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We asked them key questions about design trends for today’s casinos, about the uses and drawbacks of new technologies, about the growth of green initiatives, and about the problems of building and operating in a challenging economy. Then we sat back and let them talk.

Nineteen design and construction experts shared their perspectives. Most agree that “clean, edgy, contemporary” design is dominant today; they are adamant about the importance of good design principles, high quality materials and proper programming. To succeed, they agree, one must understand the customer profile, adhere to the client’s budget and facilitate the client’s vision.

In the words of a roundtable participant, “We must dazzle the eye and soothe the senses.”

Everyone acknowledges that “green is grand” and here to stay. Environmental initiatives are responsible, marketable, appropriate and sustainable. Palazzo, a Sands property on the Las Vegas Strip, is an example of a casino that’s won applause for its use of green technology. It’s the largest green building in the world to date, and a recent recipient of the U.S Green Building Council’s Leadership in Energy and Environmental Design Silver Certification. LEED certification is viewed as a benchmark of achievement in healthful environment and responsible use of resources.

Our experts also agree that technology has revolutionized the way we communicate. Transmission of information over web-based and other technologies greatly improves accuracy and speed of delivery; it also makes it easier to dialogue with multiple disciplines domestically and around the world. Technology has increased efficiencies and cut costs. It is also ever-evolving, so stay tuned for new and exciting programs.

The capital market, the cost of raw materials and labor challenges are of great concern to the majority of our experts, as is the disappearance of skilled vendors and craftsmen.

Here’s what they told us. 

Please identify the most significant design trend today and why it’s at the top of your list.

BRINKERHOFF: As in the past, a “trend” is determined by the owner’s vision. Many owners are now going “South Beach,” others are more minimalist in their preference and some remain convinced that traditional “theming” is still valid.

DOUGALL: Design trends have changed worldwide, and Las Vegas is now playing catch-up. Hip boutique hotels and restaurants with celebrity chefs have been the impetus for this change. Youth is being promoted more than ever before. But the baby boomers don’t want to be left out; they’ll hang on to every last bit of their youth, including staying in hotels designed for guests ranging from 24 to 63!

DOUGLAS: The most significant trend is the continuing segmentation of the marketplace, and tailoring experiences to individuals. Why? Because guest expectations are higher. They expect more that’s directly relevant to their particular interests. It will be our charge to translate this objective into viable casino destinations.

EWING: The proportion, scale and environmental comfort of a gaming space are so important to the psyche of today’s customer. Lighting is also critical to the success of a well-designed casino.

FRIEDMUTTER: The newer, younger gaming customer is well traveled with more sophisticated and modern expectations. This customer routinely combines work and play, and we’re able to offer this convergence by bringing technology, leisure, business and entertainment into one mixed-use facility.
 
GARDNER: Environmental consciousness is the most important issue the design industry will address in years to come. We’ve barely scratched the surface in the gaming industry, but the shift toward sustainable design is gaining momentum-especially on the West Coast (United States).

HARMAN: Larger and larger projects are being built on smaller, more limited sites. There’s an ongoing trend to upgrade the exterior aesthetics of the highly visible parking garages, because they are a prominent part of a project’s overall appearance.

HOSKENS: Casino resorts are becoming complete retail entertainment mega-centers. They are creating their own unique urban fabric and they must be sustainable both in design and throughout their operation.

LANGEMADE: Many designers are now incorporating the desk, credenza, mini-bar, coffee service, television and storage drawers into one piece of furniture. Bathroom vanities are purchased inclusive of plumbing fixtures, stone tops, mirrors, bowls, etc.-as one piece. This trend requires detailed planning on how to build the furniture to economize shipping and installation. The biggest challenge is making sure we can fit this set-in-place furniture into the elevator, through the guest-
room doors and into the contractor’s finished opening!

O’CONNOR: A definitive emphasis is being placed on “timeless” design-forward statements for both buildings and spaces. As the hospitality industry embraces the “entertainment” aspects of shopping, dining and gaming, we’re seeing more adventurous solutions aimed at a younger, more sophisticated patron. Also essential: quality materials that integrate luxe with technology.

PRIFTI: Theming is still “in”-it just doesn’t mean what it used to mean. Successful design today is an aspirational design, defined by the tastes of the wealthy and applied to a mass-market audience. We characterize this as a simpler yet sophisticated approach, exemplified by high-end modernism.

SPARER: The most significant design direction today is the concept of sustainability. I would not classify this “green awareness” as a trend, as that implies a short-lived awareness. Rather, I see the whole concept as a paradigm shift in how architects will design buildings for generations to come. Also I believe that a new, sophisticated architecture is on the horizon, such as CityCenter and Echelon. It’s a reflection of the more universal, educated world traveler who has developed a deep appreciation for refined design.

UDELL: Utilizing interactive lighting, video, LED and computer-based programs to accommodate for the changeability the casino industry demands. This allows the casino operator to create different types of environments, instantly, whether it’s for the change of seasons, a special event or to create a very special environmental niche.

VANCE: Beyond the non-thematic approach is the dynamic targeting of the customer. Properties need to not only provide comprehensive and diverse services, but make environmental changes quickly and freely as demands change, keeping the property perpetually fresh and exciting. For example, restaurants and clubs that are not doing well will be walled up, replaced, and renamed. With respect to gaming, we’ll see more virtual table games, and the ability of slot floors to change their mix overnight to meet the current demographics of the day. The slot machine will be a box with software serving as the agent of instant change.

WALLS: In the past 10 to 15 years in Las Vegas we have seen an increase in the high-profile retail venue and celebrity chef restaurant. Customers must now be entertained by the architecture of these interior spaces as part of the product, providing them with an immersive experience.

Are you building green or specifying more green products for the casinos you design or construct?

BRINKERHOFF: Yes. We’re seriously considering all options that save water and minimize waste while still maintaining a viable resort environment. Our projects have standard water-saving features such as drip irrigation systems as well as drought-tolerant and desert-sensitive plant materials. We encourage natural light for interior-scapes whenever possible.

DOUGALL: Every current project we have is using LEED criteria, which affect every single thing we specify from carpets, paints, wall covering and furnishings, just to name a few.

EWING: Casinos are complicated, integrated spaces; you have to approach green design in pieces. We pay particular attention to the introduction of natural light into our casino design while at the same time employing passive solar techniques in order to control heat gain.

FRIEDMUTTER: Our clients are requesting more green design strategies and products. For example, Sheik Mohamed of Dubai has introduced an edict that all projects in the jurisdiction are to be designed to a minimum of Silver LEED certification. Our projects in Dubai reflect this. Clients are looking for ways to be as green as possible without sacrificing customer expectations.

FO: In the design of our projects worldwide, we consider solar heating, lighting occupancy sensors, waste recycling, moisture and AC controls, recycled building materials, low-emitting interior materials and finishes, water conservation strategies such as low-flow water in showers, and rapidly renewable materials.

GARDNER: We think energy and water-efficient strategies, indoor air quality, sustainable management practices and sustainable development initiatives have the most direct long-term environmental impact in the gaming industry.

MARMAN: Structural concrete and structural steel are already green! Hard to believe? Structural steel used in the United States is manufactured with more than 85 percent recycled content (on average). Concrete is primarily limestone, which is the most abundant mineral on earth. It can also be made with fly ash, slag cement and silica fume, all waste byproducts from power plants, steel mills and other manufacturing facilities.

HOSKENS: All of our projects follow a “project green card” approach whereby the project team, along with our clients, continuously evaluate design decisions based on economic, environmental, social and cultural aspects.

