Las Vegas suffering from airline contraction, economic heat
Las Vegas, once one of the favorite getaways for the masses yearning to make it rich, is suffering from an economic downturn, less disposable (gambleable) income and pending airline capacity cuts.
Travel Weekly reports the latest numbers from the Las Vegas Convention and Visitors Authority (LVCVA) “show visitor volume, room rates, hotel occupancy and gaming revenue continued to fall in April.”
The London Times notes that the gaming industry is slowing:
Harrah’s, the world’s largest gaming group, with eight casinos on The Strip, including Caesars Palace, reported a first-quarter loss of $187.8 million (£96.5 million) after what Gary Loveman, its chief executive, described as a “lousy” March.
Both the New York Times and The London Times reported last month that Tropicana Entertainment filed for bankruptcy protection and Deutsche Bank “recently started foreclosure on a $760 million construction loan for the Cosmopolitan Resort and Casino, a partly built project in the heart of the Las Vegas Strip. ”
What doesn’t help is the fact that airlines are cutting back flights to Las Vegas. The Las Vegas Review Journal reported last month that
Already five airlines with service to Las Vegas have filed for bankruptcy or ceased to operate since December.
Another, US Airways, recently announced it would reduce the number of flights to and from Las Vegas nearly 20 percent come August.
American Airlines also announced it would cut some flights after the peak summer season is over although it did not announce which routes would be affected.
Even Southwest Airlines, an industry leader that remains profitable and the carrier that hauls the most Las Vegas passengers, has reined in growth plans in large part due to escalating fuel costs.
The people who still come to Las Vegas to gamble are cutting back in their gambling.
Rita Keene, a retired insurance risk manager from Collinsville, Ill., said she has been coming to Las Vegas several times a year since 1978 and had never set gambling limits. This year she is betting no more than $300 a day at the slot machines, and she is not going to shows.
Julia Lee, 27, of Los Angeles said she normally brings $10,000 on her trips here to play blackjack. As Ms. Lee picked up show tickets the other night, she said she had brought less than half that on this trip.
The outlook for Las Vegas would be worse if it weren’t for foreign visitors. “They are taking advantage of the low dollar to savor the fare of celebrity chefs like Alex Stratta and to snap up goods that might cost twice as much in Europe.” The LVCVA reports that “the average foreign visitor spent $1,200 for purposes other than gambling in 2007, up from $1,159 in 2006.”
The city is hopeful that the new resort developments like the Encore and City Center will draw “gawkers.” The new projects, “which will include 31,327 hotel rooms, are expected to bring 106,360 jobs to Las Vegas by 2012.”
Despite all the doom and gloom, analysts still expect Nevada “to remain the fastest growing state over at least the next two decades, at which point it will have added 2.2 million to its population since 2000.” Shari Wong-Cullota, head of PowerHouse Realty points out that in the long run, the city will be able to weather the storm.
“House prices are still cheap relative to some states and are coming down. Taxes are low, the climate is great and the city will continue to create thousands of jobs,” she said.
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2 Responses to “Las Vegas suffering from airline contraction, economic heat”
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The main issue in Vegas is that they’ve outpriced themselves for the typical middle to upper middle class American to visit and gamble. While there are room deals still to be had (if you look), the city has become for all intents and purposes an overpriced playground for the spolied brat Los Angelino trustfund scenesters(I’m looking at you Paris Hilton!) and Cheapskate Eurotrash looking to get louis vutton and chanel at discount prices. I’ll be headed there next month for some R&R, but I dont know if i’kll be heading back.
Papers in New York and London reporting on Las Vegas would be about as accurate as the Las Vegas Review-Journal trying to report on London.
1. Gaming stocks are in the tank because of a zillion “Vegas Is Dying” stories. Less than two months ago, Steve Wynn said the farther his stock goes down, the more of it he is going to buy.
2. Harrahs has been in the process of going private (from being publically traded). Harrah’s didn’t lose money in March on tourism. Room discounting hadn’t kicked in yet (like it is now).
3. The Tropicana’s bankruptcy has nothing to do with the recession. It has to do with their gaming license issues in Atlantic City and mismanagement of their gaming properties nationwide.
4. US Airways cutting their night hub operation at McCarran is going to hurt the most. Southwest will probably pick up some of the slack. Las Vegas isn’t a big American Airlines city to begin with and the carriers that went bankrupt were not major players at McCarran.
5. Gaming win is down only a few percentage points and visitor numbers are steady. Summer room rates traditionally are slashed anyway because it is our “off” season (with 105 degree temps the norm). If fall ends up being soft, then there may be cause for worry.
6. Las Vegas will not add another 2.2 million people. We don’t have the water. Not now, nor on the drawing boards. We also realistically don’t have the infrastructure to be a city of over 4 million. The present 2 million has things pretty stretched. However, you will see growth in Laughlin (9000 acres were just released for future development), Pahrump, Mesquite, and similar areas within an hour or so of Las Vegas.
7. Taxes won’t be low for long. All the people fleeing high tax states moved here and expected the same level of schools and public services they had back in their old state. Now, taxes are having to be raised to cover those demands.
The Bottom Line: Long term prospects for Las Vegas tourism are good. The resistance to oil exploration and nuclear power are declining. One way or another, a high speed train will link Las Vegas to Southern California (probably electric) and hybrid vehicles are becoming more prevalent.
The US has over 100 years of shale oil supply and they are finally figuring out how to mine and refine it. That will keep the planes coming here for decades to come.
Las vegas’ biggest problem is dealing with the future of growth, water and where to put all the people who want to live here. Tourism (in the long run) will be fine.
Ted Newkirk
Managing Editor
http://www.accessvegas.com