than 25 years in the gaming industry.

"This is the end of gaming as we know it in Lake Tahoe." Davis said. "And that's the sad part; gaming will never be what it used to be in South Lake Tahoe."

Both Schwartz and Davis pointed to combined pressures of the recent recession and the continued growth of Northern California Indian casinos as the most significant contributors to Lake Tahoe's gaming revenue woes.

This month, Nevada gambling regulators said casinos in the state won about $800 million from gamblers in October, down more than 11 percent compared with the same month in 2008.

October's figures mark the 22nd straight month of year-over-year declines for Nevada casinos.

Stateline was particularly hard hit in the latest figures, with October gaming wins dropping 24 percent from 2008 in the area. The drop was more than five percent larger than any other Nevada region analyzed by the board.

"I think we've all seen this coming," Davis said. "We've been in denial."

While Davis is optimistic about the potential for new jobs to fill the gaps left by gaming in the future, he said reverberations from the decline of such a major Lake Tahoe employer have been felt in every segment of the community.

"It's really an economic tragedy," Davis said. "Gaming was the big player and it affects all the other jobs in town."

"Unfortunately when gaming reduces their spending, the whole town suffers," Davis added.

Reinstituting regular commercial flights at Lake Tahoe Airport, getting casino management to react more quickly to customer trends and marketing Lake Tahoe's unique and abundant recreational activities are all keys to breathing life into the local economy, Davis said.

"I think we're hit harder here, but I'm still optimistic," Davis said. "We have Lake Tahoe and nobody else has that."

Expanding offerings beyond what Indian casinos provide is critical to getting visitors to travel to Northern Nevada, said Mark Nichols, an economics professor at the University of Nevada, Reno.

"It's simple in theory," Nichols said. "You've got to give people a reason to travel the extra distance, to get people to drive to Northern Nevada."

Lake Tahoe Visitors Authority sponsored events, like the annual celebrity golf tournament and holiday fireworks displays, are one way to attract drive up visitors to the lake, said Mike Donovan, executive marketing manager for MontBleu.

"A lot of those (events), at the end of the day, can drive those people up here," Donovan said.

Still, Donovan said he doesn't expect Stateline gaming to ever return to the profit levels seen during its gambling heyday.

On a statewide level, striking the right balance between luxury and value is critical to the recovery of the gaming industry, Schwartz said.

"You've kind of got a tension," Schwartz said. "On one hand, they're promoting luxury, but people need values and people need bargains. It's kind of hard doing both at the same time."

But the biggest challenge the industry could face is the loss of thousands of slot machines since 2008, Schwartz said.

"The installed base in Nevada is shrinking," Schwartz said. "This seems to be a major systematic issue. There's just less gaming going on."

The loss of gaming infrastructure is troubling for a state that relies on gaming taxes for about 30 percent of its general fund, Schwartz said.

Nationally, a feeling that the U.S. gaming industry may never fully recover from the recession appears widespread.

Seventy-six percent of gaming industry officials surveyed nationally said they felt the recent economic collapse and credit crunch had irreversibly altered the gaming industry, according to a November American Gaming Association survey of 260 industry officials

Although the gaming industry is certainly troubled, Schwartz expressed a tempered optimism that Nevada casinos may not be as bad off as some have predicted.

"I think now there is a temptation to say that things are just going to keep getting worse and worse and worse, but I think it will be in somewhere in the middle," Schwartz said. "Finally, at least, it gets rid of that aphorism that gaming is recession proof. Hopefully no one ever says that again because it was never really true."

-The Associated Press contributed to this story