The latest earning reports from casino operators and tourism officials show strong earnings and visitation and convention attendance on an upward trajectory in Las Vegas.
Last Tuesday, Nevada reported record first-quarter gaming revenues, while the Las Vegas Convention and Visitors Authority data indicated strong visitation and convention attendance in March that brings the city closer to pre-pandemic levels.
But it might not stay on that strong trendline, according to a report released Wednesday by the Center for Business and Economic Research (CBER) at the University of Nevada Las Vegas.
While Las Vegas is projected to close out 2023 with nearly 8% more visitors than 2022, an UNLV economics professor said that uncertainty about inflation and a potential slowdown could dampen any gains in 2024 when the city is expected to see a drop in gaming revenue and relatively flat visitation and occupancy rates.
Stephen Miller, director of research for the Center for Business and Economic Research, said southern Nevada has yet to feel the fallout from the collapse of the Silicon Valley Bank or further liquidity and credit concerns in the financial markets due to higher interest rates. That will crop up, however, as time goes on.
“Inflation poses a palpable threat to the economic prosperity of America and, by implication, of Nevada and southern Nevada,” Miller said.
Miller predicts Las Vegas will end 2023 with visitor volume up 7% for the year. He sees the economic and inflationary impacts as worsening in 2024, when visitor volume will grow by only 1.2%. Miller anticipates gaming revenue will decline by 2.8% and hotel occupancy will be unchanged, after increasing 6.1% in 2023.
“Gross gaming revenue over time will likely return to pre-COVID trends, as savings and discretionary income return to where they were before the pandemic, adjusted for higher wages and inflation,” Miller said.
Despite his projections of slower visitation growth and gaming revenue declines, Miller isn’t suggesting anything drastic for the Las Vegas economy. Such events as the Formula One race in November and Super Bowl in February are definite boosts.
“Absent a new wave of a coronavirus variant, a financial crisis leading to a recession, and assuming a resolution of the war in Ukraine, the southern Nevada economy and local tourism sector will continue to expand somewhat in 2023, 2024, and into 2025,” Miller said. “We have several major sporting events that will help keep Las Vegas front and center for business, leisure, and international travelers.”
Miller noted that CBER’s models don’t fully consider new sporting events coming to southern Nevada. F1 and the Super Bowl alone are expected to bring hundreds of millions in economic impact to the city.
“Minus an exogenous shock, such as another health crisis, both events are expected to draw record-setting crowds to Las Vegas and may lift our forecasts for 2023 and 2024 at the margin,” Miller said.
In an interview with CDC Gaming, Miller identified a bifurcation between what people “are feeling in the trenches versus what’s reported in the press.” CBER’s survey of Las Vegas business leaders showed they were positive on the local economy, but negative on the national economy.
“Stories are coming out about record this, record that, and things are up and looking good, but I’m wondering if they’re all that great,” Miller said. “We still haven’t come back in terms of employment in the leisure and hospitality sector and maybe we never will. We see record gaming revenue, occupancy rates are doing well, and visitor volume is coming back, but there’s a difference between raw and seasonally adjusted data. When I do the seasonal adjustment, they don’t turn out to be as positive. The caveat is the pandemic may have thrown the seasonal factors out the window.”
Miller stressed continuing uncertainty, as evidenced by the wide confidence range of what happens in the economy within CBER. The range includes a recession, although CBER is not calling for one.
“At best we’re calling for a slowdown – slower growth a year out, but not a recession,” Miller said. “Within our range of confidence, we could have a recession or a more positive economy than we’re forecasting.”
Southern Nevada has faced more difficulties than most other metro areas, due to its reliance on sectors of the economy that require the gathering together of people for face-to-face interactions.
The leisure-hospitality and food-and-drink sectors, accounting for more than one in four southern Nevada jobs, place the economy at a much higher risk for negative outcomes when a pandemic clobbers the economy.
“The Las Vegas metro area remains highly specialized in the leisure and hospitality business, which suffered so much during the pandemic recession,” Miller said. “When times are good, we also tend to feel it more than others. With further professional sporting events coming to Las Vegas, there is more upside than downside in the latter part of 2023 and 2024. FI and Super Bowl will set records in Las Vegas helping to boost any softness we experience in the first half of 2023. With time, we will know more about what a world with higher interest rates looks like and whether inflation has a long tail.”