We all know it has been a tough few years for gaming in Las Vegas, and for the town as well. We cover the former in this month’s cover story. As the industry gathers in the global gaming industry’s capital city for G2E, it’s worth pondering the latter as well.

The gaming industry has shown admirable resilience, as our cover story shows, not just in terms of its strategic response to the downturn but also in the quality of the product itself. People still want to come to Las Vegas, and they are again arriving in growing numbers. A tougher challenge, for the city at least, is how to make companies from outside gaming and tourism want to come to Las Vegas.

“There will inevitably be another downturn at some point, and whenever the U.S. economy takes a dive during a recession, it’s going to affect the tourism industry; people are going to cut back on luxury items like travel and tourism before they cut back on housing, food and clothing,” said Jonathan Rothwell, senior research analyst at the Brookings Institution. “Going forward, Las Vegas will have to diversify if it doesn’t want to experience these kinds of gyrations.”

Brookings released a report called Education, Demand and Unemployment in Metropolitan America last month that looked at the supply and demand for educated workers, its relationship to unemployment and how well metro areas have fared in the recession. Las Vegas ranked 84th out of 100, which is another way of saying it remains overly dependent on a rebound of tourism, and, more problematically, construction and housing, to regain economic health as its competitive positioning to attract other industries is weak. General education levels and attainment of standards are lagging. One challenge in addressing the problem is the state’s traditional skepticism toward government may not be the best fit for its future.

“It’s not clear what role the government should or can play,” said Rothwell. “But insofar as it makes strategic investments in infrastructure and education, supporting universities and community colleges, it does have an influence on which businesses are going to compete there and whether their workforce needs are being met. Boosting education attainment and attracting more folks with bachelor’s degrees or higher could lend itself to more diversification, including manufacturing.

“It’s not an easy problem to solve on a tight budget,” Rothwell continued. “To some extent, the state needs to revisit its fierce orientation toward less taxation and small government, not that it needs to become Massachusetts or California, but it’s hard to boost public goods like education and infrastructure without public spending. Now might not be the time to raise taxes, but when the economy recovers, they might want to seriously think of ways to get more revenue so they can start making investments for the long term.”

Diversification, besides being highly desirable from the macro standpoint, would also have the happy effect of taking some pressure off the gaming industry on the taxation front. There might also be something in it for existing gaming companies. Brookings is working on a more detailed report on Las Vegas with the Nevada government that is scheduled to be released this month. One area of focus will be how Las Vegas can leverage existing manufacturing and casino gaming technology to tap into other business opportunities, including exports.



NEXT MONTH AT FOXWOODS

Speaking of Massachusetts, the prospect of expanded casino gaming in the Bay State has been a desired item for many in the industry for quite some time. The recession brought the issue to the forefront in 2010, but a disagreement on the particulars of the legislation killed the bill. This year, it appears that problem has been solved. Coordination between the Senate, the House and the Governor has been there from that start and, last month, a first hurdle was cleared with a landslide vote in the House in favor of a bill that would legalize three casinos and a slot parlor. Nothing is done until it is done, but the combination of the high-level agreement and the lack of high-profile opposition has expanded gaming in Massachusetts tantalizingly close to the finish line.

We’ll be teaming up with our friends with Spectrum Gaming at Foxwoods next month at the second annual New England Gaming Summit www.newenglandsummit.com to take an in-depth look at this issue. The conference, which will be held November 14-15, will also have keynotes from Mitch Etess, chief executive officer, Mohegan Tribal Gaming Authority, and Scott Butera, president & chief executive officer, Foxwoods Resort Casino. Hope to see you there.