LANGEMADE: We are fully engaged in incorporating green products and practices into all of our projects. We buy from more local factories, use emission free products, ask manufacturers to reduce packaging and use recycled or recyclable materials. We are also asking certain vendors to pick up and recycle their products at the end of their useful life on a casino property.

RIZZO: We are involved with MGM’s Project CityCenter, which is reported to be the largest LEED-certified building program ever attempted.

THALDEN: Sustainable architecture is here to stay. Flagrant wastes of water, energy and other precious resources will no longer be acceptable. Our firm is very much involved in the green building movement as sustainability fast becomes the industry standard.

VANCE: Remarkably nearly all of our clients are asking for green approaches to their projects. They see themselves as responsible stewards of our environment and consequently are asking for recycled products as well as energy efficient electrical and mechanical energy systems throughout their projects.

What design trends are now passé?

FO: Trying to be everything to everybody.

FRIEDMUTTER: “Theming” has been used to describe transporting customers to a different time and place through the built resort environment. We still transport people, but through lifestyles. These lifestyle trends are usually aspirational, making people feel richer, younger, sexier, stylish, famous, beautiful and fun.

HEDGE: Drawings prepared by hand are now passé. We have software that allows a freehand drawing to be generated electronically. The folks I tutored under showed me the good old ways, and many of those techniques are still useful now; we just tend to let the machine do more of the thinking.

HERETAKIS: Modern luxury. As strong as Red Rock is in its design and detail, and as an example of money well-spent for the “wow” factor, it’s been diluted as a style by poorly done knock-offs!

O’CONNOR: Good design should never be passé. But popular taste is fickle. The construction field experienced an entire missing generation of stonemasons because granite and marble fell out of favor in the ’70s and ’80s. Now that we’ve rediscovered the desirability of stonework, a new generation of craftsmen has to be trained! Now they can’t tool the work fast enough.

PRIFTI: There are lots of different trends, just as there are lots of different tastes. What’s passé? Perhaps it’s the use of overt historic or geographic pastiche as theme. We do benchmark older properties, evaluating each for core competency. This informs our current work, which typically appears in the marketplace three to four years after a project starts.

SPARER: The concept of themed architecture has finally run its course here in Las Vegas. This is not to say that some of the most successful examples of this genre are not well done, such as Paris Las Vegas, but the approach seems to be at the end of its lifecycle.

UDELL: The buffet seems to be giving way to upscale optional food. We are not designing for the 50-to-70-year-old group, but to a much younger group of patrons. Also, the heavily fantasized space of the stage theater is disappearing as new theaters based on modern technology are emerging.

VANCE: “In-your-face” gaming. In the past, when you walked into a property, the first thing you saw was a wall of slots. Now, it’s anything but.  Look at the Venetian, the Wynn, the Bellagio or the Palazzo. It actually takes you a bit of time to find the gaming floor, which is refreshing for the customer. Another passé trend; literal thematic design approaches. The design trends of this industry are now echoing the evolving mainstream approach, which is “Just do good architecture.”

Is technology playing an important role in design/construction? How much is web-based?

BRINKERHOFF: The use of video conferencing, CAD (in all its ever-evolving forms) and other tools have made working with multiple disciplines, domestic and internationally far more feasible.

DONNELLY: Definitely! As the landscape environments we install get more and more complicated (such as rooftops in tightly restricted areas of access), executing ambitious efforts requires sophisticated software tools for quantity surveys, and 3D modeling for pipe runs and below-surface support structures. Technology is essential in developing integrated and precise construction schedules.

DOUGLAS: Almost 100 percent is web-based using collaboration tools and programs such as Buzzsaw, Google Earth, Aconex and Generations. Being highly adept technologically also allows us the freedom to design projects worldwide while still providing hands-on service.

FRIEDMUTTER: Everything from our presentations to documentation to the way we conduct meetings has changed extensively over the last five years.  We use Revit, a building information model-based design and documentation tool to create all our projects. We utilize many graphic, 3-D animation and video technologies to assist our clients in the visualization, development and evolution of their projects. Also, our offices are connected to one main server, allowing all offices to collaborate on a project in real time. We can have face-to-face meetings with our clients around the world.

HEDGE: Technology plays a huge role in our profession. Computers are faster and the software allows us to make changes and revisions like we never imagined. The downside is that we pay hefty licensing fees for the software.

O’CONNOR: Technology is a major driver both in design and construction. For instance, construction techniques employing computer-laser technology create intricate patterns in stone and terrazzo fabrication and carpet design/manufacture. Also, construction sequence and shop drawing review applications can be time-compressed for greater cost savings.

RIZZO: The use of three-dimensional drawings to coordinate and integrate structural, electrical, mechanical, plumbing and sprinkler design is being successfully used to minimize conflict in layout.

RYDER: With the advent of new estimating software programs and tools, technology has helped us to become more efficient, has increased bid accuracy, and allows us to create various reports that detail unit costs and highlights areas of scope inclusion. These clearly illustrate to the client what they’re buying and where they are spending their dollars.

THALDEN: We’ve been stretching the envelope on a new technology breakthrough that’s changing the way architecture is done. It’s called Building Information Modeling. This is the most significant change in architecture since the Renaissance in the 1500s. We are no longer drawing on two-dimensional sheets. Instead, we’re virtually creating the buildings in three dimensions in the computer. Some of the advantages: better quality documents, ease on examining design options, greater ability to visualize 3-D fly-arounds or virtual walk-throughs, a constant flow of digital information during construction, just to name a few.

WALLS: Technology continues to take an increasingly crucial role in the architectural process. Document transmission is being condensed to the electronic transfer of drawings, correspondences, RFIs, submittals, etc. This new process has increased the productivity of our offices but raised a concern about proper recordkeeping, as in many cases physical paper copies do not exist unless properly processed and logged.

The increase in the cost of construction is affecting all gaming jurisdictions. How much does it affect your business?

DONNELLY: To help clients manage costs, we have dedicated our best estimating and scheduling people to form a professional pre-construction services team. This allows us to provide real-time budgeting, construction ability and scheduling analysis early in the design and development process, so fewer cost surprises pop up during construction. A successful collaboration with the landscape architect through pre-construction and beyond ensures that the owner is getting more landscape value for every dollar invested.

FO: Due to rising costs you have to plan more efficiently and you have to be more careful from the outset. The design process is an evolution so you have to monitor costs at all stages. Cost consultants now are brought on to the team from day one.

FRIEDMUTTER: We recognize that market conditions are cyclical. The current conditions are helping to stabilize many of the construction costs, giving owners the opportunity to look ahead in order to design and implement renovation or expansion projects in anticipation of the next cycle.

HEDGE: The increase in construction costs has definitely impacted the gaming industry. But I think the shake-up in the residential construction and commercial/residential (mixed use) lending market has had a greater impact on our business. Many high-rise condos have been stopped before we even complete their design. Alternatively, we had several projects for which we completed the majority of design that were never constructed.

HERETAKIS: Many of our projects have been put on hold because of escalating construction costs on other projects our owners are involved in.

LANGEMADE: For the first time in many years, we’re seeing double-digit increases in the cost of furnishings. We’re also faced with higher labor costs, higher fuel costs and competition from China and India on raw goods. There is a shortage of qualified vendors and other service providers to adequately service all the casino projects underway globally.

RIZZO: The costs of all elements of a building (i.e. labor, material and equipment) are obviously very sensitive as cost increases. The cost of raw materials, the fabrication and the transportation are all affected by the ever-increasing cost of energy.

