South Lake Tahoe starts to shift its focus

STATELINE, Nev. – Gambling is transforming Lake Tahoe again. This time, though, the changes are being driven by ferocious competition from Northern California's Indian casinos.

The casinos here are struggling. One of the big ones, the Horizon Casino Resort, is talking about closing in three years. That's adding fuel to a redevelopment movement that's changing the face of Tahoe tourism.

The new Tahoe relies less on gamblers, "day trippers" and budget-motel travelers. Taking their place: fewer but more affluent visitors seeking outdoor recreation and atmosphere and staying in time shares, second homes and upper-end hotels and condos.

The first major redevelopment took place six years ago with the opening of Heavenly Village, the upscale lodging-residential-retail complex at the base of the Heavenly gondola in South Lake Tahoe. The next big piece is the Chateau at Heavenly Village, a $400 million convention center and condo-hotel under construction on the other side of Highway 50.

But the road to a new Tahoe isn't always smooth. Construction of the Chateau has been stalled since Christmas by the credit crunch, a reminder of how outside forces can intrude on this mountain paradise. Meanwhile, the weak economy and high gas prices are creating anxiety about the summer season as Tahoe tries to recover from last year's destructive wildfire.

"I know that everybody's kind of scared right now," said Camden Collins, South Lake Tahoe's economic development coordinator.

Tahoe still has plenty going for it, including a one-of-a-kind setting. Users of online travel site TripAdvisor recently declared Tahoe the nation's top travel destination.

But the changes underfoot leave some uneasy.

An image facelift

Overnight stays at hotels and motels have fallen 16 percent in the past decade, according to the Lake Tahoe Visitors Authority. That's been partly offset by increased occupancy of time shares and vacation homes. But many here are troubled by the number of older motels and other businesses that have closed or been torn down for redevelopment.

"They're trying to change the image of Tahoe," said Cheryl Horner, manager of the Red Hut Cafe, a fixture in South Lake Tahoe since 1959. "They've tried to make it more high-end, and I think it's hurt some of the small businesses. … Everywhere I go, I see another business going out."

Business leaders say change is necessary. "We really need to push, to upgrade," said Jerry Bindel, president of the South Lake Tahoe Lodging Association. "We've rested on the laurels of, 'Come on up to Tahoe, no matter what.' "

Ralf Garrison, a Denver consultant, said Tahoe is morphing from a traditional weekend getaway to a place where the wealthy own second homes or go to retire. "Tahoe is the poster kid for what is going on at many destination mountain resort communities," he said.

Accelerating the movement is California's decision in 2000 to permit Vegas-style tribal gambling. While Lincoln's Thunder Valley and other Indian casinos have boomed, Tahoe gambling revenue has stagnated. Red Hawk, a tribal casino opening this fall on Highway 50 in Shingle Springs, won't likely help.

One casino's struggle

The Horizon, one of the south shore's major casinos, might even fold its hand.

Tired of trying to compete with the Indian tribes, the casino's landlord said last month it will consider converting it into a residential-retail site in three years. That's when the landlord, Park Cattle Co., will take control of the property after settling a lawsuit against the Horizon's parent, Tropicana Entertainment LLC.

Park Cattle sued Tropicana for allegedly letting the Horizon slide into "general filth and decay." As part of the settlement, Tropicana also agreed to pay $165 million in damages.

Park Cattle's tentative plans for the Horizon have caused a stir. Gambling has helped define the south shore since the first big casino, Harveys, opened in 1944 as the Wagon Wheel. In its glory days, the Horizon, then known as the Sahara Tahoe, hosted big names including Elvis Presley, the Beach Boys and Liberace.

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