Inside Asian Gaming

43 42 gambling and as a result benefited. People had no qualms about wanting to rid the cities and places where they lived of gambling and crime, but were prepared to accept it in desert outposts like Las Vegas. As a result of the increasing pressure on organised crime and illegal gambling, the mobster Bugsy Siegel left New York for Los Angeles to exploit gambling opportunities. But it became too hot for him in Los Angeles and he turned his attention to Las Vegas. regulations was felt by both the industry and the state since both par- ties had an interest in insuring that the goose that laid the golden eggs remained intact. One mistake these regulations made was the stipulation that every stockholder of a gaming establishment had to be licensed by the state. This aimed to keep organized crime out of the business. But it had the unintended consequence of making it vir- tually impossible for listed companies to invest in the industry given that they usually had thousands of shareholders. The boom in the early 1950s was followed by a period of consoli- dation. A number of casino resorts struggled, resulting in consolida- tion.A number were taken over while others leased out the properties to other “Strip” management groups. In what was to become a sig- nificant step in the development of Las Vegas as a destination, some operators looked to develop the convention market. While the hotels were filled at the weekends with vacationers, the convention strat- egy enabled them to fill their rooms mid-week. Properties marketed themselves as resorts and as a place for doing business while playing down the opportunities for gambling. Other properties went further and organised junkets among target groups around the US and later overseas from Hong Kong, Japan and Thailand. The success in this strategy led to an increase in the size of casino resorts and the need for more initial start-up capital. Start-up costs for the early casino resorts ranged between US$1-2m but some 10 years later had risen to US$15m. This was too big for the informal alliances of mobsters that funded casino development in the 1940s and early 1950s. This need for ever increasing funding was subsequently filled by the Teamsters. Central States Pension Fund, and it became a major investor in “the Strip”. Teamsters boss Jimmy Hoffa had links to organ- ised crime and the Teamsters funds were always referred to as “quasi- legitimate.” The Teamsters provided much of the start-up capital for Caesars Palace which took themes, size, and costs to a new level when it opened in 1966. Its 680 rooms and extravagant fountains cost what was considered then an astronomical US$25m. The Mob Moves In The Flamingo casino resort was to change the tone and per- ception of the Strip. Contrary to popular mythology the Flamingo was not the inspiration of Bugsy Siegel. It was conceived by Billy Wilk- erson, a newspaper publisher restaurateur and compulsive gambler from California. Wilkerson aimed to bring the Hollywood crowd to Las Vegas. In what was to become a familiar story for casino operators during the 1940s and 1950’s he was to run out of money and turned to what was then one of the few sources of capital prepared to invest in gambling – organised crime. Bugsy Siegel took an initial 70% stake in the project, which became 100% after making Wilkerson an offer he felt unable to refuse. The Flamingo opened with a great flourish in December 1946 with Hollywood elite flown into to join in the opening party fronted by Jimmy Durante. Las Vegas thus provided an outlet for those with links to organised crime to either continue their activities or to become legitimate. As Robert De Niro, in his role as a casino manager remarked in the film Casino: “For guys like me, Las Vegas washed away previous sins. Las Vegas is a morality car wash.” Organised crime provided much needed capital because legiti- mate sources, the financial markets and banks steered clear of the in- dustry due to the of the stigma which was then attached to gambling and its uncertainty given that law enforcement officials had it con- stantly in their sights. Mob interests in casinos were held in the form of “points” (percentage points) held by local front men. The mobsters were repaid through massive skimming exercises. Despite the anti- gambling sentiment prevalent in the US during the period, business in Las Vegas boomed. Gaming revenue soared from US$27m in 1946 to US$120m in 1956 while the population rose from 8,400 in 1940 to 50,000 in 1956. Property valuations rose from US$10.5m to US$118m over the same period. Pressure from the Kefauver Commission in the early 1950s, whose accusations (largely unproven) argued that strip casinos were pro- viding finance for