UNLV outlook: More growth

Alison Calkins

Tuesday, Dec. 17, 1996 | 11:59 a.m.

Instead of "Entertainment Capital of the World," a more appropriate title for Las Vegas might be the "Construction Center of the United States," experts at UNLV's Economic Outlook 1997 said today.

"With high construction cranes across the landscape and construction employment now comprising more than 10 percent of the workforce, the tourism sector no longer matches the economic buoyancy of construction activity," wrote outlook authors Ricardo Gazel, Robert Potts, and R. Keith Schwer of UNLV's Center for Business and Economic Research.

They believe that 1997 will generally be a repetition of 1996, with strong growth in construction but a more rapid expansion in gaming and tourism. With the completion of new hotels in 1998, a return to expanded levels of tourism growth is expected as the pace of construction slows.

The U.S. economy in 1998 will be important to tourism, although nongaming business construction will continue and "public sector construction keeps going in an effort to catch up with past growth."

In light of the amount of past and planned hotel-casino construction and plans for new and refurbished properties, the big concern is if Las Vegas will overbuild itself into a inevitably bursting bubble.

"If a bubble were to occur in Las Vegas, it would require rapid acceleration in profitablility among major businesses and sweeping participation in the market," the professors wrote, adding that so far Las Vegas and gaming has gotten enough negative press to "snuff a speculative run," -- including nationwide ballot defeats on legalized gaming, casino bankruptcies, reorganizations and closings.

They also said that "an absolutely necessary precondition for a bubble is large amounts of available funding ... (and) people with large amounts of money must act foolishly."

But the good news is that "... Las Vegans pursue opportunities in a competitive environment understanding full well the risk of overbuilding."

With the addition of 4,000 rooms in 1997, the number of visitors should continue to grow in 1997, they said. The experts predict 17,000 more rooms in 1998.

They also project that the historic growth of visitor volume and occupancy rates due to the opening of new megaresorts in 1993 and 1994 won't be repeated in 1997.

"We forecast visitor volume in 1997 will increase 7.3 percent above the 1996 level (31.9 million) and a 9.5 percent increase in 1998 (34.9 million) over 1996."

Gaming activity reached new highs in 1996, although it was only a slight increase over 1995, as visitors are spending less on gaming than in the past.

But "anticipation about future business leaves gamers flush with optimism."

Considering the estimated tourist volume and a 2 percent decline in revenue spent per visitor in 1997 from the 1996 level, "we estimate a growth in Southern Nevada's gaming revenue of 5.2 percent in nominal terms ... and a growth of 7.3 percent for 1998. Thus, gaming revenue in 1997 and 1998 will rebound from the slow growth of 1996."

Employment growth in 1997 is expected to fall below the 6.5 percent rate of 1996, increasing at a 5.5 percent rate in 1997 and by 5.2 percent in 1998.

When major construction projects are finished and new businesses open, the mix of employment will change. "Furthermore, the bouyance of construction will be lost as this current round of major hotels comes to completion."

Likewise, a reduction in housing permits is expected -- 28,500 units, down 4.6 percent from 1996, although a 5.6 percent increase is forecast for 1998.

And population? It's estimated that Clark County will reach 1,192,486 -- a 6.5 percent increase -- in 1997, and 1,267,612 -- a 6.3 percent increase -- in 1998.

Southern Nevada's outlook remains bright, according to the experts.

"To be sure, construction activity is transient, but the diversification of Southern Nevada continues, thereby ensuring the region's future."