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The question asked by Deirdre Van Dyk of Time Magazine: What happened to recession-proof Vegas? And the short answer: The city put most of its bets on the tourism industry. And what a gamble that turned out to be.
For a long time it paid off, but, says Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada at Las Vegas, "if you ride a fast horse, you have the likelihood of greater volatility."
Van Dyk points out that Vegas became so mainstream that even the Southern Baptists had a convention in the city. "Visitors were coming to hotels at rates of 90 percent - a signal to expand," Schwer explains. "And interest rates dropped, so there was readily available cash to do just that." Jan Freitag, a hotel analyst at Smith Travel Research, agrees: "There was the sense that if you build it, they will come - that there was this pent-up demand."
Likewise, the city attracted loads of convention business: 6 million attendees brought in $8 billion of business last year. No other city could compete with the entertainment, parties and number of hotel rooms. "If you put three to a room," says Schwer to illustrate the capacity Vegas has, "you could put the whole population of Wyoming in Vegas and still be able to feed, clothe and give them extra towels."
The state's population grew 50 percent and jobs increased to six times the national rate. Home prices increased to 135 percent.
"We thought we had decoupled from the national economy," says Schwer. Unlike the rest of country, Nevada hadn't had a downturn since the 1980s.
But Las Vegas, in doubling down on the travel sector, had not diversified its economy, according to the Time article. As the visitor rate dropped 10% in October, average daily room rates fell 14% and gaming revenue dove 26%.
"In our union halls, 30% of members were what we call travelers," says Steve Holloway of the Las Vegas chapter of the Associated General Contractors of America. "They came here for the work, and now they're going home." The construction industry alone employs 10% of Las Vegas's population.
T.R. Witcher of Time.com adds that the recession is hitting Las Vegas on all fronts. Nevada legislators have struggled to close a deficit of more than $1 billion in the 2009 budget. Budget projections for 2010 and 2011 also look grim. Construction on Boyd Gaming's $4.8 billion Echelon resort was stopped last August just as three of its towers reached the 12th floor (the tallest would have risen to 55 stories). Construction won't resume until 2010, though the cranes will remain towering above the site (it's cheaper to leave them in place - and these days no one else in town needs them).
But the customer who once spent $10,000 to $15,000 on the tables is now spending maybe $5,000, Time reports. And other customers are shopping around. "They know they can get a deal," Shalala says. "They used to call up, asking for a table at a club, not caring what it cost. These days they're saying, 'Well, I can get a table at another hotel for $1,000.'"
Jagajeet Chiba, Gambling911.com
