The authority on tourism

Five years ago, Venetian owner Sheldon Adelson wanted the Las Vegas Convention and Visitors Authority to vanish into thin air.

Adelson didn't like the fact that the tax-funded authority owns and operates the Las Vegas Convention Center, using public money to compete against his privately held Sands Expo & Convention Center for trade shows. He also didn't care much for the way the authority was marketing Las Vegas. It reached the point where he sued the LVCVA.

It's a different story today. Adelson is at peace with the authority. And so, it seems, is just about everyone else.

As it enters its 50th anniversary year, the authority runs what is arguably the most successful tourism bureau in the United States. Its supporters, who range from prominent gaming executives here to competing bureaus in other cities, point to the 37 million visitors drawn to Las Vegas last year and the fact the city enjoys one of the highest hotel occupancy rates in the country.

Las Vegas Mayor Oscar Goodman, the authority's new board chairman, calls the LVCVA "the engine that drives this community."

There are three major reasons why the authority, which employs 475 individuals, has so much clout:

The combination of these factors raise the question: Is the authority too big and powerful for its own good?

As the authority embarks on a freshly unveiled five-year master plan that will take it through 2009, the prevailing response from Southern Nevadans who are familiar with the authority is that there is no need to fix something that they say works so well.

"I always try to emulate the market leader and the LVCVA is clearly the market leader in terms of convention and visitor bureaus," Mirage President Bill McBeath, a former authority board member, said. "The LVCVA has done a tremendous job of marketing the Las Vegas brand as a destination of choice."

It is not easy, though, to measure the authority's performance when it comes to attracting tourists. The authority says that 37 million people visited Las Vegas last year, an increase of more than one-third from the 28.2 million tourists who came to the city in 1994.

But the authority will not reveal the precise formula -- or numbers it plugged into that formula -- to arrive at the 37 million figure. Its argument is that the numbers used to calculate hotel room occupancy, a major component of the formula, come from individual resorts and are therefore proprietary.

Las Vegas has the nation's third-highest hotel occupancy rate among major markets, according to a study published last year by the Chicago Convention and Tourism Bureau. But it is difficult to quantify the amount of credit for this that should go to the authority versus the resorts, who do their own marketing.

"It is difficult to say because it has been a cumulative effort by all of us in the resort industry to get 37 million visitors," Rossi Ralenkotter, the authority's president and chief executive officer, said. "Our budget allows us to be a national advertiser and it allows us to target certain market segments. And we are the industry leader in research."

Created under state law, the authority dates to 1955, when the Nevada Legislature agreed to finance what was originally called the Clark County Fair and Recreation Board. Four years later the authority opened the Las Vegas Convention Center to help fill the slow times of year with business travelers.

Former state Sen. Joe Neal of North Las Vegas, who often complained that the resort industry never paid enough in gaming taxes, said the authority eventually abandoned part of its original mission -- to help support local recreational activities not aimed at tourists.

"The convention and visitors authority has been captured by the gaming industry," Neal said. "The convention authority is not too big because it has to compete with other convention bureaus throughout the country. But the community is not being served. Only the gaming resorts are. It should be part of the recreational activity throughout the community."

But even Neal conceded that the authority "has done a very good job of getting people to come here."

The authority's fiscal 2005 budget, $190.1 million in revenue and $166 million in expenditures, is more than four times as large as the next highest bureau budgets in Orlando, Fla., and Hawaii.

"The Las Vegas bureau has a tremendous advertising and marketing budget and they use it effectively," Rob Stern, spokesman for the International Association of Convention & Visitor Bureaus, a Washington trade group, said. "People already know about Las Vegas so it comes down to target marketing."

The Hawaii Visitors & Convention Bureau, which has about $37 million to market Hawaii to North America, is in a unique situation because it actually serves as a subcontractor of the state-run Hawaii Tourism Authority. But the Hawaii Tourism Authority, which manages the state's convention center, has a total budget of only $69 million, still far below what the LVCVA commands.

"We can't play the game the way you do because of the size of your budget, but that causes us to be more focused on our activity," Frank Haas, tourism marketing director for the Hawaii authority, said. "Where we envy Las Vegas a lot is the infrastructure you are able to develop with new hotels."

The Chicago Convention and Tourism Bureau has only $14.5 million to market that city for business travelers, and only $3.9 million from its separate Chicago Office of Tourism, a branch of city government, to woo leisure visitors. Tourism bureau spokeswoman Meghan Risch said that to have such small budgets for a city that size "is a little worrisome."

