Facebook
Fark
Digg
Reddit
StumbleOUR ECONOMY:
Local downturn a hiccup or augur of a bleak future?
THE ISSUES: Forecasts for air travel, school enrollment growth and gaming companies might mark the end of Clark County’s boom time.
Sunday, July 20, 2008 | 2 a.m.
Steve Marcus / FILE PHOTOS
High fuel costs and the national economic slowdown have affected tourism, and growth in school enrollment has slowed, a sign of the imploding local real estate market. Gaming, which has seen Las Vegas and Clark County through hard times in the past, is experiencing its own slump, partly because of new competition.
Reader poll
In Today's Sun: Brookings Report
For more than a decade, Las Vegas has been the envy of the nation in at least one regard: its explosive growth.
Year after year, the region’s economy marched in step with fast-rising gaming revenue. And the population advanced at the same pace. As last year drew to a close, officials announced that Clark County had topped the 2 million mark — 620,000 people had arrived since 2000.
It’s a story Nevadans have grown accustomed to hearing. And its repeated tellings have fed the belief that such growth would never end, that Las Vegas was immune from the economic pressures that affect the rest of the country.
We may need to think again.
In the past week, several signs, read together, show that long-held assumptions about growth in Southern Nevada could be fundamentally changing.
On Wednesday, the region was hit with two negative forecasts.
The airlines serving McCarran International Airport urged the county to hold off on construction of a third terminal because of concerns there would not be enough flights to fill it. County officials rejected the request.
And Clark County School Board officials announced that during the 2007-08 academic year, the district finished with 4,281 fewer students than were enrolled in September. The district is now predicting abnormally low enrollment growth of about 1.5 percent for the 2008-09 academic year.
Also last week, Moody’s Investors Service downgraded its outlook for Nevada’s economy and two of the state’s top gaming companies, Harrah’s Entertainment and Station Casinos. In revising its bond rating for the state, from “stable” to “negative,” Moody’s cited “uncertainty” regarding gaming industry revenue, the national economic downturn, record-high fuel costs and weakness in the housing sector.
The firm also notified MGM Mirage and Las Vegas Sands Corp. that their ratings might be lowered.
According to the Nevada state demographer, this decline might be different from downturns of the past.
In his previous job, when he compiled Clark County’s population estimates during the 1990s, Jeff Hardcastle said people often approached him with the same question regarding the region’s growth: “How long can this go on?”
As long as four factors remained in place, Hardcastle would reply: the relative monopoly held by Nevada’s gaming industry; the lower cost of housing, especially compared with neighboring California; the stable local and national economies; and the availability of natural resources such as water and land on which to build houses.
“Since 2001, pretty much all that’s been changing,” Hardcastle said. “And now we’re seeing the culmination of some of these changes.”
Las Vegas is being challenged by a variety of competitors, from Indian casinos across the California border to Macau, the new king of world gaming revenue, Hardcastle noted.
The economy and housing markets are in terrible slumps. And natural resources in the area are almost exhausted. Water is running out, as is developable land.
Keith Schwer, director of the Center for Business and Economic Research at UNLV, concurred, raising the specter of the “R” word.
Rising oil and gas prices have made air travel more expensive and limited the number of tourists who drive here from California, Schwer noted. As a result, visitor volume and gaming revenue dropped during the first four months of the year — marking the first recession to hit all sectors of the economy since the early 1980s, Schwer said.
“When it costs more money to fill up your tank and a lot more to fly to Vegas, your billfold is not going to be as full as it previously was and you are going to spend less,” Schwer said.
As a result, commercial development here — which is driven by travel and tourism — has slowed dramatically. Associated General Contractors reported the value of commercial projects permitted during the second quarter of 2008 dropped 66 percent, to $131 million, from the second quarter of 2007.
At the end of the second quarter of 2008, the office market had a vacancy rate of 16.1 percent, up from 11 percent at the end of June 2007, according to Colliers International and Restrepo Consulting. That’s nearly double the vacancy rate of two years ago.
William H. Frey, a Brookings Institution senior fellow and a demographer, cautioned not to read too much into the depressing numbers. Once the economy and housing market improve — and if the price of gasoline and other fuels can stabilize — growth might pick up close to where it left off in Las Vegas.
