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Rod Smith
 

Nevada Economy: Sizing Up, Seeing Success

2 May 2005

The $7.9 billion merger of MGM Mirage and Mandalay Resort Group is closed. And Chairman Terry Lanni is convinced the deal will benefit Nevada and its economy.

Expansion of the newly merged company should generate new jobs, add state tax revenue, keep tax rates low and help Nevada avoid having to impose an income tax, Lanni said Monday.Advertisement

"This is all a big positive for the state of Nevada," Lanni said, further predicting that the mergermania that has beset gaming for the past year is far from over.

Trends that soon will weave themselves into the fabric of American business already are being tested here, especially in gaming, Lanni said. Upscale stores, for example, have chosen Las Vegas as a site to develop the never-before-seen concept of multiple outlets in a single city.

"You have multiple operations of a Louis Vuitton store or a Chanel or a Gucci. You'll have more and more of that here, multiple locations of the same stores," Lanni said. "You see it in Asia, but that's a new phenomenon for the United States and it's happening right here in Las Vegas," he said.

Lanni said perceptions about Las Vegas are changing. Just 10 years ago, gaming generated the majority of hotel-casino revenues. But recently, the trend toward nongaming operations has accelerated, led by conventions, retail, entertainment and food and beverage.

Because of this shift, Lanni said, various business constituencies have come to see Las Vegas as broader based than they have in the past, especially as nongaming revenue began to exceed gaming revenue.

"That was a big change because that's when people focused on the fact we're not just in the casino business, we're in the food and beverage business and the entertainment business," Lanni said. "How much those two (food and beverage and entertainment) cross over is just amazing because so much of food and beverage is entertainment, from entertaining to the costuming of the people to the design of restaurants, all the additional features that take place."

Of all the nongaming components of his industry, however, Lanni said, "The retail component here is absolutely staggering."

For shopping, he said, Las Vegas can stack up against Los Angeles, San Francisco, Chicago or New York. There are few retailers in those cities that are not now also here, he noted.

But Las Vegas also holds its own against those cities in entertainment, Lanni said.

"I'd argue entertainment here is actually broader based and more exciting than entertainment offered in any one of those cities," Lanni said.

He conceded that legitimate theater in New York and the opera in San Francisco surpass anything here, but otherwise argued Las Vegas is on the entertainment cutting edge.

Similarly, hotel operators have developed properties in Las Vegas that exceed similar operations anywhere else in the United States in both quality and amenities, Lanni said.

"I think the quality of the hotel product we offer now is completely different from what it was 10 years ago. It's changing dramatically," he said.

MGM Mirage and its predecessor, MGM Grand, have a long history of investing in Nevada. Lanni cited the $800 million spent to upgrade and expand MGM Grand on top of the initial capital investment of $1 billion, and the recent addition of the Spa Tower to Bellagio.

MGM Mirage will continue to invest in Nevada, both in buildings and people, Lanni said.

The company, which now employs more than 70,000 people, is planning to expand its work force as it develops Project CityCenter south of Bellagio.

"We'll have 12,000 permanent jobs in CityCenter, and that's over and above what we've been talking about now," he said. "These are real jobs with good pay and a good benefits program that'll be available to people who have an interest in moving into Nevada. And I think that's going to be helpful to the housing developers and condominium developers."

As MGM Mirage expands, it will bring added tax revenues into Nevada and help keep local tax rates relatively low, he said.

"We obviously have a significant benefit if this economy continues to move and we build these particular properties. We'll bring in more tax dollars in the state of Nevada which will assure on a continuing basis our ability to maintain no state income tax to people living here," Lanni said.

MGM Mirage's size and business dominance in Nevada should not discourage other businesses or new investments, he said.

"I don't think the fact that there's a huge company makes a difference," Lanni said. "I think there's no question as people continue to invest in Nevada, be it the real estate companies, the homeowners, the individual operators of hotel-casinos and larger companies such as ours and Harrah's and, to a degree, coming down the pecking order, the Wynns and Sheldon Adelson, the Boyds, there's a lot of investing going on.

"You see a lot of growth in Station Casinos. That's because the population is growing, the economy's healthy, and us being big has no effect on that."

The growth won't stop now, Lanni said.

"We think with Phil Ruffin's plans for the Frontier, the Palazzo next to The Venetian. Steve Wynn's Encore, and Boyd next to Stardust, there's more interest in (the north) part of the Strip," he said. "We believe CityCenter will be the heart, the hub of the Strip but that doesn't mean the Strip can't be a lot longer than it has been."

Nevada Economy: Sizing Up, Seeing Success is republished from Online.CasinoCity.com.