Jealous

"We would like to have the funds that Las Vegas has," Risch said. "Sure we're jealous."

Unlike the LVCVA, most convention and visitor bureaus are private, nonprofit, membership-driven organizations. The members, typically from the hospitality industry, pay annual dues to help run the bureau.

The similarity with the authority is that most bureaus also receive hotel room tax revenue. Of 150 tourism bureaus that participated in a 2003 survey by the International Association of Convention and Visitor Bureaus, 115 derived funding from hotel room taxes. And, on average, room taxes made up 54 percent of their total revenue.

The reasons why the authority has the nation's largest budget among convention and visitor bureaus are obvious, according to tourism industry officials. Las Vegas relies more heavily on tourism than just about any city in the country -- about 25 percent of the local jobs are directly tied to the industry.

And Las Vegas, with the nation's largest number of hotel rooms -- 131,500 in the valley -- also commands the largest stream of dedicated hotel room tax revenue. That revenue accounts for about 80 percent of the authority's annual funding, with most of the rest coming from convention center trade shows.

"Their economic health is best reflected by their bond rating, and they have an A1 rating, which is among the best you will see for that kind of agency," Jeremy Aguero, principal analyst with Las Vegas-based Applied Analysis, said of the LVCVA.

The $153.1 million in room tax revenue that the authority received last year represented 46 percent of the tax distribution. The remainder went to the Clark County School District, county transportation projects, the state and other taxing entities.

The last time the distribution of the room tax changed significantly in Nevada was in 1999, when the authority abandoned its objection to the transfer of $12 million in room tax revenue -- 10 percent of its budget at the time -- to the Clark County School District. The transfer had been authorized by the Nevada Legislature in 1997 to help the district with school construction.

No state lawmakers since then have advocated that the distribution of room taxes, which are set by state law, be reallocated so that less money goes to the LVCVA, Carole Vilardo, president of the Nevada Taxpayers Association, said. She said the investment of room tax revenue in the authority has paid off for Clark County because it has helped generate sales tax revenue from tourists, which keeps other taxes down for residents.

"There are probably people who would say that we spend more room tax revenue than we need to," Vilardo said. "But there is enough evidence that the LVCVA has benefited the county because of the number of conventions that come here. I have got to believe that we get about 33 percent of our sales tax revenue from convention visitors and tourists."

With such a large budget, the authority has the means to outspend other cities when it comes to marketing. Count the San Diego Convention & Visitors Bureau, whose budget is only $12.5 million, as one of the jealous competitors.

"We use the Las Vegas budget often in our discussions with local public policy makers to try to get more money because clearly we compete fiercely with Las Vegas for the same people," Sal Giametta, a spokesman for the San Diego bureau, said.

'Critical part'

"What your state has done is to say that tourism is a critical part of the infrastructure. You have enlightened leadership that understands that. What you have in Las Vegas is like a major state department, with the clout and recognition and all that go along with it. You are, without a doubt, the envy of the convention and visitors bureau world."

When it comes to tourism, only Orlando and New York City have opened as many overseas bureaus, Ralenkotter said. The LVCVA's reach includes foreign branches in Paris, Warwickshire (near London) in Great Britain, Munich, Germany, Tokyo, Seoul, South Korea, Sydney, Australia, and Mexico City in addition to domestic offices in Washington, Chicago and Laughlin. The foreign branches are in countries that produce the largest stream of visitors to Las Vegas.

"The competition is for the discretionary travel dollar," Ralenkotter said. "Twenty years ago Las Vegas was a West Coast gaming resort. We are now more of an international resort city.

"There are now 29 states where tourism is among the top three industries in economic impact. So the value of travel and conventions has become recognized. That's why we have to have research, to be smarter than the competition."

Of all the things the authority does, none draw more attention than its advertising campaigns. As Las Vegas has grown as a tourist destination, so has its advertising budget.

When R&R Advertising Ltd. of Las Vegas first won the authority's contract in 1980, the ad budget was $4.2 million. Today, R&R Partners, as it is now known, commands an authority ad budget of $66.5 million, the largest single line item in the LVCVA ledger. The ad budget alone is bigger than the combined budgets of the tourism bureaus in New York City, Los Angeles and Chicago.

