A new Deutsche Bank study of the northern Nevada gambling market is pitching Reno as "the biggest little locals market in the world."
"Even though the gaming market in Reno has remained soft over the past 10 years, we see a silver lining that goes unnoticed," said Deutsche Bank analyst Marc Falcone. "We believe further development of newer and high-quality properties is in the cards and likely to generate above-market returns (for investors)."
In its study, Deutsche Bank found the Reno area is experiencing solid, sustainable growth partially because of its track record in attracting new businesses.
"Reno offers some very compelling demand trends, both demographic and economic. We believe this environment supports high-quality, targeted casino development by sophisticated locals operators with long and successful track records," Falcone said.
The Deutsche Bank report also found that while gaming revenues in Reno have remained soft for 10 years, the segment catering to local residents has proved strong.
"Premium locals casinos in the market have achieved revenue growth in the high single digits. In our opinion, this signals what could be an increasing and largely unmet demand for local casino development," Falcone said.
But the market's ultimate size will be dictated by the quality of the hotel-casinos it offers customers, according to the study, which cited the "tremendous growth of the Las Vegas locals market over the past 10 years."
Station Casinos, one of the leading locals casino operators in Las Vegas, has already made moves into the Reno market.
The company recently announced an agreement to buy a 50-acre site on Mount Rose Highway and a nearby 96-acre parcel on South Virginia Street. It has also reached an agreement to lease an 8-acre site across from the Reno-Sparks Convention Center.
"We find investing in northern Nevada makes a lot of sense," said Station Casinos Executive Vice President Glenn Christenson. "We see it as an excellent business environment, one of the most robust economies in the country. It's very similar to Las Vegas in demographics and economic potential. Essentially, many of the same characteristics we see in Las Vegas are what are drawing us to Reno."