Business
5:52 pm
Sun November 24, 2013

Reviving Las Vegas With Less Sin, More City

Originally published on Mon November 25, 2013 7:38 am

In Nevada, there is no income tax. And if you've ever been to Las Vegas then you know why — they don't need one.

More than 30 million tourists a year stumble down the Las Vegas Strip, and many of those tourists come to gamble, leaving behind a ridiculous amount of money. For decades, business boomed.

But the financial collapse hit Las Vegas hard. Despite what people had been saying for years, the gaming industry is not recession-proof. According to the Center for Gaming Research at the University of Nevada, Las Vegas, casino revenues on the Vegas strip dropped for 22 straight months during the last recession, and the city became the unofficial foreclosure capital of the U.S.

The city is now taking steps to claw its way back. In doing so, it may emerge as more than a one-economy town.

The New Nightlife

To be clear, gambling is not going anywhere. It is still what drives Las Vegas. But 2008 was a wake-up call.

Rick Lax, a writer who lives and breathes Las Vegas, tells NPR's Arun Rath that the city discovered that it was, in fact, not immune from the economic downturn.

"It turns out, when people don't have money, in fact they do not have money to come out to Las Vegas and gamble," he says. "And it really sunk in once President Obama ... used as an example of fiscal irresponsibility coming to Vegas on a bender, and that's when we knew we were in bad shape."

Las Vegas has remade itself before, becoming a bit more family-friendly in the '90s. But a more recent trend is the trading in of billboards for penny slots and buffets in exchange for ones advertising the latest nightclubs — and there are a lot of them.

"The club scene has boomed in the past five years," Lax says. "We have just been opening up mega-club after mega-club. And now if you look at the list of the highest money-making clubs in the United States, if you look at that Top 10 list, seven of them are right here in Las Vegas."

One of the newest clubs is called Light, which opened at the Mandalay Bay Hotel and Casino in May. Its $25 million cost can be seen in the massive walls of LED screens that illuminate the room, lasers, strobes and fog cannons. And if that wasn't enough of a spectacle, Light is a partnership with Cirque du Soleil, a company that has taken Las Vegas by storm since its first show there in 1993.

In Light, the Cirque du Soleil acrobats and performers swing from the rafters above club-goers.

"So all this is happening while the club's going on," says Andy Masi, CEO of Las Vegas hospitality company The Light Group. "You're part of the experience."

Masi says party-goers pay anything from $30 to get in the door to $10,000 to get a prime table and hear the world-famous DJs these clubs attract, like Kaskade and Tiesto.

"It's part of the culture right now," Masi says. "This is a movement, and these DJs who are creating this music ... they're composers, they are creating music. And it's really something that has inspired a massive generation."

The clubs in Las Vegas are getting bigger and bigger, and making huge amounts of money that isn't gambling. Masi says that it is all part of the market shift in the city.

"Gen X and Gen Y are really more into entertainment and dining and seeing shows and staying in great hotels than they are into gaming," he says. "[But] gaming is still a big part of Las Vegas ... I don't think you can have one without the other."

Counting On Collision

A couple of miles away, one entrepreneur is trying to bring the spirit of a party to a corporation. Tony Hsieh, CEO of online retailer Zappos, wants to transform Las Vegas.

Zappos has its headquarters in downtown Vegas (away from the Strip), but Hsieh's goals are broader. In 2009, he sold the company to Amazon for $1.2 billion, and with some of that money he started the Downtown Project.

In one way, it's a venture capital firm, trying to attract new industries. But in other ways, it's much more ambitious. Hsieh wants to rethink city planning and imagines how a well-designed city can breed innovation.

The secret, he says, is forcing more collaboration. It's something he likes to call "collisions." One example, Hsieh says, is at Zappos' new headquarters housed in what used to be Las Vegas City Hall. The company shut down a skybridge in order to force employees out into the street and into the community when coming to work.

"Research has shown that most innovation actually comes from something outside your industry or outside your area of expertise being combined with your own," he says. "So on the city level, it's really important for people from all different backgrounds and industries to collide and talk to each other. That's where a lot of the great ideas come from."

