- The Washington Times - Friday, April 2, 2010

RENO, Nev. | Before the Las Vegas Strip ruled the gambling world, Frank Sinatra, Dean Martin and Sammy Davis Jr. helped make the Cal Neva Lodge one of Nevada’s coolest casinos in the early 1960s.

This week, roulette wheels stopped spinning and blackjack games folded their decks at Sinatra’s old resort that straddles the Nevada-California border on Lake Tahoe’s north shore at Crystal Bay.

Although the resort’s current owner hopes to reopen the casino under a new outside contractor by year’s end, some analysts think the Cal Neva might have dealt its last hand. They said Tahoe casinos are particularly vulnerable to the double whammy of the recession and competition from Las Vegas and American Indian-owned casinos.

In 2009, gambling revenues at Lake Tahoe casinos were roughly half of the 1992 total in real terms, said William Eadington, an economics professor and director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada at Reno.

“The realities are when you have that kind of decline the weakest operators typically get pushed out,” Mr. Eadington said. “The older, tired casinos - and the Cal Neva is a great example - don’t have much to offer for gaming.”

Sinatra owned the Cal Neva from 1960 to 1963 during its heyday, drawing fellow Rat Pack members Martin, Davis and Peter Lawford, and stars such as Marilyn Monroe, Joe DiMaggio and Juliet Prowse.

Monroe spent her final weekend at the Cal Neva before she died of a drug overdose in Los Angeles in August 1962. The small cabin where she stayed still stands and is part of a tour offered by the resort.

Sinatra renovated the Cal Neva, adding the celebrity showroom and a helicopter pad on the roof. He used tunnels to shuffle mobsters and celebrities beneath the resort so they wouldn’t be seen by the general public, said Carl Buehler, a bartender who leads tours at the resort. The tunnels were built in the late 1920s so liquor could be smuggled into the casino during Prohibition, he said.

“This was one of the hottest casinos in Nevada when Frank owned it,” Mr. Buehler said. “Frank had all the stars coming in and out of here, and it was always packed with people. I think the history is what keeps the Cal Neva going.”

The Nevada Gaming Control Board stripped Sinatra’s gambling license after Chicago mobster Sam Giancana was spotted on the premises.

Richard Bosworth, senior director for Canyon Capital Realty Advisors, said the Los Angeles-based financial institution that has owned the rustic resort since last year has held discussions with several gambling license holders who have expressed an interest in managing the casino.

He noted that the rest of the property, including restaurants and the showroom now named for Sinatra, will remain open. The company has overseen significant turnarounds in non-gambling operations such as hotel and wedding bookings since becoming the landmark’s owner through foreclosure.

“We have worked hard to successfully stabilize business operations over the past year, and we are confident that an operator shift at the casino will only further enhance the value of the Cal Neva resort,” Mr. Bosworth said in a statement.

Former Nevada state Archivist Guy Rocha said he questions whether the casino will be able to reopen because of the decline in Nevada’s gambling business.

The Cal Neva’s colorful past isn’t enough to draw younger gamblers not so familiar with Sinatra and other celebrities who entertained there more than 50 years ago, he said.

“People just aren’t coming in the numbers to gamble like they used to,” Mr. Rocha said. “The Cal Neva doesn’t capture people’s imagination the way it once did.”

The American Gaming Association said last month that the U.S. casino industry reported a revenue decline of 5.7 percent to $30.7 billion in 2009, on top of a 4.6 percent drop in 2008.

The decline was even more dramatic in Nevada, where revenues plummeted 10.4 percent to $10.4 billion - the largest annual fall since records were first kept 55 years ago. Nevada has one of the nation’s highest unemployment rates among the 50 states, and the greater Las Vegas housing market was one of the markets hurt most by the mortgage crisis that began in 2007.

Since 2001, the number of adults visiting a casino in the United States has dropped 14 percent, reflecting the economy and competition from Internet-based gambling alternatives, leading some industry analysts to forecast a permanent loss of market share and revenues for the casino industry.

The Cal Neva is one of Nevada’s first legal casinos. The present resort was built in 1937, when a fire destroyed the original lodge that opened in 1926. Before Sinatra’s tenure, singing legend Judy Garland first performed at the lodge in 1935 at age 13.

Canyon Capital took over the Cal Neva after foreclosing on a $25 million loan to its prior owner, financier Ezri Namvar. A two-state auction of the property last year netted no bidders. Mr. Namvar bought the Cal Neva from Chuck Bluth in 2005.

At a meeting last week, Lake Tahoe casino owners agreed that the local gambling industry is in sharp decline and the status quo is not a viable option.

“The cost of doing nothing is considerable,” said John Koster, regional president of Harrah’s Northern Nevada.

Mike Bradford, president of Lakeside Inn and Casino in Stateline, said he has had to lay off about 100 employees since 2006.

“I just couldn’t afford to pay their salaries,” he said.

Elsewhere on Tahoe’s south shore, Bill’s Casino closed and the Horizon Casino eliminated table games of chance last year, further signs of the industry’s distress.

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