Facing ferocious competition from Northern California’s Indian casinos, Lake Tahoe’s newest gambling palace wants to generate most of its revenue from sources other than gambling.
The Hard Rock Hotel & Casino Lake Tahoe, set to replace the old Horizon casino in late January, will feature four new restaurants, music-themed rooms, a healthy dose of live entertainment – and a modest-size gambling floor.
Just 25,000 square feet will be devoted to gambling, compared to 40,000 at the Horizon. Most major casinos in Northern Nevada take up at least 40,000 square feet of space or more.
“You can’t thrive as a business if you concentrate on the gaming alone,” said Don Marrandino, chief operations officer at the Hard Rock Tahoe. “We hope to derive close to 50 percent of our revenues or more from non-gaming operations.”
Closed since March, the property is wrapping up a $60 million overhaul. Next door, the rival Montbleu resort is undergoing a $24 million face-lift, which Marrandino welcomes as the Tahoe market struggles to reinvent itself.
“For a destination to make a comeback, it’s got to be different,” he said.
Marrandino, in a wide-ranging interview Tuesday, said the Hard Rock will stress luxury accommodations and its entertainment offerings when it opens to the public Jan. 29. Ski packages will be plentiful during winter, and glitzy nightclub-style parties around the swimming pool will be a feature of summer.
During the slow seasons, the hotel will offer fitness programs tied to Tahoe’s natural surroundings, such as biking and mountain climbing. Eventually, Marrandino wants to open a spa at the hotel, similar to the spa facility at the Hard Rock resort in Las Vegas.
In some sense, the diversification strategy is hardly revolutionary. For the past 20 years or so, major casinos practically everywhere have tried to ramp up the revenue they get from entertainment, shopping and other sources. The strategy has paid big dividends in Las Vegas, but less so in Northern Nevada.
Last year, the big Las Vegas Strip casinos got just 37 percent of their revenue from gambling, according to researchers at the University of Nevada, Las Vegas. Large Reno casinos still derived 52 percent of their revenue from gambling.
There were no comparable statistics for Lake Tahoe’s casinos, but industry experts say it’s difficult to generate a lot of non-gambling revenue in a small market like Lake Tahoe, which enjoys just a sliver of the tourism traffic that Las Vegas brings in.
“It’s a very hard model to replicate unless you have that much traffic,” said Ken Adams, a casino industry consultant in Reno. “That’s a tough market.”
Since Indian gambling was fully legalized in California in 2000, tourism and casino revenue at Tahoe has both fallen by more than 30 percent.
Nonetheless, Adams said Hard Rock is smart to give it a try. Marrandino “has got to do something other than just (run) an old, tired casino,” Adams said.
The Horizon, which opened in 1965 as Del Webb’s Sahara Tahoe, certainly fit the description of old and tired when its owners, the Park family, closed the resort in March for renovations.
The Parks have teamed up with Warner Hospitality, a Las Vegas resort company that manages the Hard Rock casinos in Vegas and Sioux City, Iowa. Marrandino, Warner’s executive vice president of operations, has been running the Hard Rock in Vegas, as well as overseeing the Tahoe renovation.
Marrandino said the Tahoe casino will open with 500 slot machines and 24 table games. But if the company’s projections prove faulty, there is potential to expand the slot and table game offerings.
“Hopefully, we’re wrong, and we need more of both,” he said.