Betting on a New Horse

Frank J. Fahrenkopf Jr.'s family moved to Reno when he was 9 years old. He graduated from the University of Nevada, Reno, and spent 17 years practicing trial and gaming law in the state before heading to Washington, D.C.

Although he went on to pursue a career in politics — chairing the Republican Natl. Committee as well as numerous civic and legal groups — Fahrenkopf's roots in the casino industry would lead him to the position of president and CEO of the American Gaming Assn. When AGA founders were creating the organization in 1995, Fahrenkopf's combination of gaming and political experience made him a perfect candidate.

It's an interesting time to be in the gaming business, as Fahrenkopf recently told Tradeshow Week Senior Editor Heidi Genoist. Trends like Internet gambling and racinos (racetracks with casinos) are keeping the world of wagers hot, while tradeshow players have battled to produce an event that will lure both casino operators and manufacturers.

Now that the AGA and Reed Exhibitions have achieved dominance with their Global Gaming Expo (G2E), locking in COMDEX's coveted former dates at the Las Vegas Convention Center, and launching a spring conference that incorporates two other industry events, Fahrenkopf reflected on G2E's rise to power, the role of Las Vegas and what tradeshows mean to gaming.

Question: Gaming and tradeshows have a love-hate relationship. Do you believe gaming ultimately helps or hurts tradeshow business?

Answer: I don't think there's any question that it helps. The old argument that you didn't want to have a convention in a gaming destination because the attendees would all be out gambling doesn't hold water any more.

Managers have figured out a way to provide the meat and potatoes of the convention and schedule the entertainment that people want around it.

Q: Why, in 2001, did the AGA pull its support of World Gaming Congress & Exposition and launch its own show?

A: When we opened the doors of the AGA in 1995, there were a number of shows. We represent both operators and manufacturers. It became clear to us early on that the buyers and sellers at these other shows were our members. We did some research and found that most trade associations run shows for their members.

We are a small organization, and there was no way we could put on a show the size of the WGC, so we entered into an agreement with them to participate. The contract was for four years, and it was provided that we would negotiate a new agreement (at the end).

Q: But you didn't agree to continue with WGC?

A: When the end of the four years came, we felt it was a satisfactory arrangement. A group of our board members sat down with representatives of our partners in the show and tried to get financial disclosure and move forward, but, basically, we got a stiff arm. So, we decided that we would undertake our own show.

Q: Why did you choose Reed Exhibitions to manage G2E? Why not run the show yourself?

A: We did some research and interviewed five or six companies, and were very pleased with the offer by and relationship with Reed. We thought their experience was superior and liked the guarantee — the money, to be candid.

Plus, they offered us an equity position in the show. That was a stumbling block with the former organizers. We now own 60 percent of the show, and Reed owns 40 percent. We continue to have a great working relationship.

Q: In 2002, the AGA and Reed acquired your former competitor, the WGC. Was that part of the plan all along?

A: We went head-to-head for one year and drove them into the ground. They came to us and said, "No mas, no mas." And we acquired, for an insignificant compensation from our standpoint, the rights for the show.

We told them when they were stonewalling us that we'd go forward with the show, and I guess they thought they'd be able to take us on.

Q: You chose to produce G2E in Las Vegas. How do you see the role of this city vis-à-vis other destinations?

A: As No. 1, because most of the major manufacturers have facilities in Nevada. They're the ones who have to put up the booths, and you know what's involved in that. Most have facilities in Las Vegas, if they're not headquartered there. And the 600-pound gorillas on the buying side — MGM Mirage, Boyd Gaming — they're all headquartered there. It's a natural focal point for both sides.

We don't expect G2E to move from Las Vegas. We've now locked in set dates in November for many years in the future.

Q: Destinations like Atlantic City and those in the Gulf Coast must have an inferiority complex about Las Vegas. Do you think any city will ever reach Vegas' stature as a gaming destination?

