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The Center for Business and Economic Research, UNLV – Box 456002 – 4505 S. Maryland Parkway – Las Vegas, Nevada 89154‐6002 Phone (702) 895‐3191 – Fax (702) 895‐3606 – cber@unlv.nevada.edu – http://cber.unlv.edu – http://twitter.com/cber_unlv
May21,2013
Nevada’sEconomicRecovery:GamingandTourism
RyanT.Kennelly
ImprovingworldeconomicconditionsoverthepastthreeyearshaveledtoapartialrecoveryinLasVegastourism.Nonetheless,mostmeasuresofLasVegastourism,particularlyspending,havenotyetreachedtheirprerecessionpeaks.TheweakrecoveryinLasVegastourismowestoanumberoffactors,includingsluggishU.S.economicgrowth,thelaterecoveryintheArizonaandCaliforniaeconomies,economicproblemsintheEurozone,andaslowingofeconomicgrowthinAsia.Astheseothereconomiesimprove,LasVegastourismwillcontinuegrowing.1.LasVegasTourism
ThestateofSouthernNevada’stourist‐basedeconomyisreflectedinanumberofdifferentindicators—ClarkCountyvisitorvolume,totalpassengersatMcCarranairport,LasVegasStripgamingrevenueandClarkCountytaxablesales.StronggrowthinalltheseareasisnecessaryfortheSouthernNevadaeconomytodowellforitsresidentsandbusinessesalike.
AsshowninChart1,ClarkCountyvisitorvolumeandtotalpassengersatMcCarranairporthaveshownmoderategrowthinrecentyears.ThetotalnumberofpassengerspassingthroughMcCarranhasincreasedonly4.17percentsincehittingbottominearly2011.ThenumberofvisitorstoSouthernNevadahasincreasedbyonly7.36percentsincehittingbottomin2010.
BothLasVegasStripgamingrevenueandconsumerspendinginClarkCountyhaveshownfairlystronggrowthinrecentyears.Althoughbothtooksubstantialhitsin2008,theyhavefaredmuchbettersincelate2010(Chart2).GamingrevenueontheLasVegasStriphasincreasedby13.85percentsinceitsbottom.ClarkCountytaxablesaleshaveincreasedby14.04percentsincehittingbottom.1
AlthoughthegrowthofthesefourmeasuresofSouthernNevadaeconomicactivityisencouraging,noneoftheseserieshasreacheditsprerecessionpeak.ClarkCountytaxablesalesandLasVegasStripgamingrevenueremain13.15and9.40percentbelowtheirpeaks,respectively.Similarly,totalpassengervolumeatMcCarranairportis14.20percentbelowitslate2007value.ClarkCountyvisitorvolumeistheclosest,down3.76percentfromitsprerecessionpeak.2
1ThelagbetweenLasVegasgamingrevenueandClarkCountytaxablesalesunderscorestheimportanceoftourismtothehealthoftheSouthernNevadaeconomy.2LasVegasvisitorvolumeexceededitsprerecessionpeakin2012.