organised crime, led to a tightening up of gaming regulations by the state of Nevada authorities. The need for tighter The early to mid 1960s marked the high point of the traditional Las Vegas “Golden Age”. It became known as the Copa period when Frank Sinatra and the rest of the so-called Rat Pack played at the Copa Lounge at the Sands while a host of other stars also played at “Strip” casinos.Regulations continued to be tightened during this period and the “black book” was introduced in 1960 to ban “known hoodlums” from obtaining gaming licenses. It was this regulation that subse- quently led to Frank Sinatra being forced to sell his “points” in the Sands in 1963 as a result of his connection with mobster Sam Gian- cana. Tighter regulation and the passing of the anti-crime and anti- gambling concerns in the 1960s went some way towards diminishing the stigma of mob finance that still swirled around Las Vegas. Dawn of the Megaresorts The appearance of eccentric billionaire Howard Hughes in 1966 and his buying spree was another important stage in the access to legiti- mate capital. Within a few years he owned one seventh of Nevada’s gaming revenue, one quarter of Las Vegas revenue, and one third of “the Strip’s.” Much of this was bought from aging mobsters at what were considered high prices, as they were happy to retire away from the ever increasing pressure of law enforcement authorities.The man- agement of these casinos was generally left in the same hands. The significance of Hughes was his public relations value through inject- ing a note of respectability. He was also to play a part in the landmark change in gaming regulations in 1967, which allowed publicly-listed bodies to own gaming licenses. The change in the laws opened the door to new sources of capital and listed companies initially hotel companies such as Hilton,Ramada and Holiday Inn bought up casino resorts. During the 1970s New York banks bought into “the Strip.” Over the next decade listed corpora- tions were to become the dominant operators of casino resorts. The public climate against gambling continued to improve with the publication in 1976 of the US Commission to Review the National Policy on Gambling which took a close look at Las Vegas gambling and concluded that organised crime, which had once been significant in some casinos was negligible and the stringent accounting regula- tions and sound internal control mechanisms had minimised skim- ming. This paved the way for the licensing of gambling in Atlantic City later in 1976, and elsewhere in the US during the late 1970s and 1980s. Gambling had come to be regarded as respectable and as an acceptable means for raising revenue and rejuvenating economically run down areas. The new respectability enabled emerging Las Vegas casino entre- preneur Steve Wynn to raise US$160m for his Golden Nugget proper- ty in Atlantic City.The funds were raised by Michael Milken and Drexel Burnham Lambert in what is believed to be the first issue of high- yield junk bonds.Ten years later Milken was able to raise US$535m for Wynn’s blockbuster new property, the Mirage. Coming after a period of stagnation during the 1980s this investment ignited another boom in hyper-themed extravagance which saw the number of rooms on “the Strip” double over the next decade from 67,391 to 120,294 in 1999, according to the Las Vegas Visitor Statistics. During the same period visitors swelled from 18m to almost 34m, while the number of conventions and convention delegates rose exponentially. Over a period of about 40 years Las Vegas had transformed itself from an obscure desert town offering no frills gambling to the enter- tainment capital of the world.It shifted from offering gambling to fami- ly-oriented tourism,entertainment and finally the Las Vegas experience. There can be few other places that offer the mix of tourism, celebrity chef dining,top class music and feature shows,convention facilities,and high-end retail shopping together with gambling. By 1995 Las Vegas had passed Mecca as the most visited place in the world. It is ironic that the casino resort that developed as a result of gam- bling’s pariah status is now being exported from Las Vegas to the rest of the US and elsewhere in the world. It is not necessarily a model that travels well or is easily replicated.While casino resorts boost em- ployment and raise state revenue,they do not necessarily do much for local businesses as most of the money is spent in the resort. In 2004 Las Vegas Strip casinos generated some US$5.3 billion in gaming rev- enue, just under half of the “Strip’s” total revenue. It’s a far cry from the days when casino operators were virtually giving away food and entertainment to support the gambling operations.