Las Vegas: Gamblers flee as economy goes bust

There are many cities across the country that are beginning to see the first glimpses of the end of the recession. Las Vegas is not one of them.

The nation’s gambling capital is staggering under a confluence of economic forces that has sent Las Vegas into what officials describe as its deepest economic rut since casinos first began rising in the desert here in the 1940s.

Even as city leaders remain hopeful that gambling revenues will rebound with the nation’s economy, experts project that it will not be enough to make up for an even deeper realignment that has taken place in the course of this recession: the collapse of the construction industry, which was the other economic pillar of the city and the state.
The Plaza Hotel and Casino, which is downtown, recently announced that it was laying off 400 workers and closing its hotel and parts of its casino for eventual renovation, the latest high-profile hit to a city that has seen a steady parade of them.

“If you look at the gaming revenues, they have declined and continue to decline over the past three years... Sept 11 set off a two-year slowdown, But nothing of this magnitude,” said David G Schwartz, director, Centre for Gaming Research at the University of Nevada, Las Vegas.

The drop in the city’s gambling revenues, at first glance, tracks historical trends: Americans cut back on recreational travel and gambling during a recession. There are some signs that gambling revenues, which are down to 2004 levels, have at least stabilised. After months of precipitous decline, revenues increased 3 per cent in the first quarter of 2010, but then dropped 5 per cent in the second quarter.

“Expectations are that once the US economy turns around, the gaming industry will begin to improve,” said Stephen P A Brown, director, Centre for Business and Economic Research, University of Nevada, Las Vegas.

Caution

What is worrisome now is the nature of this economic downturn, when many people saw the value of their retirement funds or homes collapse. Economists say people are less likely to gamble as freely as they have in the past, particularly baby boomers, who may now be rattled about their retirement years. In one sign of this, while there were more people coming to Las Vegas in recent months, gambling receipts have remained stagnant.

Gambling by Nevadans — itself a steady and critical stream of revenue — has also fallen off as a result of high unemployment, and analysts see no obvious way to turn that around anytime soon.

And in the midst of all of this, standing as a prime symbol of Las Vegas’ taste for extravagant risk — or perhaps of a fateful misreading of a changing landscape — is a huge new ‘urban community’ called CityCentre, which opened next to the Bellagio on the Strip.

Built by MGM Resorts and the government of Dubai, CityCentre is the largest privately financed construction project in US history. It is an $8.5 billion labyrinth of hotels, retail malls, meeting rooms, auditoriums, spas and a casino spread across 76 acres with 16 million square feet of floor space.

CityCentre was conceived before the economic downtown and did not open until last December, an unfortunate turn of timing that dropped 5,000 new hotel rooms into the city when some of the older properties had been struggling to bring people in. Another 2,500 rooms are due to be added when another new hotel and casino on the Strip, the Cosmopolitan, opens in mid-December.

The potential challenge from the internet is a reminder of just how much the playing field has changed for Las Vegas over the past generation: with states sponsoring weekly lotteries and legalised gambling permitted in many cities and Indian reservations.

The downturn in gambling is just one big part of the economic malaise. Nevada is paying a price for an exuberant and often speculative run of commercial and residential construction that has left the market glutted. As a result, the confidence that the return of tourists alone would spur the city to rebound automatically after this recession — the way it did after, say, the recessions of 1982 and 1992 — is absent.