Hsieh has already started forcing a few collisions by funding companies like CrowdHall — a site that hosts Q&A sessions where visitors vote on the best questions — and Fluencr, a site that rethinks the celebrity endorsement and gets companies to offer everyday people endorsements instead.

Hsieh's Downtown Project, which is separate from Zappos, divides its $350 million budget between investing in small business, tech companies, education, arts, music and real estate.

"In the past year, we've relocated about 60 companies from other states or even countries actually to downtown Vegas," he says.

Hsieh says there are a few different goals of the project. One is to have everything people need to live, work and play within walking distance; another is to make downtown Vegas the most community-focused large city in the world — in probably the place most people would least expect it.

A third goal is to make Las Vegas the co-working and co-learning capital of the world. Co-working is where small companies, especially tech startups, share the same physical space. The idea started with some startups in San Francisco.

"What they found was they would start overhearing each other's conversations, and that would result in these serendipitous interactions and they'd start collaborating," he says. "And it actually drove a lot of innovation and productivity."

Dollar Signs In The Sky

For other new sources of revenue, Las Vegas is looking to the skies. Next month, the Federal Aviation Administration will decide on a new test site for unmanned aerial vehicles, better known as drones. Nevada is vying for that honor.

"We also have the largest concentration of unmanned aerial vehicle pilots in the world," says Tom Wilczek, who fronts the effort for the governor's office.

Wilczek says the Department of Defense did drone research here in the early 1990s, and military pilots fly drones from both Nellis Air Force Base in Las Vegas, and Creech, about an hour away. But the FAA isn't looking to do more military research; it's interested in the commercial possibilities for drones.

"The very first applications we're going to see are agricultural and then law enforcement — more of a public safety context," Wilczek says. "Somewhere in the future, you may have packages coming from a UPS or FedEx transited on aircraft that are remotely piloted."

That new industry could mean billions. Wilczek says commercial drones could earn about $90 billion in global revenue by 2025, a fraction of which he hopes will come Nevada's way.

"It's going to be enormous for our economy. The governor's made this one of his top economic development platforms," he says.

Casinos Will Always Rule

While Las Vegas appears to be branching out from its tried-and-true model, writer Rick Lax wants you to know that in Las Vegas, the casino is still king.

"We've got this giant, Chinese-themed Resorts World Casino that's going be opening up soon," he says, "so I think come three or four years, that's going to be the place to be and people will be saying at that point, 'Wow, Vegas really turned itself around.' "

Most of the high-earning dance clubs are all owned by casinos, as well as plenty of other non-gambling attractions like shows, amusement parks, mini-aquariums and zoos.

As Vegas comes roaring back, Lax says the casinos will still be on top.

Copyright 2014 NPR. To see more, visit http://www.npr.org/.

Transcript

ARUN RATH, HOST:

It's ALL THINGS CONSIDERED from NPR West. I'm Arun Rath.

There's no income tax in Nevada. Come to Las Vegas and you'll see why. They don't need one. More than 30 million tourists a year stumble down the Las Vegas Strip, and those tourists mostly come to gamble, leaving behind a ridiculous amount of money. And for decades, business boomed. But the financial collapse hit Las Vegas hard. Despite what people have been saying for years, the gaming industry is not recession proof.

According to UNLV's Center for Gaming Research, casino revenues on the Las Vegas Strip dropped for 22 straight months during the last recession, and the city became the unofficial foreclosure capital of the U.S. But Las Vegas is clawing its way back and, in doing so, may emerge as more than a one-economy town. That's our cover story today, the push to diversify Sin City.

(SOUNDBITE OF MUSIC)

RATH: Let's be clear. Gambling is not going anywhere. It's still what drives the city. But 2008 was a wakeup call. Rick Lax is a writer who lives and breathes Las Vegas. It was a shock for him to see his city linked with another perennial struggler.

RICK LAX: Detroit and right after that is Las Vegas. That's what you would always hear for years and years. We were just ahead of Detroit. It hit us hard.

RATH: Well, I remember some people were thinking that Las Vegas would maybe be immune somehow. And it seemed for the first six months like it got there but it was, there was a little bit of a delay.

