[Editor's Note: This struck us as an intriguing, yet particularly difficult, series of questions to answer, given the speculation it required over the number of hypotheticals and what-ifs it contained. Still, we offered it to one of our regular QoD writers, David McKee, and though he initially balked, it seems to have gotten his juices flowing, which, as is evident from the depth and breadth of his answer, are considerable. We're all extremely lucky to have so erudite a thinker and eloquent a writer as David as a main QoD go-to guy.]
First off, to correct a misconception, Native Americans were not "allowed" to have gambling. This was set out as a sovereign prerogative in the California vs. Cabazon Band of Mission Indians. Riverside County wanted to assert control over bingo games on the Cabazon reservation. The United States Supreme Court, by a 6-3 majority, ruled that gambling on reservation land was outside state or county jurisdiction. (Federally recognized tribes are sovereign nations, after all.) Writing for the majority, Justice Byron White stated that economic self-sufficiency for tribes took precedence over state concerns about criminal activity in tribal bingo halls and that, since the issue was a civil rather than criminal matter, the state's authority did not extend onto the reservation.
The penumbra created by the Cabazon ruling was illuminated in 1988 by the Indian Gaming Regulatory Act, one of the most far-reaching achievements of the Reagan administration (which supported tribal self-sufficiency). It established three classes of gaming, of which Class I was penny-ante stuff, not worth discussing here. Class II permitted bingo and non-banked card games, provided they were legal in the state where the tribe resided. Class III allowed "Vegas-style" gambling if the tribe reached a compact with the state – and any state that legalized Vegas-like gambling for the private sector was obligated to do the same for tribes.
Another major economic factor that must be taken into consideration is the expansion of private-sector gambling outside Nevada and New Jersey. Sometimes with the active support of Las Vegas casino interests (looking to capture a dollar closer to where that dollar lived), casinos spread to states like Mississippi in 1990, Illinois in 1991, and Indiana two years later. This proved to be a far more consequential development than the expansion of tribal gaming: Atlantic City withstood the impact of tribal Foxwoods Resort Casino and Mohegan Sun, seeing revenue growth through 2006, when the cumulative impact of private-sector casino growth into Delaware and Pennsylvania began taking its toll.
Using Atlantic City as an example, we would take a conservative view of Las Vegas' last quarter-century. For example, when Borgata opened in Atlantic City in 2003, it was the first new casino in that market since Trump Taj Mahal in 1990. By the time the next new casino opened, Revel in 2012, the tide had been receding from the Atlantic City market for six years. Success had bred complacency.
As such, It’s not unreasonable to posit that Las Vegas would have evolved more slowly, relying on established product, without the spur of tribal and out-of-state competition. After all, when Steve Wynn opened The Mirage in 1989, the nature of Las Vegas casinos hadn’t evolved significantly in decades, and the last major casino to open before the Mirage had been the original MGM Grand (now Bally’s), in 1973, more than 15 years earlier. It’s easily forgotten that, in creating a non-gaming-centric resort, Wynn drew legions of scoffers who were loudly proclaiming The Mirage's imminent failure even as they lined up to see it on its opening night.
Given the smash success of The Mirage, it’s something of a chicken-and-egg question as to whether the growth of tribal casinos impelled, or simply coincided with, the revitalization of the Las Vegas Strip. For instance, the period in which tribal gaming was growing in the Midwest was also one in which themed megaresorts like Excalibur, Luxor, and MGM Grand arose along the Strip. And the breakout years for tribal gaming in California (which Vegas corporations vainly tried to thwart) ran parallel to a resurgence along the Strip that included Bellagio (1998), the Venetian and Paris-Las Vegas (1999), the new Aladdin (2000), and Wynn Las Vegas (2005).
Would older resorts like the Sahara, Stardust, and Riviera have been superseded? Quite possibly. However, when a megaresort was still a good return on investment (15%), Vegas-based companies took their eye off the redevelopment ball and went on a mergers-and-acquisitions spree. To cite only the most catastrophic example, when Harrah's Entertainment followed up its acquisition of Park Place Entertainment with an unsustainable leveraged buyout, it put another nail in the coffin of the company's ability to finance a metaresort that would have replaced Harrah's Las Vegas, O'Shea's and the Imperial Palace, possibly even the Flamingo and Barbary Coast. (The grand scheme was never divulged.)
Even if tribal and regional casinos were drawing off bread-and-butter gamblers, it’s worth remembering that Boyd Gaming, MGM Mirage, and Phil Ruffin all had Strip projects that looked like The Next Big Thing when the Great Recession hit. It hit some regional markets pretty hard too, especially in the Rust Belt, exploding the myth that gaming in general, and Las Vegas in particular, are "recession-proof," or at least "recession-resistant." And when the recession lifted, convenience gaming had taken a substantial tranche of casino play from Vegas, never to return.
As for some of the other "what ifs" ... Even when Vegas was still fat and happy, the Las Vegas Monorail was a bust, losing money right from the beginning in 2004. Even now, with Vegas visitation at all-time highs, the political will to extend it downtown or McCarran International simply has not manifested. The satellite airport once planned for Jean was intended for international flights. Had domestic travel sustained recession-proof levels, it might yet have been built ... But all hypotheticals are pretty much rendered moot by the Great Recession, in which America caught a cold and Las Vegas got pneumonia.
It would have taken a great deal of recession-resistant gambling to bring economic victims like Echelon, the Plaza, the St. Regis, and CityCenter North across the finish line. Our population would have grown significantly, but the recession would have driven many of those newcomers away again. Due to infrastructural issues and pre-existing casinos, Flamingo Road would probably not have been the axis of east-west development. People were talking about a "Harmon Strip" from as far back as 1998, but they've finally stopped spinning that golden oldie. Even when business in Vegas was through the roof, financing for Harmon Avenue projects was hard to find.
Prior to the Great Recession, gambling remained the primary driver of Las Vegas' economy. That fact alone might have induced an Atlantic City-like complacency and retarded the redevelopment of the Strip. After all, if the Riviera was doing perfectly well on gambling alone, why close it? With the comfortable certainty of hindsight, we can see that The Mirage was a crystal ball of the Vegas to come, one in which gambling was no longer the centerpiece.
There's no greater spur toward improving a product than competition, and the rise of both native and regional gaming gave Vegas a reason to reinvent itself it might otherwise not have had. And never forget that, when there were managerial opportunities in the Native American sphere or expansion ones in other states, Vegas-based companies were quick to pounce. So if somebody chooses now to play at Harrah's Philadelphia instead of Harrah's Las Vegas, who does Caesars Entertainment have to blame but itself?