RYDER: The spiraling price of oil alone has affected everything from fuel to PVC pipe to irrigation components to insulated wire. With regards to hardscape, the prices of steel, copper, aggregates, concrete, stone and glass are the key elements driving up the cost of finished flatwork, pools, water features, masonry, fencing, railings, etc. This obviously has a
huge impact on our business.

VANCE: Volatile and ever increasing construction costs are affecting every facet of the build environment. We as architects are no longer willing or able to provide opinions of probable costs for our clients. The result is a process change that we have used for years in the commercial sector, “Design-Assist.” Selecting a contractor at the onset of a project (based on GCs and fees) provides the design team with real-time cost data that ensures that the project is kept within the owner’s budget.

PARTICIPANTS:

Don Brinkerhoff, Chairman and CEO, Lifescapes International, Inc.
Don Brinkerhoff guides Lifescapes International’s award-winning landscape architectural design team on virtually all projects worldwide. “I guess you could say I’m the visual storyteller for the company,” Brinkerhoff says. He received his profession’s highest honor when he became a fellow in 1998 of the American Society of Landscape Architects. His  industry contributions include landscape terminology (“softscape,” “hardscape”) and cobblestone-patterned concrete paving (now an industry standard).

Tom Donnelly, President, ValleyCrest Landscape Development
Thomas Donnelly joined ValleyCrest in 1980 and became vice president in 1984. He developed relationships with key national clients, opened several new offices and managed operations through the 1996 Olympics. He continues to expand operations throughout the Southeast, principally North and South Carolina, Tennessee and Alabama, and manages national expansion of the company’s site development capabilities. He is a member of the American Society Landscape Architects and the Urban Land Institute.

Terry Dougall President, Dougall Design Associates, Inc.
Since 1988, Terry Dougall has created some of the most talked-about casinos and retail projects in the gaming industry: Mandalay Bay, Borgata, the Monte Carlo, the Forum Shops at Caesars, and the lion concept for the corner marquee of MGM Grand. Current projects include Echelon Las Vegas, to open in late 2010, the Cosmopolitan Resort and Casino, opening in late 2009 and the just-completed Planet Hollywood Resort and Casino in Las Vegas.

Jonathan F. Douglas, Managing Principal, VOA
Jonathan Douglas has been VOA principal-in-charge on large-scale leisure entertainment/hospitality projects throughout the U.S., the Caribbean and the United Arab Emirates. His design approach reflects the philosophy that visitors and guests want to be informed and entertained. Douglas believes that themes and messages that “tell a story” lead to a memorable experience. He has been quoted in numerous business and trade publications on architectural design in the resort and hospitality sector, and the growing green movement.

Brett Ewing President, Marnell Architecture
Prior to joining Marnell, Brett Ewing worked for firms in Nevada and Colorado. He is a registered architect in those states as well as California and Idaho. Certified by the National Council of Architectural Registra- tion Boards, he is also a member of the American Institute of Architects, the International Council of Building Officials and the National Association of Industrial and Office Parks. He graduated summa cum laude from the University of Idaho, Moscow.

Tom Fo, Associate Vice President, WATG
Since joining WATG in 1985, Tom Fo has worked on most of the firm’s high profile gaming projects including the Venetian and Grand Canal Shoppes in Las Vegas and the Tropicana in Atlantic City. Fo has led design efforts on projects around the globe and served as senior project designer for Disney’s Grand Floridian Beach Resort at Walt Disney World and Disney hotels in Paris, Tokyo and Hong Kong. He has also directed design efforts on a multi-resort destination in the Maldives, and a luxury resort in Morocco.

Rick Gardner, Partner and Principal, Hnedak Bobo Group
As the leader of HBG’s largest design studio serving the entertainment and hospitality markets, Rick Gardner has directed teams from concept design through client occupancy on an array of technically challenging and intricate large-scale projects from coast to coast. He directed the $170 Million Greektown Casino Resort project in Detroit, a complex urban expansion of an existing casino. He is currently leading design teams on two significant confidential destination resorts on the West Coast.

Mark Hedge, Principal, Civil Engineer and Co-Owner, Lochsa Engineering
Before founding his own firm, civil engineer Mark Hedge was project manager on projects like the MGM Theme Park, Golden Nugget Laughlin, Boulder Station, Bellagio, and the Orleans. He was civil principal-in-charge at Fiesta Rancho, Wynn Las Vegas, Mandalay Bay, CityCenter, Fontainebleau, the Palms, Panorama Towers, One Las Vegas, Pala Casino and the MGM Grand. His company, based in Las Vegas and Boise, provides civil, structural and traffic engineering and surveying.

Paul Heretakis, Vice President, WESTAR Architects
Paul Heretakis has more than 15 years of experience with the top gaming and hospitality companies in the world (Venetian, Bellagio, MGM Mirage, Caesars, Harrah’s Entertainment, Trump) and celebrity chefs (Mario Batali, Paula Deen, and Georges Perrier). He has established design studios offer branding, restaurant development, client-driven vision process, innovation laboratory and alternate revenue studios. WESTAR Architects continues to be ranked as one of the top hospitality design companies in the country.

Tom Hoskens, Principal, Cuningham Group
Tom Hoskens has over 30 years of experience in architecture with an emphasis on casinos, hotels and entertainment. He was principal-in-charge for $3 billion worth of destination resort design in the last four years alone. Hoskens’ commitment to client satisfaction includes highly responsive architectural and engineering teams. “Each team responds directly to the client to help drive clarity of communication and accuracy of information,” he says, ensuring large-scale, complex projects are completed on time and within budget.

William Langmade, President, Purchasing Management International
William Langmade has more than 20 years of hospitality construction, management and purchasing experience. His company, providing furniture, fixtures and equipment for the hospitality and gaming industries, has purchased and installed over $1 billion dollars in hotel, resort and casino furnishings, operating equipment and systems worldwide. The company is headquartered in Dallas with offices in Las Vegas, Guadalajara, Cancun, and New Delhi, India. PMI is also gaming’s leading purchasing company agent.

Tom O’Connor, Founding Principal, SOSH Architects
Tom O’Connor has helped grow SOSH into a powerhouse, designing projects for the country’s best-known hospitality, gaming and entertainment clients. With offices in Atlantic City and New York, O’Connor is working on projects coast to coast as well as in the U.K., Europe and the Middle East. O’Connor accepted the Sarno Award for casino redesign for the Spotlight 29 Casino in Palm Springs, and the McGraw Hill 2007 Best Adaptive Reuse Award for Harrah’s Chester Downs.

Michael Prifti Principal, BLT Architects
Michael Prifti is a fellow of the American Institute of Architects and an award-winning professional with experience in new construction, adaptive re-use projects and project management. Prifti is currently leading the 5.5 million-square-foot Revel casino mega-resort in Atlantic City and supports BLT’s project teams for both the Water Club, a 40-story glass hotel tower addition to the Borgata in Atlantic City, and Echelon, the $4 billion resort planned for the Las Vegas Strip.

Dick Rizzo, Vice Chairman, Perini Building Company
Dick Rizzo is responsible for market planning and research at Perini, and oversees marketing strategies with particular emphasis on developing national clients. With more than 40 years of experience, Rizzo helped steer Perini into the hospitality and gaming industry. It has since become the nation’s largest builder of hospitality and gaming projects, with a project list that includes Paris Las Vegas, Caesars Palace, and Trump International. Perini is currently building MGM Mirage’s CityCenter.

