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Las Vegas turnsluck into fortune

Like many American cities, Las Vegas began as an accident of nature. But in the 100 years since the its official founding, the city’s economic vitality has been entirely man-made, fueled by a series of entrepreneurs who were as quick to tear up the city’s business plan and start over. By's John W. Schoen.

Like many American cities, Las Vegas began as an accident of nature — a watering hole rest stop on the parched Spanish Trail, the trade route linking Santa Fe, N.M. with Los Angeles in the first half of the 19th century. But in the 100 years since its official founding, the city’s economic vitality has been entirely man-made, fueled by a series of colorful entrepreneurs with big egos who were as quick to tear up the city’s business plan and start over as its developers today now tear down old resorts to make room for new ones.

The city's name comes from the Spanish “The Meadows”  — a fertile valley with a plentiful water supply in the middle of the desert that had provided a rest stop for travelers for as long ago as 1000 years.  But it wasn’t until the San Pedro, Los Angeles and Salt Lake Railroad (later bought out by the Union Pacific) came through in 1905 that the town took off.

The completion of the main railway, linking Southern California with Salt Lake established Las Vegas as a railroad town. But this was more than a whistle stop to take on water: The town was chosen as the site of a maintenance yard, according to Hal Rothman, a history professor at University of Nevada Las Vegas, and author of "Neon Metropolis: How Las Vegas Started the Twenty-First Century."

“That’s what made the land auction worth having,” he said. “Businesses knew there would be 1,200 to 2,000 people who would buy things on a regular basis. They knew there would be an economy that would come through here.”

On May 15, 1905, the town held its first land auction. Within two days, all 110 acres had been sold. The rail link brought merchants from Los Angeles who set up shop to supply the growing city, which by 1930 had grown to more than 5,000. But the town fathers made a fateful gamble in the 1920s by backing a railroad workers strike, said Rothman, and in 1930, the railroad had pulled out, leaving the town looking for another way to make a living.

As luck would have it, the city’s economic salvation came in the form one of the biggest works public projects of the Great Depression: the building of the Hoover Dam. Thousands of workers flocked to the area looking for constructions jobs. Thousands more who couldn’t find work stayed on and collected welfare payments. Both provided a significant shot of cash to the city’s economy.

The project also left a lot of bored workers looking for something to do with that cash. Though gambling had been as common in Las Vegas during Prohibition as any other American city, it was officially legalized in Nevada on March 19, 1931. Combined with liberalized divorce laws — a "quickie" divorce could be had with just six weeks of residency — visitors looking to get unhitched stayed at "dude ranch" resorts that pre-dated the sprawling Strip hotels that would be built in the coming decades.

With the Hoover Dam completed in 1936, the flow of public dollars began to dry up. Once again, Mother Nature played a hand in the city’s fortunes. The largely uninhabited surrounding land made southern Nevada an ideal location for a military base. On Jan. 25, 1941, the U.S. Army Air Corps set up a gunnery school for aviators. Nellis Air Force Base and its restricted ranges now cover more than 5,000 square miles — an area bigger than Connecticut. The Cold War also brought with it the creation of the nearby Nevada Test Site (about the size of Rhode Island) where nearly 1,000 atomic bombs would be detonated over the next four decades. Those defense dollars helped tide the city over through what might have been something of a cold streak. But the end of World War II meant the city would have to adapt to a peacetime economy.

“Then in 1945, down the road comes a little red sports car with a beat-up looking mug in a checked sports jacket and really hard eyes,” said Rothman. “And if you called him Bugsy, you might not live. People who knew him well called him Ben.”

“Ben” was Benjamin Siegel, a Brooklyn-born gangster who saw an opportunity to expand on the natural oasis in the desert and build another Havana or Monte Carlo. He took over a failing hotel project, which became The Flamingo, bankrolled by his gangster friend Meyer Lansky back east. Despite his visionary gifts, Siegel’s project lost his backer’s money and his luck ran out. He was murdered in 1947.

But Siegel’s Flamingo eventually became a success — sparking the construction of a series of lavish resorts designed to lure gamblers to the city, and laying the foundation for the culture of self-indulgence that has fueled the city’s growth for much of the last 50 years. As late as 1970, some 70 percent of city’s economy was based on gambling revenues, according to Rothmans

“Caesars Palace, when it opens (in 1966) is the most revolutionary thing on the face of the earth,” said Rothman. “It begins the idea that Las Vegas has perfected today — that every individual is special. In that world, every man is Caesar.”

The 1960s also saw the arrival of legendary billionaire Howard Hughes, who liked what he saw and went on a shopping spree, buying up The Sands, The Desert Inn and the Frontier among other properties. After a change in gaming laws in 1969, public corporations were allowed to build or buying casinos properties. Major hotel chains soon placed their own big bets.

And while the gaming tables were the main draw to the city, hotel operators looked for “marquee” name entertainers to draw foot traffic their own casinos. The era of the “rat pack” — Frank Sinatra, Dean Martin and Sammy Davis, Jr. (some insist the full list included actor Peter Lawford and comedian Joey Bishop) introduced long-running shows that became something like an annuity. One of the biggest was begun in 1981, when magicians Siegfried and Roy opened a show at the Frontier that ran for over 7 years, with some 3 million people catching at least one of 3,500 performances.

By the mid 1980s, a construction boom was once again drawing workers to the city, with the population nearly doubling between 1985 and 1995. Developer Steve Wynn borrowed some $500 million to build the Mirage.

“He had 7 years to pay it off,” said Rothman. “He paid it back in 18 months.”

In the 90s, seeking to broaden its appeal, Las Vegas embarked on its “family friendly” campaign — an effort some outsiders saw as an odd strategy for a city whose name had become synonymous with vice. The Treasure Island report, with nearly 3,000 rooms, was designed to resemble a Caribbean pirate village, with hourly staged battles (in which the buccaneers always win.)

Along the way, the competition for bigger, glitzier, more expensive hotels moved to a new level with the construction of the $1.7 billion Bellagio, the most expensive project at the time. The 36-story, 3,000-room resort featuring a 10-acre lake with nightly water shows of 1,000 fountains spewing water 240 feet in the air, a 90,000-square-foot greenhouse, and some $300 million worth of paintings by Monet, Renoir, Picasso, van Gogh and Matisse.

Today, the city’s tourism industry has returned to its roots with its latest promotional campaign. Family-friendly is out, sex and sin are in: The new ads assure visitors that “What happens here, stays here.” 

But as it has grown, the Las Vegas economy has diversified away from gambling; Rothman estimates that gaming revenues no contribute just 40 cents to every dollar of the city’s economy. And the city faces increased competition from other states that have dropped gambling bans in hopes of balancing stretched budgets. 

Still, despite rising gasoline prices and competition from other states, visitor traffic to Las Vegas isn’t showing any signs of slowing, said Rothman.

“We already get more visitors in a year than Mecca,” he said. “And you have a choice about Las Vegas.”