A: No, I don't think so. Las Vegas — to use a bad analogy taken from people who like to go there — is the Mecca of gaming. There's nothing like its concentration of restaurants and casinos anywhere else in the world.

But in the last couple years, you have seen places like Atlantic City, where the average stay used to be eight hours (it's three days in Las Vegas), become more like Las Vegas with the addition of the Borgata, and its restaurants, shopping, spas and convention center. The same thing is going to be true in other cities and states as well, but I'd be surprised if anywhere else ever reached the legendary status of Las Vegas.

Q: Do you think the gaming industry along the Mississippi Coast will come back?

A: Actually, I think it's going to come back bigger and better. There's a dramatic change that has taken place in our industry in the last 10 years. If you looked at the financial statements of the big players from 10 years ago and looked at their bottom line, about 65 to 70 percent of it would be the result of gaming revenue. The rest was from restaurants, food and beverage, etc. Today, only about 45 percent comes from gaming revenue. The rest is food and beverage, but also upscale restaurants, shopping, golf and other entertainment.

When the Gulf Coast is rebuilt, it will have those things: better restaurants, shopping, entertainment, golf, spas, bigger convention facilities. The facilities are going to look quite different than they were before. They'll look more like the casinos in Las Vegas.

Q: New gaming facilities are being developed in Macau and Singapore. What impact, if any, will this have on the U.S. gaming industry?

A: I think it's going to be a positive influence for a couple reasons. One, most of the players who are building the hotel casinos are U.S. companies. They'll be extensions of our companies.

Two, we've found something interesting about this over the years. In the 1970s when gaming was approved in New Jersey, people felt Atlantic City would hurt Las Vegas — that it would take all the business from the East Coast market. That didn't happen. People were exposed to casinos in Atlantic City and then wanted to go to Las Vegas.

The same thing happened with lotteries in the '80s ... and the riverboats in the '90s. The more people are introduced to gaming, the more they like to go to other venues, particularly Las Vegas. People will be exposed to gaming there (in the Far East), it will be new and different for them, and, hopefully, it will attract them to our gaming destinations in the U.S.

Q: Since you became CEO of the AGA in 1995, how has the overall picture of gaming in the United States changed?

A: Legalized gambling in the U.S. has spread rapidly over the last 20 years and continues to grow and expand. Two areas are seeing more expansion than others: Native American gambling, primarily in California and New York; and racinos. The three states involved in that are New York, Florida, and soon (it's been passed by voters) Pennsylvania.

Q: What about online gambling? Is it changing things?

A: No, but it is a very controversial subject right now. The federal government believes it's illegal to gamble on the Internet anywhere in the U.S., and because of that and the threat of prosecution, there are no Web sites located in U.S. that take bets on sports wagering or casino-type games. They're all based offshore.

Q: Getting back to your show, G2E has grown steadily since its inception, and was named as one of last year's TSW Fastest 50. What's fueled the growth?

A: The key was, from day one, we said this would be a show by the industry for the industry. We sat down with the folks who exhibit and asked what their complaints were, what we could do to make them happier. We sat down with buyers too. That combination just worked.

Q: Have you focused on any specific areas?

A: Yes, we had 30-percent growth in international participation last year, and our food and beverage pavilion was really popular. We've practically doubled where we were when we started, in terms of both net square feet of the exhibition and attendance.

Q: Do you have any competing tradeshows nipping at your heels?

A: Really, there are no other competitors. There's a Southern Gaming Summit run in the Mississippi area (by Ascend Media). This year, they can't do it in Biloxi, so I think they'll move it to Tunica. It's a much smaller show, and we've always cooperated with it. But the world's largest, most successful show is G2E.

Q: How important are tradeshows to the gaming business in general?

A: I think the growth of G2E, and the size of the show itself, shows how important they are. If you have a product to sell to this industry, you better be at G2E. But there's another side of it. It's not just an open floor with new products out there. The educational component of what we do is very important.