Las Vegas as Economic Indicator

Looking to Las Vegas for signs of economic recovery might not be such a bad idea. With the 2014 NFL season kicking off this weekend, it serves as a reminder that gambling is one of the more taboo economic indicators we can look at. Casinos have been commonly thought of as “recession proof,” but they have become much more susceptible to the business cycle. Bernard Baumohl noted in his book The Secrets of Economic Indicators: Hidden Clues to Future Economic Trends how true this was for Las Vegas during the recent economic malaise. “In the year before the recession, casinos on the Las Vegas Strip were raking in about $600 million each month from just gaming activity,” said Baumohl. “Those monthly revenues plummeted 25% during the economic downturn.” This makes sense, since it isn’t hard to see how gambling patterns can hint at the overall economy’s performance. When people are more confident they will have disposable income they won’t need to save incase of a rainy day, they’re more willing to blow it at a casino.

 

This article from Hannah Dreier of the AP last fall highlights how deadbeat gamblers becoming more willing to repay their outstanding debts is another sign things are turning around for Las Vegas casinos. Shockingly, the article notes “Las Vegas executives say people are especially likely to skip out on their gambling losses when times are hard.”

 

Las Vegas has followed the economic roller-coaster of the past few years, with tourism dropping from over 39 million visitors in 2007 to only 36 million in 2009. Sin City’s gaming revenue also plummeted during the same time frame, falling nearly 20 percent, according to the Las Vegas Convention and Visitors Authority. However, Las Vegas has returned to pre-2008 visitor numbers, with the city expected to cross the 40 million visitors threshold in 2014 for the first time in its history.

 

Giving people a place to gamble hasn’t been the only reason for the city’s comeback, though. Casinos have shifted their focus to attract customers through celebrity restaurants, fancy pool parties, and bringing in high end DJs to their nightclubs. “Las Vegas has moved away from being just a gambling town,” said Rob Oseland, president and COO of SLS Las Vegas told NBC news. “It’s about offering a broader array of products from luxury rooms to fine dining to entertainment for people who aren’t necessarily interested in gambling.”

 

Las Vegas is banking on the trend to continue upward, with new hotels popping up along the Strip. Oseland’s 1,600 room SLS Las Vegas opened up last month, and new hotels are expected in the coming years next to Circus Circus and the Wynn. It’s a welcome change to a city that has seen several big money casino projects abandoned following the economic downturn.

 

Lastly, investors have caught on to the recovery in Las Vegas as well. Wynn Resorts (WYNN) has seen its stock appreciate nearly 300 percent in the past five years, and the Las Vegas Sands Corp. (LVS) has seen its share price increase from the low teens to $63 dollars per share this week.