Litigation

Las Vegas: Recession or no?

By Tracy Coenen

I love Las Vegas. And when my fellow WalletPopper Zac Bissonnette decided to write a story about how recession-like times (no, we’re not really in a recession) have hit Vegas hard, I was saddened. I said to him, “Are you sure there’s really a recession there? Cuz I just tried to book a room and was amazed at the prices and availability. Seems like things are hopping.”

Zac assured me that times were tough, and even wrote on WalletPop that revenue is down, property values are declining, and stocks in casino companies are hurting.

He based his report on a Wall Street Journal article that said in part:

Reacting to a national economic slump that has depressed gambling revenues and room rates along the tourist zone known as the Las Vegas Strip, casino and hotel operators are offering up a buffet of spring time deals normally reserved for the hot, slow summer months.

Already, room rates along the Strip are predicted to decline 23% through May 3, according to one analyst. Gambling revenues recently dropped for the second straight month, and visitation is down slightly. Conventioneers — those lanyard-wearing herds responsible for driving up midweek hotel-room prices — are cutting their stays short. Leisure travelers aren’t coming in their usual peak spring numbers.

That “has a significant impact” on revenue, said Terry Jicinsky, senior vice president of marketing for the Las Vegas Convention and Visitors Authority. “That’s where we’re beginning to see some of the opportunities in discounted room rates and packages.”

Now don’t get me wrong. I’m not saying that these writers and reports are not credible. Everything they said makes sense to me.

But there is a competing viewpoint out there, namely that there are no hard times in Vegas and that hotel rooms are full!

Ted Newkirk, the CEO and Managing Editor of AccessVegas.com writes this on Yahoo360:

This “Las Vegas Recession” story has taken on a life of its own… generally by journalists who haven’t followed Las Vegas for more than a few years and think that the recent boom years were the norm.

Not so:

1. Room occupancy is down about 1% (from 96% to 95% occupancy). That is a rate any other tourism city would kill for.

2. Over the decades, Las Vegas room rates fluctuated wildly depending on consumer demand. It has only been the past few years that they went high and simply stayed high. Ten years ago, a lull in rates wouldn’t have even been talked about.

3. Gaming revenue now makes up less than 1/2 of all revenue. People are coming less and less for the gaming and more for the shopping, shows, and clubs. If people were really spending less here, you’d see a rash of clubs cutting hours and shows shutting down. (Spamalot is leaving, but is being replaced by Danny Gans, who is being replaced by Terry Fator. Bottom Line: No loss of shows).

He goes on to talk about how normal it is for big construction projects in Vegas to be announced but never get off the ground. This is nothing new. People want to announce a concept and see if it takes off. If they get a lot of interest, they might build. If not, they’re on to the next idea.

Ted does admit that property values have dropped and there are more foreclosures. There is empty commercial space and housing starts are down. He opines (and probably rightly so) that too many people bought into the Vegas hype and thought they were going to get rich there.

It’s not unusual that property values are pulling back to line up better with reality. And anyway, housing is tough all over, and shouldn’t be an indicator that Vegas is struggling.

Ted also mentions one easy indicator of how things are going in Vegas: How busy is The Strip on a Saturday Night? (I’ll let you know in a few weeks!)

Full post as published by The FRAUDfiles Blog on May 21, 2008 (boomark / email).