Bart Ryder, Partner, Tracy & Ryder Landscape, Inc.
A seasoned landscaping professional with 30 years of experience, Bart Ryder is a partner at Park West Companies Inc. of Rancho Santa Margarita, California and its Las Vegas arm, Tracy & Ryder Landscaping. The companies provide work site development from concrete and electrical foundations to landscaping and irrigation. Notable Las Vegas projects include the Red Rock Casino, the Palazzo and the upcoming Fontainebleau Casino, as well as the Lake Las Vegas Resorts. Born in Orange, California, Ryder studied at the Marshall School of Business at USC and graduated in 1981.

Jon Sparer Principal, YWS Architects, Ltd.
Jon Sparer perceives the world visually, and always with pencil in hand. In 2001, he joined Tom Wucherer to form YWS; the firm has since grown in size and caliber with more than 30 gifted employees. YWS projects span the industry and the globe: from Las Vegas, where the firm devised the “light as architecture” concept for the Rio porte cochere, to China, where it created the concept design for MGM Grand Macau.

Barry Thalden, Partner, Thalden Boyd Emery Architects International, Inc.
With more than 35 years in hotel and casino design, Barry Thalden specializes in the design and architecture of hotels, casinos and related hospitality projects; its portfolio includes more than 400 hotels and 100 casinos. Currently working with over 40 Native American tribes in the development of gaming facilities, Thalden·Boyd is an associate member of the National Indian Gaming Association and the California Nations Indian Gaming Association.

Rebecca Udell President, Floss Barber, Inc.
Rebecca Udell works to sustain Floss Barber Inc.’s reputation as a national boutique interior design firm while expanding into the international market. Her analytical and strategic skills enhance her design capabilities. Udell believes that understanding the client’s needs and how they want to represent themselves both internally and externally to their clientele can be captured in the interior environment, which in turn strengthens the company’s brand identity.

Ed Vance, President and CEO, Ed Vance & Associates
For 25 years, design excellence has characterized Ed Vance’s career.  His work has led to numerous awards and significant commissions with major hospitality, commercial, and health care clients. Among other awards, Vance has received The AIA Nevada Silver Medal, the highest honor bestowed on an architect in the state. He is a past professor at UNLV’s College of Architecture, where he continues to guest lecture, and is a registered architect in 14 states.

Scott Walls, President, COO and Co-founder, Bergman Walls Architects
Scott Walls has been partner-in-charge for the Augustus Tower, Palace Tower and numerous suite, lounge and restaurant remodels at Caesars Palace Las Vegas. Upcoming projects include the Octavius Tower, Fontainebleau, the Sahara and the Majestic Star Casino in Pittsburgh. A graduate of the School of Architecture at Syracuse University, Walls spent 10 years on design teams for projects such as the Mirage, Treasure Island and all the Golden Nugget properties. 

Although Las Vegas is often associated with excess and waste instead of conservation, the gaming and resort industry has pitched in to become part of the green effort.

In April, the Palazzo Las Vegas was named the biggest green building in the world, earning the Silver LEED Certification for energy conservation and a proclamation from Nevada Governor Jim Gibbons.

“From the beginning, we were determined to create Las Vegas’ first truly eco-friendly property,” said Sheldon G. Adelson, chairman and chief executive officer of the Sands Corporation. “We are extremely proud to have achieved it and to be recognized for it.”

Among the Palazzo’s energy-saving features: air conditioning that resets when guests leave the room; lighting occupancy sensors in service areas; an average 95 percent of recycled content in the building’s steel structure; and a 26 percent recycled rate for concrete.

“There is an increasing necessity to employ green construction principles,” Adelson declared. “We’re proud to be a leader in the evolution of environmentally-focused building practices, not only on the Las Vegas Strip but at our properties throughout the world.”

Additional green strategies that are now commonplace:

“Given the energy demands of Las Vegas, perhaps more than any other U.S. city, it has the most to gain from a sustainability focus,” says Tom Donnelly of ValleyCrest Landscape Development.

“We have no doubt that Las Vegas will emerge as a world leader in this science. In all of our operations we are finding more clients asking us to be green, build green and take different approaches to sustainability in their business models.

The desert oasis that is Las Vegas has thrived as a resort by featuring many artificial structures-the Eiffel Tower, the New York City skyline and an Egyptian pyramid, to name a few.

But an emerging trend now taking hold in Vegas is natural landscape designs, internal and external, that add more visual serenity to the world’s most famous strip of commercial land.

“People love to be in a beautiful garden, no matter where they are,” says Julie Brinkerhoff-Jacobs of Lifescapes International Inc., which worked with Steve Wynn at the Mirage and the Wynn, and is currently in the design process at Echelon Resort. “That’s definitely one of the driving factors behind the casino gardens trend.

It’s all driven by the visitor.”

An Enlightened Outlook
With the desert as a backdrop, most landscaping in Las Vegas is developed artificially; it would never exist in such an arid environment without constant care.

“Historically, resorts took a conventional approach to landscaping, albeit within an increasingly grand and beautiful scale, and with complex site engineering challenges to match,” says Tom Donnelly, president of ValleyCrest Landscape Development. “Many attempt to evoke a theme or style that immerses the guest in either a replicated or altogether unique environment. And in some cases the landscapes are meant to complement or conceal the architecture.”

Today, Donnelly adds, “We’re seeing a more enlightened landscaping that transforms the environment, enhances the guest experience and provides a human scale to the towers that grace downtown and the Strip.”

Natural design appeal is achieved with dramatic water elements (for real and perceived cooling) and effective use of plant material (to soften harsh direct and reflected heat and light). It’s a fairly recent phenomenon in the gaming industry,” says Brinkerhoff-Jacobs.

“Until the Mirage 20 years ago,” she says, “there wasn’t a lot of attention paid to the landscape environment outside the pool area.”

The Mirage set a new trend by featuring orchids and other flora that typically would not survive in the desert. Prior to landscaping, several heat analyses had to be completed. It was a race to the finish, with major changes in landscape design implemented just six weeks before the Mirage’s grand opening.

Sheer Romance
“One of the reasons the landscape environments are so successful in Las Vegas is because we treat them all like large gardens,” says Brinkerhoff-Jacobs. “We are romanticists in garden design. We respect the geometry of the space. We are not afraid to use unusual materials to create beautiful surroundings.”

As in any industry, staying ahead of the trend curve is essential. As Las Vegas becomes an international destination-in Donnelly’s words, “a modern desert metropolis”-new natural landscapes must reflect a more modern architectural design.

“With modern building design comes the opportunity to make equally inventive statements through landscaping,” Donnelly says. “An expanded interest in drought-tolerant plant materials has led to the introduction of new species from around the world with potential applications in the Las Vegas desert. Along with an expanding plant palette, more realistic looking synthetic turf, and more sophisticated irrigation systems, landscape professionals have more tools to shift the Las Vegas paradigm.”

The “large garden” now in vogue can make other natural destinations (like pool areas) more inviting. Because pools today can be situated on up to five acres of land, resorts want to make use of them day and night.

“The pool setting and cabana design have changed,” says Brinkerhoff-Jacobs. “Now you have to figure in the restaurants, fire pit experience, and cocktail areas. We’ve completed over 20 casino properties in the Las Vegas metro area, and this is definitely a big trend.”

Another trend: interior gardens in surprising areas, like retail and other gathering spaces.

Surviving the Desert
Because the desert is subject to extremes of heat, cold and wind as well as seasonal monsoons and long periods of drought, the palette of materials available is limited.

“Our challenge is to develop a theme that evokes a specific time or place using a limited palette of locally viable materials,” says Donnelly. “The materials don’t have to be ‘native,’ but they must be able to adapt to the local climate. For the landscape contractor, the challenge is to find the right material, help it through the acclimation process, and install it in a manner that overcomes the local challenges.”

