08/08/2002 11:00PM

California tribe casinos: Threat or lucrative partner?


Last Thursday, a sparkling new casino out West opened with gorgeous showgirls, rock 'n roll bands, and the Flying Elvi skydivers.

The odd part was the opening was not in Las Vegas but 300 miles away in Valley Center, Calif. Harrah's Rincon Casino and Resort, a $125 million facility, opened as a partnership between a Las Vegas gaming company and a native American tribe.

Ever since 61 California tribes signed compacts with the state that would permit each of them to operate a casino with up to 2,000 slot machines, tribes and gaming companies have courted each other in a race to develop Las Vegas-style tribe casinos.

The scenario has created problems for the California Gambling Control Commission.

For example, Gov. Gray Davis promised voters during his election campaign that the tribes would be limited to 45,206 slot machines statewide. If one multiplies 2,000 slots times 61 tribes, that equals a potential 122,000 slot machines in California, nearly triple what Gov. Davis had mandated.

Las Vegas gaming companies are taking a calculated risk, similar to what occurred two decades ago in Atlantic City, N.J. It was once believed that Atlantic City would cannibalize business from Las Vegas. What happened was Atlantic City created a feeder market for Las Vegas.

A big difference between casinos in Atlantic City and in California is proximity. Since 9/11, Las Vegas marketing has focused on people within 500 miles of the city, or what is considered driving distance. That includes major California cities San Diego (330 miles) and Los Angeles (270 miles), with San Francisco (600 miles) close enough to count. Thus the new tribe casinos would be in direct market conflict.

Where the gaming companies are prudent is in partnering with the tribes. This allows them to hedge their bets regardless of what happens in California. If a taste of casino action drives more Californians to Las Vegas, that's fine. If Californians stay put in local tribe casinos, the gaming companies will own a piece of the action. It's a win-win situation.

Harrah's Rincon is a 200-room luxury hotel with 1,500 slot machines, six restaurants, and all the amenities of a Las Vegas resort. As grand as Harrah's Rincon is, the next casino-hotels will only get finer and fancier.

Consider that the model casinos of Indian gaming are both in Connecticut, Foxwoods and Mohegan Sun. I visited both of them recently and believe me when I say that if Foxwoods and Mohegan Sun could be uprooted and transplanted to the Las Vegas Strip, they would be stylish neighbors to the Bellagio, Mirage, and Venetian.

For now, earnings from California tribe gaming are second in the nation behind those of Nevada casinos. Those positions could switch during this decade.

Then I suspect that Nevada will be pressured to compete, grow the marketplace, and regain its preeminence. Can anybody say Internet?

Richard Eng is the turf editor for the Las Vegas Review-Journal and host of the Race Day Las Vegas Wrap Up Show.