And the first one bites the dust By Ken Adams, CDC Gaming Reports April 19, 2020 at 8:00 pm It did not take long – a month, give or take a day – before the first casino in Nevada closed permanently, a victim of the coronavirus pandemic. The Lakeside Inn and Casino, on the South Shore of Lake Tahoe, announced on April 14 that it would not reopen after the coronavirus crisis has passed. It is not certain right now when any casino in Nevada will open – probably not before the second week of May, at least – but it is certain that the Lakeside Inn will not be among the casinos standing with open arms, hoping to welcome their customers back. It is sadly ironic timing; in May, the Lakeside Inn would have celebrated its 36th anniversary. The property itself actually opened in 1969 – it’s had several owners and several names over the years -but since May 24, 1985 it has been the Lakeside. Lakeside Inn and Casino in Lake Tahoe, Nevada Lake Tahoe has never been an easy place to operate a casino. In the years just after World War II, the casinos at Lake Tahoe operated only between Memorial Day and Labor Day. It was a summer market. The visionary Bill Harrah changed the seasonality of the market by busing customers from elsewhere in California to Harrah’s. Dwayne Kling, in his oral history Luck is the Residue of Design, said that, without busing, he doubted that Harrah’s would have survived the winters. By the late 1960s, Harrah had proved his point: Harrah’s was successful and expanding, and so were the other South Shore casinos. Revenue grew, year after year, for roughly three decades, with very few exceptions. That is, until tribal gaming hit the state. In 1999, California signed the first of the gaming compacts that allowed Native American tribes within the state to operate casinos. It took a few years, though, before Lake Tahoe really felt the impact of California’s new Indian casinos. But that time did come, and when it did, the casinos in northern California began to drastically cut into the revenues of casinos on the South Shore. In 1969, there were five casinos at Stateline, with a collective 190 table games and 4000 slot machines, generating an annual gaming revenue of $88.9 million. In 1999, there were also five casinos at Stateline, with 376 table games and 6800 slot machines, generating a total annual revenue of $324.8 million. By 2019, there were four casinos operating 184 table games and 2569 slot machines, with a total gaming revenue of $225.5 million. The Lakeside, with 13 table games and 314 slot machines, was already the smallest and weakest property in the market, more vulnerable than the others to snowstorms, increased competition or any other change in conditions. Clearly, the COVID-19 crisis, and the concomitant shutdown of all the casinos in Nevada, created one of those conditions. It is not the only small casino that has been forced to close during the pandemic, of course; every casino in the country is currently closed, and many are in positions that are just as precarious. For a time, it appeared that the federal relief efforts would offer a lifeline. However, the rules of the Small Business Administration expressly prohibit a business that derives the majority of its income from gambling from receiving any support. That had been the last hope for the Lakeside Inn. In recent articles online about the property, there has been a lot of blame directed at management for not having done better, saved more and been more efficient. That is somewhat unfair. Like all small casinos, the Lakeside Inn was challenged by the current situation, and operating a small casino is a difficult juggling act even in the best of times. In 1997, Reno experienced a flood that forced a temporary closure of the downtown casinos. In time, most of the city’s casinos reopened, but for the Riverboat and the Comstock, the flood was a death knell. Both casinos had always struggled in the winter; when business picked up in the spring, they paid off their winter debts, and then spent the summer trying to save enough cash to get through the following winter. The strategy usually worked, but a bad spring, summer, or fall made it more difficult, and the additional debt was debilitating. That flood pushed the Riverboat and the Comstock over the edge. Most small businesses are in that same position; they have good seasons and bad seasons. If they are lucky, they have enough cash flow from the good times to see them through the bad. But if something goes wrong in the good season, for most of them, there is not much hope of survival. As far as I know, the Lakeside was the first property to throw in the towel, but within a week two more – the Carousel and Naledi casinos in South Africa, both owned by Sun International – did the same. In Sun’s announcement, the company said the properties had been in a long decline, and the lockdown resulting from the coronavirus was the final straw. There will be others. The casino industry, on the whole, will recover, although not instantly. But there will be many small casinos, just as there will be many small restaurants, gift stores, specialty boutiques, bars, hotels, grocery stores and other small businesses, that will not survive this crisis. It would be nice to put all the blame on the SBA and its unwillingness to lend any financial assistance to gaming enterprises, but that would not be just or accurate. The failure of the Lakeside Inn simply reflects the difficult nature of business. Any business, including the biggest, can fail when revenue falls and debt increases. A flood, a hurricane, a pandemic – these are all it takes sometimes to push a company into bankruptcy and failure. Regretfully, odds are that the Lakeside Inn will prove to not be an outlier. In the next twelve months, we will see likely many more businesses like the Inn close their doors permanently.