LAX: There was, which I remember that hope. But then it turns out, when people don't have money - in fact, they do not have money to come out to Las Vegas and gamble. And it really sunk in once President Obama made that comment, you know? He used as an example of fiscal irresponsibility coming to Vegas on a bender. And that's when we knew we were in bad shape.

RATH: Now, Las Vegas is a place that's remade itself before. I remember during the '90s that it got a lot more family friendly. But one more recent trend that I've seen coming into town recently, there's been a change in the billboards. There used to be a lot more about the penny slots and the best buffets. And now there are a lot of dance clubs, it seems.

LAX: Yeah. And these billboards - my parents come visit me. They have no idea what these billboards are. It'll just be a blank billboard with the name, you know, Kascade or Tiesto. These are, you know, electronic dance musicians. They're DJs, and they are huge now. The club scene has boomed in the past five years. We have just been opening up mega club after mega club. And now, if you look at, you know, the list of the highest money-making clubs in the United States, if you look at that top-10 list, seven of them are right here in Las Vegas.

(SOUNDBITE OF SONG, "CLARITY")

ZEDD: (Singing) Why are you my clarity.

RATH: We visited one of the newest clubs. It's called Light. It opened in May at the Mandalay Bay Casino and Hotel. It cost more than $25 million and you can tell. Massive walls of LED screens illuminate the room, lasers, strobes, fog cannons. And if that weren't spectacle enough, Light is a partnership with Cirque du Soleil.

ANDY MASI: And in the ceiling above us is tracks where the Cirque performers kind of swing from the rafters and do their usual performances. So all this is happening while the club's going on.

RATH: So it looks like between the tracks and those catwalks, they can pretty much get from one side of the club to the other.

MASI: One side to the other.

RATH: Sort of like going to a Las Vegas show but you actually get to sit in the show and drink while you're...

MASI: You're part of the experience.

RATH: That's Andy Masi. He's the CEO of The Light Group. The vast interior of the club was empty and quiet while we were there, no acrobats dangling above us right now. But it still screamed opulence. Partygoers pay from $30 to get into the door to $10,000 to get a prime table.

MASI: It's part of the culture right now, you know? It's - the '60s had rock and, you know, there's these different sides of the movements. This is a movement. And these DJs are creating this music.

RATH: It's not like the old idea of a DJ. They're not there spinning discs or even doing like a little bit of scratch. They're composers.

MASI: They're producers. They're composers. They are creating music. And it's really something that has inspired, you know, large - a massive generation.

RATH: Obviously, these dance clubs are - they're just getting bigger and bigger and making huge amounts of money. And it's not gambling.

MASI: You know, I think the market has shifted a bit where, you know, Gen X and, you know, and Gen Y are really more into entertainment and dining and seeing shows and staying in great hotels than they are into gaming. Gaming is still a big part of Las Vegas, right, but I think people are coming because of the experience you get in Vegas.

RATH: Well, that's the thing. Nowadays, I don't think - when I think Mandalay Bay, you know, I don't think of gambling. I think about the Shark Reef, taking my kids there, or the restaurants here. And now, you know, this massive crazy nightclub.

MASI: Well, it's the mixture of it all. I don't think you can have one without the other. The gambling helps the hotels, and the clubs help the gambling. And it's just all part of entertainment. And I think that's what makes Vegas really unique.

RATH: Andy Masi. He's the man behind one of the newest nightclubs in Las Vegas, Light.

TONY HSIEH: We're going to call it a mini tour.

RATH: A couple of miles away, one very unusual CEO is trying to bring the spirit of a party to a corporation. The headquarters of Zappos is in downtown Las Vegas, the real Vegas, one might say. The Strip is actually outside city limits. Zappos, as you probably know, transformed how people buy shoes. Now, its founder, Tony Hsieh, wants to transform Las Vegas.

In 2009, Hsieh sold the company to Amazon for $1.2 billion. And with some of that money, he started the Downtown Project. In one way, it's a venture capital firm trying to attract new industries. But in other ways, it's much more ambitious. Tony Hsieh wants to rethink city planning, imagining how a well-designed city can breed innovation. The secret is forcing more collaborations, something he likes to call collisions.

