Leaving for Las Vegas

It's about upscale dining and entertainment, shopping and attractions, and the Japanese are loving it.

October, 2000

It has been a city that has transformed its identity faster than a Liberace costume change. The one-time Mormon settlement turned train-and-truck stop, turned gambling haven for high rollers and low lifes, turned gigantic amusement park, Las Vegas may be the world’s largest laboratory for the study of high-speed economic evolution. It’s glitter or die in the Desert City.

But over the last several years things have been moving fast, even for the neon light speed of Vegas. Just a couple of years ago, the city was heralding itself as a family destination, Orlando with craps and better prime rib. But when that market dried up, Vegas retooled itself as a city of attractions, once again targeting older more free-spending adults. And those working in Hawaii’s rebounding tourist industry might want to take note because this Las Vegas is about upscale dining and entertainment, shopping and attractions, attractions, attractions. And the Japanese are loving it.

“The typical Japanese traveler to Las Vegas used to be male, like to gamble, have a good time and stay only a day or two. But that was last century,” says Mikio Maruyama, supervisor of planning at JTB Las Vegas, Inc. “Those people are still coming but the others have increased. Just name it, they are all coming, everyone.”

According to the Las Vegas Convention and Visitors Authority’s Las Vegas News Bureau, in 1994 there were 221,000 visitors to the city from Japan, up 48.3 percent over the previous year. By 1997 that number nearly doubled to 403,000. Arrivals were down in 1998 to 342,000, as they were for the city as a whole. But in 1999 that number jumped back up to 478,000, a 39 percent increase. Japan now sends more overseas tourists to Las Vegas than any other country, far ahead of number two, the United Kingdom with 302,000.

Also in June of 1999, according to McCarran International Airport, Northwest Airlines began three weekly non-stop flights from Narita to Las Vegas. Later in September, Japan Airlines also began visiting the city three times a week. Two months later they added another flight and a month later the airline added yet another. Load factors for both airlines are running high, 80 percent of JAL and 77 percent for Northwest.

Less than a decade ago, Las Vegas was merely a side trip on the Japan Travel Bureau’s (JTB) package tours to Los Angeles. Today, the city boasts an office that rivals JTB’s LA headquarters and with 10,000 customers monthly, it has surpassed the Southern California city in visitors. In fact, today, Las Vegas is the most popular destination for JTB in the mainland U.S, outpacing both New York and Orlando.

“It is not that Las Vegas has targeted the Japanese,” says Myram Borders, bureau chief of the Las Vegas News Bureau. “They are a very small segment of our market. It’s just that the city now offers a product that is very attractive to them. It’s not only about gambling anymore.”

To understand the increase in Japanese arrivals, it is important to know a little about Las Vegas’ recent history. The surge in Japanese visitor arrivals can be directly linked to the rise and retooling of the city’s mega-resorts.

This new era of Las Vegas began in 1993 with the opening of the MGM Grand, Treasure Island and Luxor resorts. These massive, everything-under-one-roof mega-complexes, were built with the idea that gambling was only a part of the Las Vegas experience. It was still a very large part but not the only part nevertheless. This strategy was built in large part on the assumption that to keep pace with its competitors (Orlando chiefly among them), Las Vegas had to capture the family market and offer more kid-friendly facilities.

“The opening of those properties really broadened the base of Las Vegas and we started to get away from being just a gaming destination,” says Dr. John Bowen, director of graduate studies at the University of Nevada Las Vegas’ William E. Harrah School of Hotel Management. “The MGM had its theme park and massive arcade, Treasure Island had its outdoor pirate show and the Luxor had its water ride. There were a lot more things happening around and outside of the casinos.”

Old world charm, new world excitement, other wordly success:Paris Las Vegas is one of the city’s newest and most opulent resorts.

The family-friendly Las Vegas seemed to work. In 1994, visitor arrivals for the city increased by 19.9 percent from 23.5 million to 28.2 million. Visitor dollar contribution (including gaming revenues) experienced a similar increase. But the experiment wasn’t working well enough. In the years following that initial spike, visitor volume flattened out, less than 3 percent growth for three years in a row and only a half- percent increase in 1998. More importantly, gaming revenues slowed down, from $5.4 billion in 1994, a 14.9 percent gain over 1993, to $5.7 billion, a 5.3 percent gain in 1995 and $5.7 billion, a 1.2 percent increase in 1996.

“It didn’t take long for some genius to figure out that a 12 year-old doesn’t shoot craps,” says Borders. “When you have families either mom or dad or both aren’t in the casinos. You don’t make as much money in the arcades as you do on the gaming floor.”