Advantages

"The biggest advantages we have are penetration, how many markets we can get into, and the frequency of our advertising," R&R chief executive officer Billy Vassiliadis said. "In Los Angeles and Chicago, they're seeing our TV spots more than 100 times a year. The resorts are looking for us to build new demand so it's really a complementary effort.

"Most of what the individual resorts do is customer relations marketing to get their customers to return. If you're an American Express Platinum card holder, you might get an offer from one of the properties. Most of the properties do not do much mass advertising on TV. They may take out print ads in newspapers like the Los Angeles Times' travel section."

The authority's ad campaign has proven to be flexible, as was the case after the 9/11 terrorist attacks in New York City and Washington. Sensitive to fears that many Americans had about flying following those attacks, the Las Vegas ad campaign switched gears and began heavier concentration on California markets that were close enough to Southern Nevada by car.

The results enabled Las Vegas' tourism industry to rebound quicker than that of most of its domestic competitors.

But the authority has also drawn heat for its ads, most notably for R&R's "What happens here, stays here" television campaign. Media outlets and commentators around the globe have gobbled up the phrase, which has also become "What happens in Vegas, stays in Vegas."

It is now considered the authority's most successful ad campaign, a notion cemented by Brandweek magazine when the trade publication named Ralenkotter and Vassiliadis as joint recipients of its 2004 Grand Marketer of the Year.

Critics, though, complain that the ads were too racy and went too far because of the allusions to sexual activity. In one ad, Shriners at a coffee shop boasted of the wild times they enjoyed the previous evening. In another TV spot, a scantily clad woman enters a limousine and flirts with the driver. After revealing to the driver how much she loves the smell of new cars and leather, she raises the privacy wall and reappears as a professionally dressed businesswoman.

The National Football League would not allow the ads to be aired during the January 2003 Super Bowl.

Competition

But the authority has more than the NFL and other cities to worry about. Its fiercest competition, Vassiliadis and Ralenkotter said, comes from tribal gaming and from the cruise ship industry, which also offers gambling. In 2003, tribal gaming pulled in $16.7 billion in revenues nationally, compared to $7.8 billion for gaming in Clark County.

And in head-to-head advertising battles against the competition -- mostly tribal gaming and cruise lines -- the authority and Las Vegas resorts are being outspent by 3 to 1 in Los Angeles, by 10 to 1 in San Francisco and Chicago and by 13 to 1 in Phoenix.

"If I'm a gambler in Southern California and all I want to do is gamble, I can drive 40 miles and I don't have to come to Las Vegas as often," Vassiliadis said.

The LVCVA has had its share of intramural squabbles, as in the early 1980s when board members accused authority executives of weak leadership. Some former Clark County commissioners questioned whether the room taxes used to finance the authority would have been better spent on schools and roads.

But the sharpest attacks have come from the Venetian's Adelson, who also owns the Sands Expo & Convention Center. Now that his resort is selling publicly traded stock, Adelson is the gaming industry's wealthiest man, with his net worth on paper estimated at $15 billion.

As the owner of a resort that caters to high-end customers, Adelson chastised the authority for not acting faster to promote Las Vegas as a city with world class shopping, dining and entertainment.

And as a convention center operator, Adelson has viewed the authority as a business competitor that unfairly uses public funds to its advantage. He sued the authority in 1999 and 2000, alleging that the LVCVA violated state law by using $150 million in revenue bonds to finance expansion of the Las Vegas Convention Center. The expansion ultimately proceeded and in February 2001 the authority and Venetian agreed to drop all legal claims made against one another.

Venetian spokesman Ron Reese would not return repeated telephone calls seeking comment. But in 2001, Andy Abboud, director of government relations for the resort, told the Sun that the Venetian looked forward to working with the LVCVA.

"It's for the good of the entire community that we move on," Abboud said then.

It was just recently announced that the Sands Expo in 2006 will share part of the annual International Consumer Electronics Show with the Las Vegas Convention Center. Ralenkotter said the authority and the Sands Expo, together with the Mandalay Bay Convention Center, have been working together to bring trade shows to Las Vegas.

Adelson's past argument for privatization of the authority's convention center is shared by the Nevada Policy Research Institute, a conservative think tank.

"We think it's not really an appropriate use of public resources to compete with private organizations," Steven Miller, the institute's director of policy research, said. "The LVCVA is just a metastasized county rodeo board. It is a monstrous political operation with cushy jobs for union members."