Using established local specimen trees is vital, because there is no appreciable local nursery industry in Las Vegas, and large trees from Southern California and Arizona can be expensive and difficult to transport.

“Long ago, enlightened owners recognized the value of salvaging and reusing any specimen trees on local properties,” says Donnelly. “In the preferred scenario, the trees are often on site and readily stored and transported to their new location, or they are located close enough to the site to allow for cost-effective transportation.”

The seasonal timing of planting operations is as vital as material selection. Palms are planted during the summer to avoid root rot. Pines and shrubs are planted strategically to avoid extremes of the heat and cold. Deciduous trees such as maple, birch or hickory can be planted in the middle of the winter.

“There are seasonal constraints on planting,” Donnelly says. “The challenge is to find a cost-effective approach to optimizing plant installation while coordinating with all of the other trades on site. You don’t want to throw the overall project schedule into chaos.”

When using plants from outside the area-in Vegas and elsewhere-it’s helpful to import them one or more seasons prior to installation. It allows the plants to adjust and avoids the losses that can result from dramatic climate change.

“(Imported) nursery plants may lose leaves or suffer scald, but the leaves and shoots that subsequently emerge will be adaptively structured to better tolerate their new environment,” says Donnelly. “But this process is costly, as it requires sufficient land on or near the project site and sufficient lead time prior to the installation date.”

The desert soil is hard on non-native plant material, so another required strategy is soil amendment. In soil chemistries that are more alkaline and saline, and low in organic content and cation exchange rates, percolation levels can range from slow to non-existent. To accommodate this situation, the planting process is modified with the addition of oversized planting pits, plant pit sub-drains or auger-drilled drainage pumps combined with sand-based planting soils to facilitate drainage and air-exchange on the root zone.

“For shrubs planted as a dense mass, it’s not uncommon to over-excavate the entire shrub area and place a layer of amended sand-based planter soil down,” says Donnelly.

Fertilizer treatment works hand in hand with a soil amendment regimen to produce the desired results, and fertilizer injection systems ensure plant nutrients are delivered, often through the irrigation system with a precision injection pump system. This strategy allows for general plant nutrition and long-term pH correction while reducing the effect of maintenance labor that interferes with the guest experience.

Finally, drip irrigation systems are key. The heat and wind of Las Vegas can decrease the efficiency of a conventional overhead irrigation system because water is lost to drift and evaporation.

“Drip irrigation systems have become the norm in Las Vegas as a way to conserve water through precision delivery,” says Donnelly.

Establishing a long-term strategy for maintenance is another way to reduce maintenance labor costs, reduce green waste production and limit water use with no negative impact on curb appeal.

Techno Trends
Technology has certainly made maintenance easier. Modern irrigation systems feature flow sensors and data recorders that detect unnatural water flow, causing an automatic shutdown and quick notification of maintenance personnel.

Other basic maintenance trends utilized by gaming resorts include upgrading irrigation systems to match specific plant needs, and keeping shrub areas properly mulched, preferably with a mulch made of recycled “green waste,” shredded to a uniform consistency and composted.

Mulching lawnmowers are preferred on natural turf, but Donnelly recommends removing natural turf when possible and replacing it with more drought-tolerant plant materials, including woody shrubs, perennials, cacti or succulents.

Proper pruning techniques and the selective removal of inappropriate and underperforming trees and shrubs are also necessary for basic maintenance and a successful natural landscape.

A Chinese territory with a Portuguese history and a communist government has become the center of a distinctly capitalist enterprise.

xSince 2004, when the $240 million Sands Casino opened in Macau, the once-down-at-the-heels gambling enclave, an hour by ferry from Hong Kong, has become a Holy Grail for gamblers. In just a few years, the former Portuguese colony has overtaken Las Vegas as the world’s premiere gambling destination, earning more in first quarter 2008 than Vegas and Atlantic City combined.

Yet the overall aesthetic of casinos on this Chinese peninsula could not be described as fully Asian or even vaguely Pan-Asian, particularly when it comes to those built by U.S.-based operators. If anything, the glitzy, $1.8 billion Venetian Macau, to date the world’s largest casino, could have been picked up and dropped in from Las Vegas, or Disneyland for that matter. It is truly the sister property of the Las Vegas Venetian: a gilt-edged approximation of Venice complete with gondolas and a Grand Canal.

For Philip Payne, formerly  the design director for the Las Vegas Sands Corp. (Macau’s first American developer and operator of both the Sands and Venetian Macao), the comparisons between Macau and Las Vegas are inevitable.

“Some of the resorts could be transplants from Vegas-for example, the Venetian (Sands) Cotai and Wynn Macau,” and there’s a very simple reason, Payne says. In the case of the Sands, the aesthetic was driven “more by the necessity for speed and economics” than a painstaking marketing plan.

A short-lived shotgun marriage between the Sands and licensed investor Galaxy Entertainment-among the first concessionaires in line when the Ho monopoly ended-had dissolved by 2002. With a timetable in place and all systems go, Sands forged ahead on its own, and remarkably, went from blueprint to grand opening in less than two years.

Despite the frenetic pace, designers “paid special attention to what would be successfully receptive to the Asian/Chinese clientele,” Payne says; design architect Paul Steelman says 98 percent of focus group participants approved the property’s ultra-modern, un-themed architecture.

The result, says Payne: “a very international, iconic type of structure unlike anything in Las Vegas” with a landmark gilded circular tower, adjoined by a boxy gaming facility that Steelman famously described as the world’s first “stadium-style casino.”    

At 1 million square feet with an eye-popping six-story crystal chandelier, the Sands Macau takes the bigger-is-better mentality to an extreme, and the idea has paid off so far. Opening day in 2004 was mayhem. Ten thousand people charged the entryway in the first hour of opening; the property won back its $260 million investment in a year.

For its second project, the Sands Corp. decided not to reinvent the wheel, in part for financial reasons.

“The planning and design of the Venetian Las Vegas and the casting of the Venetian’s signature elements were already paid for,” says Payne. “There were economic advantages-and the saving of an enormous amount of time-by replicating the Venetian in Las Vegas.”

Wynn Macau-with a curved tower that instantly recalls Wynn Las Vegas-took the same approach.

“While the podium structures of Wynn Macau are project-specific, the high rise is a half-size replica of Wynn Las Vegas,” Payne observes. “The Butler Ashworth architectural plans required very little modification for the Macau high rise. Both saved considerable time and money for the operator and have worked very successfully.”

Paul Heretakis of Westar Architects says Vegas-based designers naturally lean toward elements and functional requirements that have succeeded in Sin City. And while some Asian casinos still rely on “a heavy dose of glitz and fantasia,” the emergent look reflects the kind of modernism found in Hong Kong and Shanghai: “No theming, just high quality materials used in a sophisticated and elegant manner.”

Payne agrees. “Minimalist design goes down very well in Hong Kong commercial development, but in my experience a sense of opulence and luxury is very important to the Chinese clientele in Macau.”

A general shift away from the bombastic themes of casinos like the Luxor and Excalibur in Las Vegas should be particularly important in emerging destinations. Consider Vietnam, where phases one and two of the $4.5 billion Ho Tram Strip are under way.

A project of Asian Coast Development, Ho Tram’s stated theme-if it can indeed be called a theme-is “environmental preservation and conservation highlighting the lush natural beauty of the area while showcasing Vietnamese and Asian culture.” The wow factor will be evident in two five-star hotels, a luxury spa, a Vegas-style casino, an 18-hole Greg Norman golf course and a Cirque du Soleil theater.

