Family-owned gaming reflects region's market

Reno's casino market has been dominated by a small handful of privately owned properties for decades, and there's good reason why the large, often publicly held corporations that control much of Las Vegas never established a firm foothold in Northern Nevada, says a gaming expert with the University of Nevada, Reno.

Bill Eadington, a University of Nevada, Reno professor of economics and director of the Institute for the Study of Gambling and Commercial Gaming, says there are few corporate-owned casinos in the Reno area because of weak returns on investment as compared to properties in more favorable markets such as Las Vegas, Atlantic City, and riverboat gaming sites throughout Missouri, Illinois and Indiana.

As a result, Reno's longtime family-owned casino properties the Eldorado, Peppermill, John Ascuaga's Nugget, and Atlantis have divvied up the local gaming revenues and tourism dollars for more than four decades in some cases.

"A lot of it has to do with the perceived potential of the Reno market," Eadington says. "Reno was never attractive enough to garner the attention of corporations looking to gather high return on investment projects."

Reno has few corporate-owned casinos: Harrah's, Circus Circus, Grand Sierra Resort, and most recently, the Sands Regency, which was purchased by Herbst Gaming of Las Vegas. The Silver Legacy is a joint venture between the Eldorado's Carano family and MGM.

Conversely, MGM and Harrah's own and operate about 70 percent of the properties and gaming space on the Las Vegas strip, Eadington says.

Lacking corporate investment dollars, gaming properties in Reno and Sparks remained largely unchallenged and in the hands of the founding families. And despite having humble roots, many small properties have grown into the market's premier hotel destinations.

The Eldorado rose from a small property on a corner lot in 1973 to just over 800 rooms with 100,000 square feet of gaming space. The Carano family also owns and operates the Eldorado Shreveport casino in Louisiana.

Gregg Carano, director of corporate food and beverage for the Eldorado, says Reno is home to more family-owned properties because it takes such a large investment to compete with established Las Vegas properties.

"In Vegas you have to build mega resorts," he says. "To get into a property down there it costs a billion dollars or more."

The Peppermill also grew from a much humbler operation: a small coffee shop for locals and adjacent Fireside Lounge. The first Peppermill tower was built in 1986, and in 2009 the property completed its $400 million Tuscany Tower, convention center and spa expansion. Today the Peppermill offers 1,623 rooms and about 80,000 square feet of gaming space.

Billy Paganetti, director of marketing, says that the long history of the property and its once-small footprint allowed the owners to gradually grow the property in proportion with demand in the Reno market.

Carano says that publicly held corporations may have deeper pockets, but over the years securing funding has not been difficult for the Eldorado's several expansions and renovations.

"We have always had a good relationship with our banks and with Wall Street because we never over-extended ourselves," he says. "Our financial institutions have been willing to work with our needs."

Funding never posed insurmountable challenges for the owners of the Peppermill, either. The family also owns Western Village in Sparks, three casinos in Wendover, and a small casino in Henderson.

"We have had very good financial results with our casinos, and we have great diversity within Nevada," Paganetti says. "The banks have been great partners."

Ryan Sheltra, general manager of the Bonanza Casino, which was founded by his father in 1973, says the family's long history of doing business in Reno is the main reason why the Bonanza never encountered problems with its bankers.

"(My father) spent 37 years cultivating local banking relationships, and there are many bankers in this town today that we owe thanks to," Sheltra says. "When you run a successful business and honor your debts, you will not have trouble finding the financing you need."

But the banking process has gotten much more difficult, adds Nugget Chief Executive Office Michonne Ascuaga deals no longer are done on a family's name and a handshake.

"Agreements are much more complex," she says. "And with the proliferation of gaming (elsewhere), banks are looking at where their opportunities are, and Reno is not always making the list."

The original Sparks Nugget was built in 1955 as a coffee shop located across the street from U.S. Highway 40. The gaming space: about 60 slot machines. In 1960 John Ascuaga bought the property and grew it into an extended property with two towers that have nearly 1,500 rooms and about 80,000 square feet of gaming space.

Today, Ascuaga's children, CEO Michonne and Chief Operating Officer Stephen, manage day-to-day operations, but the elder Ascuaga, now 85, roams the property most days.

Casino owners say being privately held makes it easier to make large-scale financial decisions, such as remodeling a tower or expanding a property's footprint.

"You can effect changes quickly and easily," Michonne Ascuaga says. "You don't have to go through some large corporate structure to get approval."

UNR's Eadington says the lack of corporate gaming ownership of Reno largely can be traced to 1978, Reno's last big gaming boom and the year the former MGM opened (it's now the Grand Sierra Resort). In the following year, gaming revenues sagged under the weight of a national recession much as they are today and corporate developers shied away from the region.

The investment community instead focused its attention and money on erecting casinos in Atlantic City (and later in Las Vegas in the 1990s) because of location and low capital costs, Eadington says.

"Reno was a disappointment to the investors at the time, and that put a crimp on the gaming economy that Reno never really recovered from."