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The Center for Business and Economic Research, UNLV – Box 456002 – 4505 S. Maryland Parkway – Las Vegas, Nevada 89154‐6002 Phone (702) 895‐3191 – Fax (702) 895‐3606 – cber@unlv.nevada.edu – http://cber.unlv.edu – http://twitter.com/cber_unlv
Chart1:McCarranTotalPassengersandClarkCountyVisitorVolume
Source:LasVegasConventionandVisitorsAuthority,McCarranInternationalAirport
Chart2:ClarkCountyTaxableSalesandLasVegasStripGamingRevenues
Source:NevadaGamingCommission,NevadaDepartmentofTaxation
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The Center for Business and Economic Research, UNLV – Box 456002 – 4505 S. Maryland Parkway – Las Vegas, Nevada 89154‐6002 Phone (702) 895‐3191 – Fax (702) 895‐3606 – cber@unlv.nevada.edu – http://cber.unlv.edu – http://twitter.com/cber_unlv
1.1LasVegasStripGrossGamingRevenueLasVegasStripgrossgamingrevenuetookabighitintheGreatRecession(Chart3).ItsawgreaterpercentagelossesthanU.S.realgrossdomesticproduct(GDP),U.S.personalincome,andU.S.gambling.Sinceitstrough,however,LasVegasStripgrossgamingrevenuehasincreasedby11.84percent.Incontrast,U.S.gamblinghasincreased8.76percentoverthesameperiod.U.S.GDPandpersonalincomehaveincreasedby12.23percentand11.28percent,respectively.Despiterecentgains,LasVegasgamingislaggingwellbehinditsnationalcounterpart.U.S.gamblingisaboveitsprerecessionpeak,butLasVegasStripgrossgamingrevenueisstilldown9.40percentfromitspeak.Chart3:U.S.GamblingandLasVegasStripGaming
Source:U.S.BureauofEconomicAnalysis,NevadaGamingCommission
1.2VisitorSpendingonNon‐GamingActivitiesVisitorspendingonnon‐gamingactivitiesinLasVegasismorethanthreetimesthatofgamingrevenue.DuringtheGreatRecession,visitorspendingonnon‐gamingactivitiesinLasVegasdroppedmuchmoresharplythanU.S.GDP,U.S.personalincome,orU.S.spendingonfoodandaccommodations(Chart4).Sincereachingbottomin2009,U.S.spendingonfoodandaccommodationhasrisenby17.5percentandisaboveitsprerecessionpeak.LasVegasvisitornon‐gamingspendingincreasedby28.18percentoverthesameperiod,butitremains2.28percentbelowitsprerecessionpeak.
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The Center for Business and Economic Research, UNLV – Box 456002 – 4505 S. Maryland Parkway – Las Vegas, Nevada 89154‐6002 Phone (702) 895‐3191 – Fax (702) 895‐3606 – cber@unlv.nevada.edu – http://cber.unlv.edu – http://twitter.com/cber_unlv
Chart4:U.S.SpendingonFoodandAccommodationandLasVegasVisitorNon‐GamingSpending
Sources:U.S.BureauofEconomicAnalysisandCenterforBusinessandEconomicResearch,UNLV
2.TheU.S.Economy
ThehealthoftheU.S.economyisalargedeterminateofSouthernNevadatourism.InitialdatashowU.S.realGDPgrewata2.5percentannualrateinfirstquarter2013(Chart5).Thatrateofgrowthmarksaconsiderableaccelerationfromthefourthquarter2012rateof0.4percent,anditallaysconcernsthattheeconomyisheadedtowardarecession.Nonetheless,theU.S.economyremainswellbelowitspotential,andamuchstrongeraccelerationineconomicgrowthisneededifwearetoquicklyclosethegapbetweenU.S.realGDPanditspotential.2.1ArizonaandCalifornia
ArizonaandCaliforniahaveamuchgreaterimpactonLasVegastourismthanotherregionsoftheUnitedStates.In2012,westernstatesprovided54percentofthedomesticvisitorstoLasVegas.3ThegreatestnumberofvisitorsfromtheWestcamefromCalifornia(accountingfor33percentallvisitorstoLasVegas)andArizona(accountingfor6percentofallvisitorstoLasVegas).ThestrongeraretheeconomiesofNevada’stwoneighboringstates,thegreaterisLasVegas’tourism.HigheremploymentandincomeinthesetwostatestranslatesintogreatervisitorvolumeandmorevisitorspendinginSouthernNevada.
Inthepastcoupleofdecades,Arizona’seconomyhastrackedcloselywithNevada’s.Duringtheearlyandmid‐2000s,Arizona’spopulationandeconomicgrowthwasoneofthehighestinthe
3GLSResearch,LasVegasVisitorProfile2012,LasVegasConventionandVisitorsAuthority,<http://www.lvcva.com/stats‐and‐facts/>.
