The final economic impact of Las Vegas hosting a Formula One race is uncertain, but it will be big no matter how it’s measured, according to a senior economic analyst for the Nevada Gaming Control Board.
Appearing Friday at the 2023 Gaming Law Conference hosted by the State Bar of Nevada, Michael Lawton spoke about the Las Vegas Grand Prix and gaming-revenue forecasts.
In May, Lawton forecast F1 delivering an all-time record for gaming revenue for the Strip and when measured statewide. Since then, room rates on the Strip have dropped and race-weekend tickets are reportedly unsold, meaning fewer people than expected. International high rollers, however, were still expected en masse.
“It’s such a hot topic right now, especially for the folks who live here,” Lawton said of the construction and traffic challenges he and other drivers have faced. “There’s some uncertainty on what this event is going to deliver. Maybe the original projections — the $1.3 billion economic impact and 100,000 spectators — were a little too aggressive.”
Lawton added, however, that casino executives have told him that a lot of front money has been deposited and a lot of credit deployed for the race weekend. Strip CEOs were also confident of the gains from F1 during their third-quarter earnings calls.
“I think it’s going to be big, but I’m not sure how big,” Lawton said. “I’m expecting a big number. An all-time record? We’ll see.”
Lawton admitted the race has been a challenge for residents and hopes for a smoother transition in the future, but noted that special events and stadiums have been “game changers” for Las Vegas. That will be the case when the city hosts the Super Bowl in February, expected to generate more than $600 million in economic benefit and be less disruptive.
A $1.3 billion economic impact from F1 would be the equivalent of hosting two Super Bowls.
“People don’t realize it’s not a one-time event,” Lawton said. “The NFL is putting Vegas on a rotation of every six or seven years. Those February gaming numbers will be really strong.”
Lawton also called out the Sphere, the entertainment venue that has gained worldwide attention, as another game changer.
Nevada has recorded 31 consecutive months of $1 billion and higher in gaming revenue and Lawton said there’s no chance that streak will end, even if numbers slow due to economic pressures.
“We’re on a pretty incredible run,” Lawton said. “A billion dollars is a bellwether number and we’ve done it 31 consecutive times. The previous streak for a billion dollars was eight and that was back in 2006 and 2007.
“When you look at the current run rate, we’ve averaged $1.3 billion in gaming win every month over the last 12 months. To miss $1 billion in gaming win, we’d have to have a significant decrease of over 20%. “I’m not seeing anything like that on the horizon. I’m pretty comfortable saying that’s the new normal.”
Lawton previously forecast that the state’s fiscal-year 2023 that ended June 30 would be a peak for gaming revenue after the pandemic, and that it will decline slightly in 2024 and 2025 because of inflation, tighter credit, rising interest rates, increase in oil prices, and macroeconomic pressure.
The $15.1 billion forecast for fiscal year 2023 was 4.2% higher than 2022, which set an all-time record. Lawton forecast a 1.2% decline to $14.9 billion in fiscal year 2024 that’s in its fifth month and $14.8 billion in 2022, a drop of less than 1%.
“I’m still pretty comfortable with that forecast. I think 2024 has the potential to be stronger than we originally anticipated, but we were conservative in our outlook and trying not to be wildly aggressive. The biggest challenge beyond macroeconomics is the strength of our comparison every month to all-time records or second-all-time.”
During the last seven months, Lawton cited “choppiness” in gaming numbers, with four months of increases and three months of decreases. He expects that trend to continue for the foreseeable future.
“The first quarter (of the fiscal year) has just ended and gaming win was up 1.6%,” Lawton said. “Slots were down 0.4% and that’s a little concerning. Table games have taken off and are up 5.5% due to unsustainable baccarat holds. There’s a good chance it will come in better than forecast and that is a great thing. If I miss my forecast on the low side, it’s better than over forecasting. The state budget is built on some of that revenue forecast.”
Fiscal-year 2024 will feature two casino openings in December: Durango filling an underserved area in the southwest valley and Fontainebleau Las Vegas adjacent to the West Hall of the Las Convention Center.
“I’m glad to see the Fontainebleau on the north end of the Strip,” Lawton said. “It could use some more critical mass.”
Lawton also highlighted billionaire Tilman Fertitta buying and investing in the Hard Rock Lake Tahoe, rebranded as a Golden Nugget.
Lawton’s long-term worry about the Las Vegas gaming industry is movement of people. Access to and from Harry Reid International Airport needs to be better and only a second airport can handle growing demand.
In addition, bottlenecks on the I-15 in California need to be addressed so that people can get to and from Las Vegas “without a traffic headache,” Lawton said. A freeway widening would address that. “There are various reasons for people to come here, but you don’t want to roadblock access to the city. A high-speed train planned between southern California and Las Vegas will help with that.”