Evolution in Las Vegas
Can Sin City become future role model for Korea’s leisure industry?
By Kim Da-ye
If a portion of the Las Vegas Strip, a 6.8-kilometer road packed with some of the world’s most extravagant hotels and casinos, is to be replicated in Korea, the plan would face fierce opposition.
Gambling addiction and huge profits taken by foreign companies are highly sensitive issues among Koreans, not just right-wing religious groups and anti-capitalists.
But today’s Las Vegas may not be the Sin City people think it is.
The place where gambling was legalized in 1931 has transformed from a capital for mobs into a center of entertainment.
On a recent Saturday night, tourists filled every single seat for “O,” the famed Cirque de Soleil show at the Bellagio, and college students on spring break packed Haze, a nightclub in the Aria. In comparison, casinos were quiet with many vacant tables.
Jim Murren, CEO and chairman of MGM Resorts International, doesn’t hesitate to say that entertainment is the biggest part of the firm’s business.
“About 75 percent of our revenue in Las Vegas last year came from non-gaming facilities,” Murren said in an interview with Business Focus, adding that the operating profit margins of casinos and the rest has become nearly equal.
MGM Resorts controls about half of the strip with CityCenter, the Bellagio, the Mirage and MGM Grand Las Vegas in its portfolio.
A five-day trip to Las Vegas found the city’s evolution isn’t just about the shift toward entertainment.
Behind the dazzle of the strip is a close-knit community of businesses, regulators, academics and local residents, who have learned over time they need each other.
Businesses pay taxes and hire, regulators offer protection by scrutinizing them and schools help improve firms by fostering talent and providing research for better hospitality.
Can Las Vegas be a role model for Korea’s leisure industry? What lessons can we learn from the city’s evolution?
From gambling to entertainment
Las Vegas is no longer the world’s largest gambling venue. Macau is, in terms of revenue from casinos.
“At one point in history, gamblers went on vacation here, but now it’s a place for vacationers and business people that may or may not gamble. That’s a very important metamorphosis of the city,” Murren says.
That’s also why hotels here are called resorts ― or integrated resorts, a term created by the Singaporean government. Resorts consist of hotel rooms, casinos, restaurants, theaters, convention centers, golf courses and even arenas.
MGM Resorts is now carrying out an “extraordinarily detailed analysis” of Korea, which involves researches into the country’s history and interviews with architects, academics as well as climate experts.
The firm is considering the Mandalay Bay Resort & Casino as a good benchmark for Korea.
The resort comes with an artificial beach, a 93,000-square-meter convention center and the 12,000-seat arena, which can be used a concert hall, a boxing venue and even for a large-scale black-tie event.
Because Korea lacks such a space, hallyu and K-pop stars have been forced to hold award ceremonies and concerts outside the country. Last year, the 2011 Korea Billboard KPOP Masters that featured SHINee, TVXQ, Brown Eyed Girl and 4 Minutes was held at the MGM Grand Garden Arena in Las Vegas.
Murren says that it is too early to talk about designs and special purposes of the resort the company wishes to build in Korea.
He did confirm that it isn’t going to be a themed resort that replicates existing buildings or designs from a certain period.
“The simple answer is that we aren’t interested in a boxed casino that does not play to strengths ― entertainment, hospitality and design,” the CEO said.
For those in Korea’s tourism industry and municipal governments, something like the Las Vegas Strip is the dream source to correct the imbalance between outbound Korean tourists and inbound foreign counterparts, boost tax revenue and hire tens of thousands young people.
Their best scenario is that a cluster of integrated resorts near an international airport draws high rollers from China, eventually helping Koreans enjoy state-of-the-art facilities subsidized with revenue from casinos.
Racing against Japan and Taiwan, they badly want investment of billions of dollars from the Las Vegas juggernauts including MGM Resorts, Wynn Resorts and Las Vegas Sands.