Back in China, bigger-is-better is rivaled by what Philip Payne calls “higher-is-better. It’s very satisfactory to look down on one’s commercial neighbor-the Galaxy Star World and Grand Lisboa in Macau are perfect expressions of this.”

If Macau’s newest casinos lack a “sense of place,” Payne attributes it to “the overwhelming preponderance of Chinese punters. It appears that they do not want Chinese interpretations, but completely embrace ‘all things American.'”

The exception might be the slot machines, which remain a hard sell among Asian gamblers. While slots account for more than 60 percent of gaming revenue in Las Vegas, it pulls in just 4 percent of the take in Macau. Though U.S. operators are confident they can acclimate Asian players to slots in time, that may be one gamble they stand to lose-and one Asian cultural preference that does not give way to Vegas sensibilities.

At the high-end retail corridor known as Via Bellagio in Las Vegas, shops like Fendi, Giorgio Armani, Gucci and Prada could easily outfit Hollywood’s entire A-list.

Movie stars usually get such goodies for free. For the rest of us, these exclusive labels carry a high price. A clutch from Fendi or Dior can cost several thousand dollars; ditto an Armani silk suit or bauble from Tiffany & Co.

Despite the pricy product lines, the shops at Bellagio are among the most profitable shopping “malls” in the country.  

In 2006, the typical regional U.S. mall averaged about $350 per square foot in revenues. (The best-performing brought in $392.) But retail located in casino environments left their suburban counterparts in the dust.

In 2006, the Forum Shops at Caesars Las Vegas posted approximately $1,300 PSF, a figure that rose to $1,500 in 2007. And some analysts whisper that this year, Via Bellagio-at the Bellagio casino resort in Vegas-could rack up an astonishing $2,000 per square foot.

Hard to believe, but the idea of putting retail in casinos was once a hard sell. In the 1980s, developer Sheldon Gordon was among the first proponents when he noted that foot traffic at Caesars Palace in Las Vegas exceeded that at Macy’s legendary department store in New York. Gordon, who ultimately developed the Forum Shops at Caesars, would be later hailed as a visionary. But first he had to overcome the ingrained conviction held by operators and retailers alike that gamblers would never shop where they play.

That conviction was not only untrue, it was the polar opposite of true. For tourists, going to the casino is like going on vacation. They expect to spend money. They’re not averse to blowing through their vacation allowance or casino winnings on a few souvenirs or the occasional big-ticket splurge.

“In the tourist environment, people tend to leave their economic sense behind,” says Brent Pirosch, director of gaming consultant services at CB Richard Ellis’s Global Gaming Group in Las Vegas. “If you have a good day at the tables, maybe a $5,000 watch for your wife isn’t out of line.”

While upscale casinos support more upscale retail (think Wynn and Bellagio in Vegas or the Pier Shops in Atlantic City), the same demographic that ogles Manolos and Maseratis readily patronizes mid-market stores like White House, Black Market and Ann Taylor. Pirosch says 10 percent to 15 percent of luxury retail is usually appropriate; it’s important, too, he adds, to serve niche consumers who aren’t drawn to mainstream apparel.

“Pay attention to who your customer is and create the kind of environment you don’t get at home.” For the alternative customer, “Maybe you want a cool, sports-themed store, like a Niketown. Or if you’re in the middle of nowhere and have your own golf course, open a high-end golf store.”

If there is any formula for success in casino retail, it’s a simple one: a great mix of shopping within walking distance of lodgings, food and gambling. Guests spend about 60 percent of their “play money” at or near their hotel, 30 percent immediately adjacent, and 10 percent elsewhere in the market; to reap the retail rewards, it’s imperative to keep them on the property as much as possible.

“The ‘why’ is partly psychological; tourists are in an unfamiliar environment, so the property becomes their ‘home,'” says Frank Volk, executive vice president of Robert K. Futterman Associates in Las Vegas and an expert on retail in the gaming capital. “The logistics of moving in and around the Vegas Strip, for example, can often be difficult and/or time-consuming. It’s far easier to shop where or near where you are staying.”

In a 24-hour environment, retailers can justify longer hours-10 a.m. to 11 p.m. on weekdays, 10 a.m. to midnight on weekends-which also boosts their bottom line.

“The important thing here for retailers is that they are getting 30 percent to 40 percent more shopping hours due extended shopping and 365 days a year of store operation,” Volk says.
    

‘Louis Vuitton on Every Corner’
Steve Henri, director of planning and design for national investment firm Taubman Centers Inc., has used the of the gaming-shopping alliance to good effect in Atlantic City. In 2006, Taubman added the Pier Shops at Caesars to its list of urban and suburban shopping centers.

The multilevel 46,400-square-foot venue has everything you’d expect in a suburban mall-retail, a food court-along with an indoor water show and elaborate fountain, a collection of high-end designer shops and boutiques, and dozens of food offerings, all within a quick walk of the gaming floor (Caesars Atlantic City is connected to Pier Shops by a skywalk over the famous Boardwarlk).

Moving from Atlantic City to Las Vegas, retail “sometimes outperforms the gaming revenue,” Henri says. “It’s a big, significant piece of the income.”

To succeed, casino-based retailers in Atlantic City strive to attract a broad swath of customers, not just the traditional older gambler who once arrived here by bus, but that veteran patron’s children and grandchildren too, as well as the locals.

“It’s the LA experience-the anchor is the casino, but you want to appeal to everybody,” says Henri. Shoppers can browse at the Pier Shops Hugo Boss, Louis Vuitton, Armani A/X, bebe and Burberry as well niche shops like The Art of Shaving, where a deluxe razor goes for $1,000.

The Pier Shops offer the kind of products vacationers wouldn’t normally buy at home: “Luxury items, out-of-the-ordinary items, impulse items,” says Henri. High-priced retail adds to the “holiday” experience; casinos recognize that and embrace it.

“You have to do a lot to keep people from leaving your property,” says Henri. “You have to have everything the other guy has, plus something else.”

He believes the growing diversity of casino patrons presents an as-yet-untapped market for casinos and retailers alike. When you successfully capture the right patrons, “You could put a Louis Vuitton store on every corner, and they’d all do well.”

Image-Maker, Moneymaker
At Harrah’s Atlantic City, Senior Vice President and General Manager Scott Barber says retail was always an important component of the 44-story Waterfront Tower, which opened this year.

“We looked at customers coming today and we looked at customers we wanted to attract tomorrow,” he says. “Once we determined that retail was high on the list, we included it in the plan.”

All Waterfront Tower retail is owned and operated by the Harrah’s organization. Not all casinos handle the retail component this way, but for Harrah’s it was a natural fit.

“We already have a very established corporate retail department,” says Barber. “We wanted to create a seamless transition for our rewards customers.” The decision allows them better control of product line in the stores and simplifies the use of comp points as well.

Harrah’s wanted seamlessness from a design perspective. Guests who leave their cars with a valet attendant enter through an amber dome with stained glass accents. The hum of slot machines beckons from the right, and Park Place Jewelers from the left. The placement of retail space is instantly visible on arrival. Seventy percent of the hotel rooms are positioned in the tower at the center of the shopping corridor.

“You have to walk right past the retail space to get to those rooms,” says Barber. “We wanted to create that foot traffic.”

As at the Pier Shops, retail at the Waterfront Tower aims for a wide demographic, though families are not targeted. The seven shops offer designer clothing, shoes, home goods and of course, jewelry.

“Our jewelry store has just been a huge hit,” Barber says, adding that Sony performed second or third in sales volume from the beginning. But changes are underway.