“It’s too soon to put out the ‘Last person, turn out the lights‚’ sign,” Frey said.
Some help may be around the corner. Boosters point to the opening of new resorts on the Strip, which will create more than 50,000 jobs through 2010. About 27,000 rooms will be added to an existing inventory of 136,000.
By the end of 2008 Steve Wynn is scheduled to open Encore, his companion project to Wynn Las Vegas. MGM Mirage is on track to open its CityCenter, a more than $9.2 billion development, by the end of 2009.
Both MGM Mirage and Harrah’s Entertainment executives say they’re confident the economy will eventually rebound and the airline industry will find a way to ferry visitors to the attractions opening in the next few years.
“It’s pretty clear that Las Vegas is going to grow steadily over the next decade,” said MGM Mirage President and Chief Operating Officer Jim Murren. “There’s no doubt we’ve been affected by the economy. (But) 2009 will be a better year than 2008, and 2010 will be better than 2009.”
Las Vegas has historically defied the economic rules of supply and demand. As the home of some of the world’s largest and most elaborate resorts, the Strip has created its own demand, building upon previous successes and defying skeptics.
But with fuel prices sky high, the airlines appear to have grown skeptical of Las Vegas’ build-it-and-they-will-come business model.
“Those decisions to build 30,000 hotel rooms were made several years back,” when times were good, said Linda Macey, properties manager for Southwest Airlines. “We’re not sure if anyone knows whether all those rooms will be filled.”
Few are certain regional population trends will resume their steep trajectory.
Declining population growth has extended to Las Vegas as well as Clark County. For the city, 2006 and 2007 brought the slowest rates of growth in some time — 2.7 percent and 2 percent respectively.
Clark County’s population growth has exceeded the city’s. From July 1, 2007, to June 30 of this year, the county grew by 4.4 percent. But that growth rate, as well as those of the two previous years, was less than the county’s average annual growth rate over the past decade, 5.5 percent.
Indeed, from 2004 to 2008 enrollment growth in the Clark County School District has dropped year by year. The projected 2008-09 growth of 1.5 percent would be the smallest increase in 25 years.
Dusty Dickens retired in 2005 after 10 years as director of zoning, demographics and real estate for the School District. Even before her retirement, Dickens said, there were indications growth was slowing. During the peak of the housing boom, teachers and families were selling their homes and relocating to cash in on the bonanza.
“Now you flip it the other way, and families are leaving because they’ve lost their homes,” Dickens said. “Did we see this coming two or five or seven years ago? I don’t think anyone would have seen this sharp a downturn was coming.”
Sun reporters Liz Benston, Emily Richmond and Phoebe Sweet and In Business Las Vegas reporter Brian Wargo contributed to this story.
Discussion: comments so far…
Comments are moderated by Las Vegas Sun editors. Our goal is not to limit the discussion, but rather to elevate it. Comments should be relevant and contain no abusive language. Comments that are off-topic, vulgar, profane or include personal attacks will be removed. Full comments policy. Additionally, we now display comments from trusted commenters by default. Those wishing to become a trusted commenter need to verify their identity or sign in with Facebook Connect to tie their Facebook account to their Las Vegas Sun account. For more on this change, read our story about how it works and why we did it.
Only trusted comments are displayed on this page. Untrusted comments have expired from this story.
No trusted comments have been posted.
Post a comment
Most Popular
- Viewed
- Discussed
- E-mailed
- Motorcycle accident claims life of man in northeast valley
- Jerry Tarkanian: Mike Moser impresses yet again on a day to remember former Rebel greats
- Investigators seek answers to Houston’s death
- Photos: The late, great Whitney Houston is the soundtrack of my life
- Pre-Grammy gala celebrates Whitney Houston’s life
- Grammy Awards struggle with honoring Whitney Houston
- Photos: Lauren Conrad celebrates her 26th birthday at Hyde Bellagio
- Israel’s president sends message of peace to Iran
- Man charged in plot to kill Utah governor
- List of Grammy winners in select major categories
Blogs
The Kats Report
Color from scene at Thomas & Mack: We have a wire job! Rebels win, and Louie Armstrong sings!