Faced with a slowdown, Las Vegas handled the problem in typical Las Vegas fashion: It upped the ante. In 1999, casino mogul Steve Wynn opened the $1.6 billion Bellagio with its $400 million gallery of fine art. Next was the ocean-themed Mandalay Bay, replete with its own beach, then the Old World Venetian with its own Grand Canal and brightly lit Paris with its half-scale Eiffel Tower.

Meanwhile, the MGM Grand, which was originally called “The Emerald City” and was built around the “Yellow Brick Road” theme, renamed itself the adult-themed “City of Entertainment.” The $250 million remodeling of facilities only several years old replaced nearly all the arcades with restaurants and shops. Treasure Island did the same to its arcades, while the Luxor filled in its water ride with sand.

“Instead of retooling, I call it an evolution, a very quick evolution,” says Bowen. “We don’t want to be known as a family destination anymore. Oh, they still come, but they aren’t the focus.”

According to Bowen, the philosophy of New Las Vegas can be easily found in the layouts of its newest hotels. In the Mandalay Bay, for instance, tourists can visit the resort’s many restaurants and shops without stepping foot in the casino.

“Dining and entertainment are now profit centers for these resorts. It used to be that you had the $4.99 prime rib to draw visitors to your hotel and you didn’t want them to leave without visiting the casino. Now, if someone wants to spend $140 in a restaurant and leave, that’s fine.”

Today, Las Vegas is home to two five-star restaurants (unheard of for a city of its size) and now resorts fight over star chefs like they once did over headliners. Eleven master sommeliers—out of only 36 in the country—now call Las Vegas home. And shopping arcades rival the casinos as premium attention getters. The brand-new Aladdin resort, opened in late August, boasts a 130-shop arcade called Desert Passage, modeled after a Moorish marketplace. The result is an urban experience that mixes New World excitement with (faux) Old World charm, a town as much about cuisine and shopping as slots and craps. And it is a perfect fit for the Japanese.

“While the Japanese gamble as much as most visitors, they don’t compare to the Chinese and Koreans. Gambling has never been the main activity like those groups. Just visiting one of these hotels is the Las Vegas experience for Japanese visitors,” says JTB’s Maruyama. “They are just overwhelming and totally different from anything they have seen.”

To keep the momentum going, earlier this year JTB started a multi-million dollar marketing campaign in which Las Vegas is the jumping off point for tours throughout the national parks of the American West. Packages range from day trips to weeklong excursion and feature such locations as the Grand Canyon, Yellowstone and Zion National Parks.

Although Las Vegas’ nearly 500,000 Japanese visitors pale in comparison to Hawaii’s 3 million, should the Islands’ tourist industry have anything to fear or learn from this awakening giant? According to Joseph Toy, president and CEO of Hospitality Advisors, LLC, who prepared the strategic analysis of the Islands’ tourist industry for the Hawaii Tourism Authority in 1998, Las Vegas is really not so much a competitive destination to Hawaii as much as it is an alternative one. The two locations draw two very different segments of the same market.

“The decision to come to Hawaii is very different from Las Vegas,” says Toy. “With Las Vegas you have people who are looking for the more urban experience. With Hawaii it’s about natural beauty. It’s about the beaches and the mountains. Of course, both places have great shopping.”

But according to LVNB’s Borders, Hawaii can learn much from Las Vegas’ ability to quickly respond to a changing marketplace or to reverse itself after making false assumptions about that marketplace. Borders believes that to be flexible and responsive you have to have cash. But acquiring that kind of money only comes from legalized gaming. It also helps that Las Vegas has developers who have the gumption to take risks.

“This is Las Vegas,” says Borders. “And those guys are essentially gamblers. You’re not going to get anywhere without gambling. I know that Hawaii has been thinking about legalizing for a long time but it is the only way they can hope to keep up, the only way to constantly keep their product fresh.”

However, Bowen believes that Hawaii shouldn’t even play Las Vegas’ game because a gambling infrastructure is far too complicated and takes far too long to perfect, some 50 years for Las Vegas.

“Hawaii should become the anti-Las Vegas.” says Bowen. “It should become everything this city isn’t. Promote the physical beauty of Hawaii and concentrate on the activities that take advantage of those attributes, the beaches, the golf, things like that. You’re never going to beat Las Vegas at it own game.”

Outrigger Resorts President and CEO and HTA Board Member David Carey agrees. “All other destinations are a threat in a certain way and Las Vegas has done a great job in building new attractions,” says Carey. “And we haven’t added many attractions in a while. But we have incredible year-round weather and look at areas like Wailea and Kaanapali. You just can’t duplicate that.”

But in a city that has recreated some of the biggest and most romantic cities in Europe and North America and another giant resort modeled after the Titanic floating over the horizon, you have to believe that someone just might try.


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