Gambling On A Long Shot Cruise Line Subsidiary Bets That A Casino In Airway Heights Will Pay Off

Who in their right mind would play a long shot like getting a casino into - of all places - Airway Heights? Here’s a hint.

It’s the same outfit that acquired an exclusive agreement a couple of years ago to manage 20 Holiday Inn Express hotels planned for Poland.

Airway Heights.

Poland.

Clearly, this is a company that knows something about gambling.

If you are tempted to conclude, however, that these entrepreneurial safaris are undertaken without a sophisticated and fully-capitalized master plan, well, think again.

Carnival Hotels & Casinos is the 2-year-old subsidiary of publicly-held, Miami-based Carnival Corp., the most successful cruise line in the world. Carnival owns or manages luxury hotels in North and South America and the Caribbean. With sales of almost $2 billion in 1995, the company has built a financial empire on vacations.

But in the future, Carnival executives are convinced, any vacation company contented with hotels or boats is going to finish far behind the competition.

Because in the future, vacations will be about gambling.

“We believe that hotel-casinos are something that we have to be involved in,” says Art Frank, a vice president of Carnival Hotels & Casinos. “Especially if we are going to stay competitive among destination-type resort companies.”

And that is what brings Carnival to Airway Heights.

“While we don’t look at Airway Heights as a destination resort,” Frank says with a chuckle, “we certainly see opportunities here. This is a project that certainly has enough merit to get us involved.”

Gambling goes Wall Street

Last month, the Kalispel Tribe and Carnival entered into a partnership to locate a $17 million casino on 40 acres the tribe owns in Airway Heights.

The legal barriers to such a project are formidable. But Carnival eagerly accepted the challenge in exchange for the rights to manage the casino for the tribe.

Frank, who is Carnival’s point man on the project, is no stranger to long shots.

He was involved in opening the very first riverboat casinos in Iowa and Illinois, the first full-scale gambling venues outside Nevada and Atlantic City.

“It still boggles my mind,” he says. “Of all the places for gaming to expand, who would have thought it would be Iowa?”

Those openings came before Frank’s affiliation with Carnival.

“Back in those days,” Frank says, “the big players weren’t involved because nobody knew if it would work.”

In Peoria, Ill., he says, the riverboat was a $32 million project and “we were having to pull investors kicking and screaming off the street.”

That project was sold three months ago, Frank says, for $160 million, and the original investors had already gotten their money back five times through operations.

“Wall Street,” he says, “looks at these operations very favorably now.”

Many people, Frank included, believed the expansion of gaming throughout America after 1988 would be the undoing of places like Las Vegas, Reno and Atlantic City. But just the opposite has occurred.

Access to riverboats and reservation casinos has changed middle America’s perception of gambling. “A whole new group of people have been exposed to gaming, and they realize they have fun doing it,” Frank says. So suddenly, Las Vegas has a whole new market to pursue. Its determined transformation from an adult town to a family destination is all about serving that market.

A 1996 survey commissioned by Harrah’s Entertainment Inc. shows that “90 percent of U.S., Canadian and Mexican residents believe casino entertainment is an acceptable activity either for themselves or for others.”

Carnival’s own research shows that while the availability of gambling used to be far down the list of factors in a vacationer’s decision about where to spend time and money, it now ranks in the top three or four.

Gambling, or gaming as it is carefully referred to in the industry, has become the province of corporate America. Las Vegas’ roots may have been in organized crime’s desire to have a safe haven for laundering money. But today, it’s as American as Wall Street and apple pie.

The world’s biggest gaming company, Caesar’s World Casinos, is a subsidiary of ITT Corp., which also owns the Sheraton hotel chain, and the Hartford Insurance Co. Hilton Hotels Corp., which already was in the casino business, acquired Bally’s Entertainment Corp. for $2 billion early this year. Harrah’s and Circus Circus also are among the industry giants. All are public corporations prized by investors.

Carnival already competes with those companies in terms of its cruise lines and hotels in North America, Latin America and the Caribbean. It is trying to push its hotel presence worldwide, thus its interest in places like Poland.

And now its strategy includes playing with the big boys in the casino business as well.

By the turn of the century, Carnival board chairman Sherwood Weiser said earlier this year, Carnival will be “solidly established as a major gaming company” and will have between 100 and 150 hotels in its portfolio.

Far-flung operations

Carnival traces its lineage back to The Continental Companies, a major hotel management firm, which formed an alliance with Carnival Cruise Lines in 1988. The Continental Companies became Carnival Hotels & Casinos early in 1995.

The “casinos” part of the company amounted to a dozen or so operations on Carnival ships, and small casinos in Puerto Rico and the Bahamas. At the end of 1994, the company opened Casino Rouge, one of two successful riverboat casinos operating out of Baton Rouge, La.