South Point owner Michael Gaughan's take on 'Vegas Stripped': 'I'll give it an 8' (4 Comments)
Author relishes writing the life story of ‘larger-than-life’ Oscar Goodman (3 Comments)
Elsewhere
Landowner: All roads could lead to Uxbridge casino
Revel reveals smoke-free casino opening
Cirque du Soleil show in Sands China casino to close this month
Meet the woman behind Sheldon Adelson
The Sun
Locally owned and independent for more than 50 years.
Recession is a horrible way to rein in out-of-control growth. We could have done it - we could still do it - in a way that blunts the impact on working men and women and families of the region. But what we can't do is allow shortsighted developers and their municipal enablers to control government policies.
Today, we have the worst of all possible worlds - a brutal end to the "endless" growth promised by the SNWA and the developers, and we still have to deal with the negative consequences created by years of irresponsible public policy that put profit over people.
Love letter to Las Vegas
Friends:
Las Vegas is one of the greatest destinations on earth. I visit monthly and stay both downtown and on the strip. Here are some observations from a fan:
1. Las Vegas is too dependent on McCarran Airport and the bankrupt Airline industry. Airlines have no future, start rebuilding and improving railroads now.
2. Fix up downtown. Clean it up, but keep it cheap.
3. Get rid of all auto traffic between Tropicana and Flamingo on the Strip. This is an adult playground, not a parking lot. Keep the busses moving though and add hundreds of them.
I just returned from Las Vegas, and I am still amazed at the crowds last week in the 100 degree plus weather. People love to come to Las Vegas and kind of let it all go, that will never change, I hope. Thank you Las Vegas, for being what you are, America's adult playground.
"For more than a decade, Las Vegas has been the envy of the nation in at least one regard: its explosive growth".
Who could possibly envy a city with this explosive growth: more crime, more traffic, unaffordable housing, inadequate infrastructure, lack of sufficient precious water, and masses of cookie-cutter houses.
What goes up, must come down. Considering the stock market is readjusting after two explosive years, no wonder the economy especially here is going down. People don't have the money right now, and gambling is not on anyones minds in this economy. But the idiots running this county and city are too blindsided by greed to realize we don't need more casino/hotels and gaming stations.
But we continue to build more and then people like Lanni and Mayor McVodka cry when the rooms aren't full. Go after more and other industry so you have a larger tax and economic base, but the fools here won't. And with airlines cutting back by a total of 25% this fall do these idiots think that people will just drop out of the sky here ??? The growth in Clark County will be stagnant along with the local economy for the next 12-18 months. But since out here no one believes facts and prefers to look through rose colored glasses you figure it out on your own..........
Las Vegas will always be an affordable get-away place for people world-wide. Dubai hotel rates will always be well out of reach for 99% of the world. What Nevada needs to do is stop ignoring it's even bigger mountain of gold and start mining it. Geothermal energy. Nevada has geothermal energy like the Arabs have oil. Innovative technologies and "outside the box" approaches for mining Nevada's vast reservoirs of hot rock (which creates hot water, FOR FREE)is Nevada's ticket for weaning itself off of it's pathetic dependence on gaming as its primary support. Power generated in Nevada can have a franchise tax put on it, and VOILA, Nevada becomes Alaska south. But this crap with Gibbons and his coal buddies has got to come to a screeching halt. Stupid is as stupid does.
A couple of observations:
"Boosters point to the opening of new resorts on the Strip, which will create more than 50,000 jobs through 2010. About 27,000 rooms will be added to an existing inventory of 136,000."
First off, creation of rooms doesn't create jobs. People staying in rooms and spending money creates jobs. "Boosters" don't know wtf their talking about. Creation of rooms = creation of jobs if demand is slackening or non-existent.
Someone in the comments wrote:
"1. Las Vegas is too dependent on McCarran Airport and the bankrupt Airline industry. Airlines have no future, start rebuilding and improving railroads now."
Thats exactly right. Dependency on that airport is nothing but trouble for the city. They need to start planning and building railways(maglev, high speed train, w/e) stations, and everything that goes along with it to California. This will create jobs and good ones at that. Not the lousy strip jobs where those at the top make all the green.