Foreign firms, however, are reluctant to enter Korea unless the country allows local residents to gamble in their facilities. Kangwon Land Resort & Casino in the east of the country is currently the only place that accepts Korean nationals.
For Murren, a highly profitable casino within an integrated resort works as a guarantor for multi-billion dollar investment and the admission of Koreans means more than just higher revenue.
“If resorts are desired for foreign tourists only…the message that sends is that they want to raise some revenue from taxes and investment and employ some people,” Murren says.
“I view integrated resorts differently. I see gaming as a means to an end, not as the end… We should integrate culture, people, ideas and entertainment. We should embrace in a very safe environment what is the most fun about going to a resort ― the tapestry of diversity.”
Another requirement of Murren’s to invest in Korea is a robust regulatory system.
“We cannot afford to sacrifice our reputation and licenses to operate elsewhere,” the CEO said.
“If regulation is not strong enough, we will not enter the market. There can be no regulation that is too strong for us.”
Most resort giants including MGM Resorts International are listed in the United States, meaning they have to strictly follow the rules of American stock exchanges.
Those in Las Vegas are also under constant scrutiny by the Nevada Gaming Commission and Nevada State Gaming Control Board, the regulatory arms of the state government that deploy officials abroad to make sure the licensees’ overseas businesses are as clean as their domestic counterparts.
The regulatory bodies wield an immense power. When a company applies for a license to operate a casino in Las Vegas, they have to fully reveal information about major shareholders, executives and important on-site managers.
When a licensee of Las Vegas goes abroad and partners with foreign firms, key persons of the foreign partners will also be scrutinized by the regulators.
W. John Flynn, the deputy chief of the investigations division at the Gaming Control Board, said that when MGM Resorts entered a joint venture with Pansy Ho, the board demanded her disclose the required information.
Her father, Stanley Ho, wouldn’t, so the board decided that he must not be involved in the joint venture at all. Stanley Ho enjoyed the government-granted monopoly in Macau’s gambling industry for four decades.
A strong focus on businesses originates from the history of Las Vegas as a haven for mobsters. Hotels and casinos had been set up by the Mafia who used it as a money-laundering machine.
After the cleaning of Sin City over a period of time, the mobs are gone. The Flamingo Hotel & Casino founded by gangster Bugsy Siegel is the last institution with such a history remaining on the strip.
Interestingly, individual gambling addicts aren’t the Gaming Control Board’s priority.
Flynn says that in Nevada, individuals are responsible for their gambling acts, probably because the history of the state founded and habited by adventurers who had to develop the wilderness on their own.
That would be the major difference between Las Vegas and Korea, which will have to look for other models and come up with its own solution. The cozy relationship between conglomerates and the government has long been cultivating distrust against them among the public who now tend to blame the government first.
Good corporate citizen
What this reporter, as a Korean citizen, found the most attractive about Las Vegas was the strong sense of community.
The close relationships among businesses, regulators, academics and local residents may raise eyebrows from outsiders, but they come across as healthy.
During the interview, Murren kept emphasizing the need for good regulators who would protect them from criminals and from getting involved in crime.
Flynn wants Las Vegas to reclaim its former glory as the world’s largest gaming center from Macau because taxes collected from the casinos account for nearly half of the state’s total budget.
Bo Bernhard, a professor at the William F. Harrah College of Hotel Administration in University of Nevada, Las Vegas, was born and raised in Sin City.
He studied sociology at Harvard University and returned to the town, researching the impacts of gaming and tourism industries on communities around the world.
Positive about the transformation of the strip and its impact on his community, Bernhard talked about a high school friend who became a millionaire by taking care of bed sheets for hotels in Las Vegas.
On the last day of the journey, this reporter visited the Smith Center for the Performing Arts, which opened last month.
Although the strip is already hosting as many shows as New York’s Broadway, businesses, the academic circle and the government decided to set up a separate performing art center. It is for local residents who now have access to classical music and jazz concerts and dance performances.