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The Center for Business and Economic Research, UNLV – Box 456002 – 4505 S. Maryland Parkway – Las Vegas, Nevada 89154‐6002 Phone (702) 895‐3191 – Fax (702) 895‐3606 – cber@unlv.nevada.edu – http://cber.unlv.edu – http://twitter.com/cber_unlv
nation,withitsannualemploymentincreasingbyover5percentformanyyears(Chart5).AlsolikeNevada,theGreatRecessionaffectedArizonamoreseverelythantherestofthecountry.Sincethetrough,Arizona’srecoveryhasslightlyoutpacedNevada’s,whichleadstosomeoptimismforcontinuedgainsinLasVegastourismfromArizona.Chart5:AnnualChangeinEmploymentforWesternStates
Source:U.S.BureauofLaborStatistics
California’seconomyisquitedifferentfromArizona’sandNevada’s,particularlyconsideringthesheersizeanddiversityoftheGoldenState’seconomy.Californiahadslowereconomicgrowththanmostwesternstatesduringthe1990sand2000s,butitalsoexperiencedmuchsmallerlossesfromthefinancialcrisis.Withemploymentgrowthjustabove2percentfor2012,Californiaisalreadyclosetothetrendrateofgrowthitsawinitspreviouseconomicexpansions.Asaresult,California’sshareofthetotalvisitorstoLasVegashasrisenduringthepastfiveyears,from28percentin2008to33percentin2012.SustainedgrowthintheGoldenStatewillcontinuetofosterarecoveryinSouthernNevadatourism.
3.InternationalEconomy
Inadditiontodomesticvisitors,foreignvisitorsarevitaltoLasVegastourism.Foreignersrepresented17percentofthevisitorstoLasVegasin2012.4Oftheforeigners,67percentwerefromCanadaorEurope,and22percenttraveledfromAsia.Astrongglobaleconomy,especiallyinEuropeandAsia,isimportanttoLasVegastourism.
4GLSResearch,LasVegasVisitorProfile2012,LasVegasConventionandVisitorsAuthority,<http://www.lvcva.com/stats‐and‐facts/>.
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The Center for Business and Economic Research, UNLV – Box 456002 – 4505 S. Maryland Parkway – Las Vegas, Nevada 89154‐6002 Phone (702) 895‐3191 – Fax (702) 895‐3606 – cber@unlv.nevada.edu – http://cber.unlv.edu – http://twitter.com/cber_unlv
In2012,worldeconomicgrowthwashinderedbyanumberofcrisesintheEurozone,aslowdownintheAsianeconomiesbroughtaboutbyweakerexportmarkets,anduncertaintyinU.S.fiscalpolicy.Thingslookbrighterfor2013,asJapanhasenactedstimulusplanstoboostshort‐termgrowth,Chinaisgrowingfaster,theUnitedStatesaverteditsfiscalcliff,andpolicyactionsinEuropelooktolessentheeconomicriskintheeuroarea.ThelatestInternationalMonetaryFund(IMF)projectionsshowglobaleconomicgrowthacceleratingto3.5percentin2013.
4.NevadaTourismandGamingOutlook
In2012,LasVegastourismandgamingencounteredanumberofheadwindsandshowedonlymoderategains.Thoseheadwindsincludedaweaknationaleconomy,theEurozonecrisis,andaslowdownofeconomicgrowthinAsiancountries.Lookingforward,manysignalspointtoacontinuingrecoveryinLasVegastourismspending,butamoderateaccelerationisthemostlikelyscenario.TheU.S.economyappearsprimedforstrongereconomicgrowthbarringanypolicysetbacksorshocks,butitislikelytoaccelerateonlygradually.ForU.S.economicactivitytoacceleratetoitspotential,spendingmustincreaseconsiderably.Thosegainsinspendingwillonlycomewhenconsumer,businessandfinancialsectorconfidenceintheeconomyincreasesenoughtosupportgreaterspending.Whenthatoccurs,asuddenaccelerationislikely.Inthemeantime,anyexcessiveshort‐termfiscaltighteningcouldslowtherecovery.TheArizonaandCaliforniaeconomiesareimproving,andmoderategainsinemploymentareexpectedinbothstatesoverthenextfewyears.Nonetheless,manyproblemsremaininbothstates’economies,andarobustU.S.economyislikelytoprovecrucialtomuchstrongergrowthinbothstates.Thesluggishinternationaleconomylookslikelytoimprovemoderatelyin2013.Nonetheless,anumberofoverhangingconcernsremainabouttheEurozoneandaweakChineseeconomy,particularlyasIMFforecastsalwaysseemtosuggestanaccelerationininternationaleconomicactivitywhenitisbelowhistoricallyaverageratesofgrowth.
RyanT.KennellyEconomicAnalystCenterforBusinessandEconomicResearchUniversityofNevada,LasVegas