“Electronics have been very popular,” but customers want “more lifestyle-type merchandise,” Barber says. In the spring, the Sony store was replaced by Innovations, which will offer everything from toasters and blenders to televisions and video games. The store will carry Sony but other brands as well.

Harrah’s Total Rewards loyalty program helps it identify the top selling merchandise.

“Our customers can use comp dollars to purchase out of catalogs, so we know literally the types of products that are most popular with our market,” Barber says.

By offering special “multiplier days,” where points are doubled or tripled on site, Harrah’s entices guests to come back for another day of shopping, dining and gaming.

“We wanted our retail to be integrated with the rest of the casino,” with a gallery of shops and dining designed to make customers feel they are at a true upscale beach resort, Barber says. Marble and aquamarine lights line the corridor, and both the retail and dining options conjure subtle images of a beach resort with natural light flooding the area from the hotel’s palm-tree dotted pool area.

The resort’s dining options include gourmet in addition to the Taste of the Shore food court and the dazzling Waterfront Buffet.

“Our approach to food is very similar to our approach to retail,” Barber says. “We wanted to make sure there were quick options as well as fine dining options.”

Variety is the key to successfully tapping its market, Barber says. “Our priority customer is our casino customer. Our goal is to increase the length of stay so we offer the kinds of amenities to encourage that.”

The amenities include a posh pool, Elizabeth Arden’s Red Door Spa, dining and a 15,000-square-foot-shopping gallery. The obvious bonus to that approach is that the whole resort becomes a destination, not only for gamers, but for those who bypass the casino floor for the diamonds in the window.

Building Aspirations
Executives at Borgata Hotel Casino & Spa in Atlantic City use the term “aspirational” to describe their target audience. The buzzword describes people who want to “trade up,” says Jordan Covell, executive director of retail operations at the Borgata.

“From the beginning, we wanted to reach those in search of a full-scale, full-fledged casino resort experience-those who wanted something more like Las Vegas.”

To attract the right visitors-including those famously dubbed “Atlantic City rejecters”-the upscale operator employed retail as a critical component of the mix. The casino included 11 retail shops including Whim, Borgata’s 5,000-square-foot version of a logo shop.

“We took a different approach because our client demands a different product,” says Covell. In fact, the store offers a whole slew of unique products including Borgata bedding, electronics and designer clothing, like 7 Jeans that sell for $200 a pair.

“Envy No One” is the store’s trademark slogan, which sums up Borgata’s overall approach.

The operator is applying the same philosophy to the 9,000-square-foot retail space at the new Water Club, a non-casino tower next to Borgata.

The shopping area is strategically placed in the corridor connecting Borgata with the Water Club. The amenities within each property will be shared, but each store will be “very distinct, very different” from its neighbors, Covell says.

Borgata and Water Club will continue to own and operate some of the shops on site, including Whim, but they also bring in high-end designers like Hugo Boss, Just Cavalli and Hearts of Fire jewelers to provide their guests with a signature shopping experience.

Luxury is an important component, and the goal is to reach the sophisticated consumer who knows and craves up-market retail and designer specialty stores. The retail shops are united by elements like marble, fine wood and elaborate chandeliers, but “they are built out to stand out,” Covell says.

Each space is a signal to the resort’s urbane customer base that Borgata and the Water Club provide what is hot now, “like Fifth Avenue at your fingertips,” Covell says.

Supersize Me
Expand the Borgata/Water Club concept, add an Italian accent, and you’ve got both two of the most popular shopping venues in Vegas: The Grand Canal Shoppes at the Venetian and the Shoppes at the Palazzo.

Together the destinations offer a stateside shopping trip to Venice courtesy of General Growth Properties (GGP), which, like Taubman, is a real estate trust company that buys and builds shopping malls.

In 2004, GGP bought the Grand Canal Shoppes from Las Vegas Sands, which had built the shopping area as part of the Venetian in 1999. In January, the company opened 60 more retail shops at the Palazzo.

According to Susan Houck, vice president of marketing, GGP operates five shopping areas totaling more than 5 million square feet in Las Vegas alone. The industry trend, Houck says, is to offer hotel and casino guests the very best in amenities: “world renowned spas, signature chef restaurants, unique lounges and nightclubs and the very best retail boutiques available. Shopping and dining are becoming as important as gaming today.”

And the demand is still growing. GGP is working with Echelon and Boyd Gaming on a new project, High Street, a luxury retail space set to open in Las Vegas in 2010.

“Las Vegas is a unique retail environment,” Houck says. “The Grand Canal Shoppes at the Venetian comprise a completely different experience than The Shoppes at the Palazzo, and each represents the culture of the resort they live in.”

Together the distinct but complementary venues offer 160 retail shops over 800,000 square feet of shopping space. The Grand Canal Shoppes offer an experiential visit to Venice, with touristy attractions like gondola rides. The Shoppes at the Palazzo focus on luxury brands including Christian Louboutin, Piaget, Diane von Furstenberg, Bottega Veneta and Ralph Lauren. Thirty of the 60 new shops are firsts on the Nevada retail scene.

“We have a strong leasing team that works closely with our casino partners to determine the right retail fit to complement the environment the resort is trying to project,” Houck says. The mix is critical to the casino and the renting retail stores since it both serves and grows the market. Houck agrees with Taubman’s Henri that in the right market, there’s never too much Louis Vuitton-in fact, her words echo his almost exactly.

“Louis Vuitton is a powerful brand, internationally recognized. We could have a Louis Vuitton on every corner and they would all continue to do great sales.”

With casinos facing more and more competition and flagging revenues, retail may be more vital than ever to attract and retain patrons. Though the casinos do not see a significant amount of direct revenue from retail-they are typically getting rent-RKF’s Volk says the benefit is “the incremental dollar spillover from a visitor to the shopping venue.”

According to Mark Birtha, vice president of development for Marriott International Lodging Development, retail, dining, and entertainment help to “insulate casino revenue, which can be volatile at times while these others are traditionally more stable.”

Sheldon Gordon was among the first to see the light. The rest of the industry has fallen in line. As for the future, Birtha foresees an even greater integration of these disparate parts.

“In years to come,” he says, “we’ll see the actual fusion of the gaming space with retail and other non-gaming components. We’re already seeing casino lounges or privès that have the look and feel of nightclubs with the equally exciting energy of tables and slots. We will see retail venues housed in or around the casino floor, with changing ambiances, lighting, and sound and provide customers with both gaming and shopping products.

“We may even see casino spaces designed and defined with the flavor of an iconic retail partner who caters to a similar customer. Both product enhancement and innovation will push the boundaries of the casino and allow for other significant revenue generators,” thus redefining the gaming experience.

How do you develop the right “recipe” for retail in a casino environment?
Creating the mix for a successful casino-based retail project requires a bit of art and science. We’ve found that it should be guided by a development strategy, program and execution plan built on four main pillars:

• Defining a clear set of goals (What positioning is the property trying to achieve? Who is the property trying to attract? Do you want to retain existing customers, gain new ones or both? What is the overall guest experience?)

• Understanding the competitive landscape so you can differentiate the project and the property within your given market

• Incorporating highly profitable uses

• Creating a dynamic environment that has a sense of place; i.e., working with existing and planned spaces or sites to create vibrant “people places” that enhance or help define the guest experience

Explain how the retail mix at The Quarter, in the Tropicana in Atlantic City, was developed.
The project was contemplated as a mid-market development to appeal to existing Tropicana visitors as well as the sweet spot (middle market) or broadest range of Atlantic City visitors who also visit other properties in the market.