But McBeath, the Mirage president, said the Las Vegas Convention Center was created before anyone in the private sector was willing to invest in his own convention facility and should remain under the authority's ownership.

"The LVCVA is as big as it should be and any other growth should be in the private sector," he said. "There are no barriers in the marketplace for anyone who wants to build a convention center. All you need is land and capital."

The 3.2 million-square-foot Las Vegas Convention Center at Paradise and Desert Inn roads includes nearly 2 million square feet of exhibition space, making it the third-largest facility of its kind in the nation. Part of the authority's five-year plan is to spend $400 million more to renovate the convention center, adding meeting rooms, a new facade and passageways to make it easier to get from one building to another.

For each of the past 10 years, Las Vegas has drawn more of the top 200 trade shows than any other American city. Last year 35 of those shows went to the Las Vegas Convention Center.

"If we didn't have a single body at the convention center but every hotel room was filled, Rossi (Ralenkotter) would have the most successful year he's ever had," Vassiliadis said. "We call it heads in beds."

The only other city tourism bureaus in this country with an annual budget of more than $10 million that own and operate their own convention centers are the Reno-Sparks Convention and Visitors Authority and the Virginia Beach Convention & Visitors Bureau in Virginia. The Reno authority, a quasi-governmental agency, is a smaller version of the LVCVA. The Virginia Beach bureau is a city department that operates the city-owned convention center.

Most other large convention and visitor bureaus help market their cities to lure conventions but don't have any control over those facilities.

In most other large cities the convention center is owned and operated either by a city department, as in Los Angeles, Dallas and Detroit; a county, such as Orlando's Orange County in Florida, or a city corporation or authority, as in New York City, San Diego, Chicago and New Orleans.

One advantage the LVCVA has in marketing for tourists and running a convention center with a single administration is the elimination of turf battles that can occur with separate agencies.

In Chicago, there is a private, nonprofit bureau for business tourists, a city office for leisure tourists and a separate government authority for its convention center. Deborah Sexton, president of the Chicago Convention and Tourism Bureau, said she wished Chicago would follow the Las Vegas example and put all of those functions under one administration.

"In my opinion that would be a much smarter approach," Sexton said. "The fewer organizations involved ultimately the smoother it is because you're not spreading the dollars so thinly."

The LVCVA also owns and operates 10,000-seat Cashman Field, home of the minor league Las Vegas 51s baseball team, and the adjoining Cashman Center, which has 100,000 square feet of exhibition space and a 1,900-seat theater.

Powerful board

Over the years many of the most powerful lawmakers in Southern Nevada have had seats on the authority board. That's because the Clark County Commission and city councils of Las Vegas, Henderson, North Las Vegas, Boulder City and Mesquite appoint their own members to the board on a rotating basis. One of its former members is Lt. Gov. Lorraine Hunt.

The current board includes not only Goodman but also Henderson Mayor James Gibson, its immediate past chairman, and North Las Vegas Mayor Michael Montandon. Clark County Commissioners Yvonne Atkinson Gates and Tom Collins are also on the board, as are Las Vegas City Councilman Larry Brown and Boulder City Councilman Mike Pacini.

In addition to the seven elected officials are six representatives of the private sector. They are businessman and political consultant Robert Forbuss, former owner of Mercy Ambulance Co.; Tom Jenkin, president of the western division of Harrah's Entertainment; Kevin Kelley, president and chief operating officer of the Hard Rock Hotel; Vincent Matthews, vice president and general manager of the Luxor; Tony Santo, senior vice president of Caesars Entertainment, and Donald Snyder, president of Boyd Gaming Corp.

"With the LVCVA you have a wonderful merger of a public-private partnership to attract tourists to Las Vegas," Bill Bible, president of the Nevada Resort Association, said. "You have people on the political side of the equation who can make things happen and people on the private side who have personal knowledge of the marketplace.

"You have to look at the overall results and they speak very loudly for themselves. Look at how quickly Las Vegas rebounded from 9/11."

The authority board, which meets monthly, has taken an active role in a wide variety of issues -- everything from discouraging smut peddling on the Strip to encouraging the expansion of Interstate 15 from Las Vegas to Southern California.

"The LVCVA is not a run-of-the-mill board," Goodman said. "There is a symbiotic relationship between the elected officials and the members of industry."

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