Earlier this year, Carnival bought a small casino in Lima, Peru. It has plans to have a “major presence” in Nevada within the next five years.

But Carnival also has actively pursued deals for tribal gaming operations and non-tribal operations in Missouri and Indiana. In Indiana, it lost out to Caesars World Casinos for rights to build a casino in Harrison County. It is still pursuing a gaming license in St. Louis.

In Massachusetts, the company is a legislative vote away from going ahead with construction of a casino for the Wamponoag Tribe. In that project, Carnival faced most of the same legal issues it will confront in Airway Heights.

But Carnival’s major success to this point is the Casino Rama Resort, which will open this month as the only casino in the Toronto, Ontario, region. Carnival is developing that casino with the Rama First Nation tribe.

“We are very excited about it,” Frank says. “It’s a $175 million project that we anticipate will gross somewhere in the neighborhood of $250 million a year.”

‘Why should the state say no?’

Airway Heights would be tiny compared to the Rama Resort, but it is important to Carnival’s strategy of pursuing gaming opportunities where ever they exist.

And the legal issue represented by Airway Heights is a crucial factor in the continued expansion of casino gaming throughout America.

Since passage of the federal Indian Gaming Regulatory Act in 1988, more than 100 tribal casinos have opened in 20 states. Ten such casinos operate under compacts with the state of Washington. Rather than being money factories, though, Washington regulatory officials estimate that a number of the casinos in this state are not profitable.

Like any other business, a major key to profitability is location. And casinos operating on remote reservations don’t draw the kind of numbers they need to consistently make money.

The problem for companies like Carnival, which are coming late to the game, is that virtually all the U.S. reservation locations within adequate population bases are taken.

If the Kalispels are limited to opening a casino on their remote reservation near Usk, they are flat out of luck. If, however, a tribe can acquire land in a less-remote location - as the Kalispels did in Airway Heights in 1993 - and open a casino there, they, too, can participate in tribal gaming.

And the market for companies like Carnival becomes vastly broader.

That will be a tough - some say impossible - task to accomplish.

But Carnival believes that if it can gain the support of Airway Heights, Spokane and Spokane County for the casino, it can succeed.

“If we have the support of the people of this area,” Frank says, “why should the state say no to us?”

Carnival is willing to invest hundreds of thousands of dollars, maybe even up to $1 million, to convince local people the casino would be a good neighbor.

Already, some objections have been voiced based on the traditional image of gambling as an invitation to undesirables and organized crime.

Frank offers two arguments to that concern. First is Carnival’s corporate leadership. Robert B. Sturges, Carnival’s president, once served as chief of the organized crime section in the New Jersey attorney general’s office. Sturges later oversaw New Jersey’s 500-member Division of Gaming Enforcement.

And second, Frank says, big corporations like Carnival simply have too much to lose to be involved in anything questionable.

“If it’s not completely within the law,” he says, “we’re not going to do it. For us to try anything questionable would be absolute death as far as us trying to get licenses in any other gaming jurisdiction, or even in maintaining our existing licenses.”

Frank adds that, “We understand that we’re going to have to cover any financial impact the operation would have on Airway Heights. We also understand that our development might have some impact on charitable bingo games in Spokane, and we are prepared to make contributions to the charities themselves.”

Frank says the casino would generate 650,000 visits a year, the vast majority by people in Spokane with $100 in their pocket for an evening’s entertainment. “We don’t have any grandiose ideas of getting people in here from all over the world,” he says, but adds that a quality casino operation would enhance Spokane as a convention destination.

Eventually, he says, the development likely would involve a hotel. But, Carnival would welcome a joint hotel venture with local investors so the economic benefits of the project would be more localized.

“I can assure you,” Frank adds, “that what we promise, we will deliver on. And if given the opportunity, we will have a project here that people of this area will be proud of.”

, DataTimes ILLUSTRATION: Color Photo

MEMO: This sidebar appeared with the story: Carnival’s portfolio Carnival manages 67 hotels, comprising approximately 17,000 guest rooms located throughout North America, the Caribbean, Bahamas, Latin America and Mexico. Some of Carnival’s hotels: Condado Beach Hotel, San Juan, Puerto Rico Golden Rainbow Maremares Resort & Spa, Puerto la Cruz, Venezuela Xanadu Beach Resort & Marina, Freeport, Grand Bahama Island Crowne Plaza Miami The Suite Hotel Underground Atlanta Radisson Plaza Hotel, Kalamazoo, Mich. Park Central Hotel, New York Glidden House Hotel, Cleveland Hotel Jerome, Aspen, Colo. Aristocrat, Dallas Casino properties: Condado Beach Casino, San Juan, Puerto Rico Lucayan Beach Casino, Freeport, Bahamas Casino Rouge Riverboat, Baton Rouge, La. La Rosa Nautica Casino, Lima, Peru Casino Rama Resort, Orillia, Ontario