The overall guest experience takes a page out of Las Vegas by creating a themed interior streetscape that does not feel like a traditional mall. Since most visitors pass a number of traditional malls on their way to the Quarter, we tried to differentiate the property with a unique mix of national brand names, signatures, boutiques and entrepreneurial or created venues.

All the while, the project was designed as a spine that connects the parking garage to the anchor-the casino.  

Do you have to periodically swap out certain shops for the good of the whole?
Leases are typically executed on five, 10 or 15-year terms. It’s often beneficial to mix tenants with different terms. Also, it’s inevitable that some tenants will go out of business for a variety of reasons.

Why does retail work so well in the casino environment?
For the same reason mall developers attach multiplex movie theaters to malls as anchor attractions-because they generate foot traffic.

On average, a multiplex can attract 1.5 million people per year. Casinos in smaller, second tier U.S. markets like Dover, Delaware or Evansville, Indiana can generate 2 to 3 million visitors per year, which roughly equates to having a mall with two major cineplexes.

Is there ever a danger that retail can become the main attraction, to the detriment of the casino?
Retail needs to be master-planned into a gaming property. The owner or developer and the architectural team need to contemplate or plan the property and consider the guest experience from arrival through departure. Without such master planning, both retail and the casino can suffer.

Also, if the mix of retail does not support the existing or planned gaming demographic for the property, you can create a situation in which you draw two distinct demographics that may not mix well.  

How much extra revenue do casinos derive from the increased traffic generated by retail?
Retail, dining and entertainment in casinos do not have to be loss leaders. They should be developed as profitable real estate ventures in which the tenant pays a base rent, and often a percentage or overage rent if they’re extremely profitable and generating significant gross sales.

In addition to keeping patrons at a property longer, a successfully planned retail development at a gaming property can serve as a true destination and gross importer of visitors. 

 “May you livein interesting times.” 
-Ancient Chinese proverb

The volatility of the financial markets has led to interesting times indeed for borrowers, investors and Wall Street. The good news is that a broader segment of the market is willing to take on risk, and we’re now seeing a number of financings proceed to closing.

In a credit crunch, lenders stop lending and credit becomes difficult to obtain. In the current crunch, the market discounted or sold off everything from weak, deeply indebted companies to over-extended lenders to over-leveraged consumers. Various surveys indicate that our economy is in a recession; however, economic data suggests that we’re not there quite yet.

Is Gaming Recession-proof?
The gaming industry, long considered recession-proof, has now shown unprecedented softness in nearly all markets across the United States, including southern Nevada. This consumer-led recession is causing lighter discretionary spending, which has a direct impact on gaming revenues. Overall, monthly reports indicate that most gaming markets are down 10 percent to 15 percent in a year-over-year comparison.
 

Impact on Capital Markets
As weaker macroeconomic conditions persist, softer credit fundamentals and constrained liquidity has pushed up default rates. Correspondingly, these risks have weighed heavily on the capital markets. Market performance has suffered as a result of highly leveraged capital structures and weak structural protections.

It didn’t happen overnight. Due to declining structural protections and other aggressive features of new deals brought to market in recent years, risk in the leveraged loan market had in fact been building for some time.

The abundance of loans originated to fund shareholder-oriented activities (like leveraged buyouts or LBOs and covenant-light and second-lien loans) was a part of this trend. The massive overhang of approximately $150 billion in the leveraged loan market has been met by anemic demand from investors. Thanks to the Federal Reserve, liquidity has returned to the market; Wall Street firms and investors have shown a willingness to take on risk, if slowly and at high return thresholds.

The secondary trading levels of debt securities (high yield bonds) for gaming-related borrowers have declined meaningfully, approximately 8 percent to 10 percent since early January. This technical market correction has resulted in a meaningful increase in the borrowing costs for all gaming operators, both commercial and Native American.
 

Deal Activity in the Gaming Industry
With continued weak demand in the leveraged loan market, Wall Street debt arrangers trying to close transactions have had their work cut out for them. Harrah’s Entertainment saw its deals flounder in the market as the massive debt used to finance the company’s going-private transaction couldn’t be sold by Street underwriters. Ultimately, large amounts of Harrah’s debt were sold at discounted levels; however, a meaningful part of this debt remains on Wall Street’s balance sheet. Yields on the Harrah’s bonds were priced at a discount to yield 13 percent.

According to Loan Pricing Corporation, there were a total of 10 of gaming financings valued at approximately $19.5 billion completed through April 2008. Given the complexion in the market, the only ones completed were those that had to be, because the opportunity costs of “not closing that merger” or “breaking ground on that casino development” were too high. The owners of those borrowers could bear the higher cost of financing because their overall returns exceeded the incremental borrowing costs resulting from the credit crunch.
 

Market Liquidity
In early 2008, credit market investor appetite for new financings was sparse. The most active players in the credit market during this period were hedge funds managers who funded transactions as club deals. The traditional high yield bond market was effectively unavailable to borrowers.

But a combination of the Federal Reserve’s continued easing, creative stimulus packages and wide investor yields have brought a broader base of investors off the sidelines to begin participating in deals.

We’re now seeing a slight opening in the high yield bond market to certain issuers, albeit at higher borrowing costs. Given the balance sheet issues of the commercial banks (LBO bridge loans, sub-prime and derivative write-downs) we continue to see minimal capital commitments from Wall Street banks related to gaming development financings. That, too, will change at a slow pace as banks shore up their balance sheets and raise capital for the next economic cycle.

Notable Gaming Financings 2008
Besides the Harrah’s LBO financing, the most notable gaming financings thus far in 2008 are the $340 million Firekeepers Development Authority (Native American casino development in Grand Rapids, Michigan) and the $720 million PITG Gaming (commercial casino development in Pittsburgh, Pennsylvania).

Both transactions were “greenfield” financings that had little to no equity in the capital structure and no corporate backstop. The result is that both projects will likely get financed at higher borrowing costs.

• Firekeeper’s $340 million 144A senior secured notes priced at 13.875 percent at a 96 discount. In what is believed to be the first Native American high yield bond financing in 2008, this transaction was met with solid interest and was meaningfully oversubscribed. Full House Resorts is the management company for this casino development.

• PITG’s $720 million credit facility (which had not closed at press time) was split into $100 million revolver, $380 million first lien and $260 million second lien facilities. The sponsor of PITG is Don Barden, a Detroit businessman who won the license to operate a casino in downtown Pittsburgh in a highly competitive selection process.

While Barden had intended not to invest any equity in this financing, the debt markets forced him to provide a $35 million completion guarantee whose proceeds are being pledged from the sale of the Fitzgerald’s Las Vegas property, which Barden owned personally.

It should also be noted that credit market investors were extracting equity warrants in connection with the second lien tranche. Overall, this financing was a highly aggressive structure to be contemplated in the current market environment.
 

Access to the Capital Markets Going Forward
It is our expectation that the capital markets will become modestly more aggressive as we work our way through 2008. A moderate increase in investor liquidity will drive more aggressive structures and lower market pricing.

However, borrowers should not expect pricing to return to the pre-credit crunch levels of 2007. In our view, it could be several years before we see deal-pricing levels return to that level of aggressiveness.

In the near-term-or until there is a significant increase in market liquidity-borrowers should expect that hedge funds will continue to drive the pricing on financings, which means higher costs of capital, tighter covenant packages and more conservative capital structures.

Given the choppiness of the market, we recommend that clients proceed carefully, get their ducks in a row on development plans and hire skilled financial advisors to help them navigate this period of uncertainty.

Remember, if you have a quality gaming development project, the market can and will finance a good project, albeit at higher borrowing costs when compared to those of the last few years.