HSIEH: We, actually, at Zappos prioritize collisions over convenience.

RATH: One example, Zappos' new headquarters in downtown Vegas in what used to be city hall.

HSIEH: There's a parking garage outside where the city employees used to park. But the city employees used to park there, walk across the sky bridge that connects directly into the building. Well, we actually shut down that sky bridge, which forces employees out into the street, resulting in more collisions with the community and with each other. And then they walk around to the Central Plaza which becomes another collision space.

RATH: So what are you getting or what do you hope to get from having collisions with your staff and the community of Las Vegas?

HSIEH: Yes. So the research has shown that most innovation actually comes from something outside your industry or outside of your area of expertise being combined with your own. And so on the city level, it's really important for people from all different backgrounds and industries to collide and talk to each other. That's where a lot of the great ideas come from.

RATH: Tony Hsieh has already forced a few collisions. He's funded companies like CrowdHall, a site that hosts Q&A sessions where visitors vote on the best questions and Fluencr, a site that rethinks celebrity endorsement and gets companies to offer everyday people endorsements instead.

HSIEH: The Downtown Project is a separate company from Zappos, and it has a $350 million budget that's roughly divided into 50 million to be invested into small businesses to help build a sense of neighborhood and community, 50 million to tech companies. In the past year, we've relocated about 60 companies from other states - or even countries, actually - to downtown Vegas, 50 million to education, arts, music and so on, and then 200 million into real estate to really make it a connected city, one where you can walk from block to block.

And there's a few different goals. One is to have everything you need to live, work, play within walking distance. Another is to make downtown Vegas the most community focused large city in the world and probably the place most people would least expect it. And the third is to make it the co-working and co-learning capital of the world.

And for those who may not be familiar with the concept of co-working, it's this thing that started out in San Francisco, I think, almost a decade ago where a bunch of small tech startups worked in the same physical space side by side, even though they were different companies. But what they found was they would start overhearing each other's conversations, and that would result in these serendipitous interactions. And they'd start collaborating, and it actually drove a lot of innovation and productivity.

RATH: Tony Hsieh, founder of Zappos and the Downtown Project, a $350 million investment in the Fremont East section of Las Vegas. For other new sources of revenue, Las Vegas is looking to the skies.

(SOUNDBITE OF DRONE)

RATH: Next month, the FAA will decide on a new test site for unmanned aerial vehicles, better known as drones. Nevada is vying for that honor.

TOM WILCZEK: We are the birthplace of the industry.

RATH: Tom Wilczek fronts the effort for the governor's office, and he cites the Department of Defense research done here in the early 1990s.

WILCZEK: We also have the largest concentration of unmanned aerial vehicle pilots in the world.

RATH: Military pilots fly drones from Nellis Air Force Base right in Las Vegas. But we're not talking about more military research. The FAA is pursuing the drone's commercial possibilities.

WILCZEK: The very first applications we're going to see are going to be agricultural, and in law enforcement, more of a public safety context. Somewhere in the future, you may have packages coming from UPS or FedEx transited on aircraft that are remotely piloted.

RATH: That's new industry. And that could mean billions.

WILCZEK: Almost a $90 billion annual revenue globally by 2025.

RATH: And Tom Wilczek hopes that nine of that 90 billion will come Nevada's way.

WILCZEK: It's going to be enormous for our economy. The governor's made this one of his top economic development platforms.

(SOUNDBITE OF MUSIC)

RATH: Now, while Las Vegas appears to be branching out from its tried-and-true model, writer Rick Lax wants you to know that in Las Vegas, the casino is still king. Those big-earning dance clubs, all owned by casinos, along with plenty of other non-gambling attractions - the shows, amusement parks, mini aquariums and zoos. As Las Vegas comes roaring back, Rick Lax says the casino will be on top.

LAX: I didn't think there were going to be any more big casinos opening up, not for another decade. But we've got this giant, Chinese-themed Resorts World casino that's going to be opening up soon. So I think come three or four years, that's going to be the place to be. And people will be saying at that point, wow, Vegas really turned itself around. Transcript provided by NPR, Copyright NPR.