What goes up does not have to come down. Pessimists have been saying Vegas is overbuilt since the 50's.
There are over 43,000 hotel rooms under construction. that will translate into about 500,000 more people living in Vegas. The growth has to rebound. For details, stats and the projected 5 year growth rates see link below:
http://vegasrepos.com/YesVegas.html
I generally agree with VegasRepos.
They only thing that will kill Vegas are gas prices or terrorists that will attack commerical airliners.
The gas prices will go back down by about 20% to 30% by Nov. That will help a lot. They will go back up next summer.
But we need to starting drilling now to protect against future price up swings. It will take at least 20 years to significantly move from oil based car transportion.
Reid, Obama and Democrats do not care about Las Vegas. There is even talk by the Democrats to rise the Federal gas tax by 10 cents a gallon.
Vegas has 2 big issues, water and energy. I actually believe energy is the more urgent concern. Oil prices will only go up. Yes, there will be periodic reductions, but the overall trend is up. Global demand is increasing rapidly, and even additional drilling is a short term response.
Vegas is so dependent on cheap energy for its economy in terms of both tourists and in terms of costs of transporting virtually everything to the city.
I really dont see how Vegas can even maintain its current economic situation, let alone have economic growth unless somehow the cost/availability of energy is addressed.
The slowdown in Las Vegas will continue as long as fuel is high. Contact Sen Reid and tell him to drill
neiman1 said: "The slowdown in Las Vegas will continue as long as fuel is high. Contact Sen Reid and tell him to drill"
Fuel prices and availability are only part of the concern that Las Vegas is overbuilt relative to houses, hotels, casinos, and restaurants. The American consumer is totally tapped out regarding discretionary money. Today most people are barely surviving because of loss of house equity, high credit card debt, inflation, stagnant wages, high health care costs, and a whole host of other factors.
The success of Las Vegas was due to offering the average American or person from some other country a "good deal" on room rates, food, gambling, and entertainment. Success has spoiled the casino owners - they have killed the golden goose because of greed (i.e. exorbitant prices). For example, I enjoy playing Three Card Poker. Look at the minimum bet in most casinos, especially on the weekends – outrageous. Do they think we are all rich?
While what goes up doesn’t necessarily have to go down, just because it’s gone up at a consistent rate in the recent past, doesn’t mean it will continue going up either.
Las Vegas has many challenges ahead of it. First and foremost, people need to recognize Vegas for exactly what it is; a tourist destination. Always has been, always will be. I seriously doubt a Fortune 500 company would ever move it’s headquarters here, so trying to make Vegas something it’s not is asking for trouble. It would take too much… much more than Vegas has, to change the economic makeup of the valley anytime soon. You don’t see Orlando trying to woo Microsoft do you? Las Vegas has become what it is today because in the past it gave the average vacationer one of the best values in the world. That’s no longer the case. The smart folks down on the strip are in the process of pricing themselves right out of most peoples consideration. Don’t forget that until the 70’s, Vegas was predominantly a regional destination. Given the state of most peoples budgets along with the aviation industry as it stands, don’t be surprised if it goes through a period of that again. I’m a big fan of rail travel. I wish it were still economical, but it’s not. And it’s asking a lot of someone to be on a train to Vegas for 20 hours when they fly here in 4 or 5.
You can blame Bush, Obama, Reid, Bin Laden, or whoever. The fact of the matter is this: it’s the desert. There’s not a lot of water here. There will be even less when they open those 50,000 additional hotel rooms. It’s 200 miles away from anything else of any consequence. The infrastructure doesn’t exist, nor is it budgeted, for the next 500,000 people to move here. It’s gotten significantly more expensive to come here, and the average consumer has less to spend. Remember, people don’t HAVE to come here.
Vegas is what it is. How can people be surprised by these issues? And who do you point the finger at when it's really no ones fault?
"I seriously doubt a Fortune 500 company would ever move it’s headquarters here, so trying to make Vegas something it’s not is asking for trouble."
Hmmm you mean like MGM MIRAGE a Fortune 400 company
MGM Mirage 323
http://money.cnn.com/magazines/fortune/f...
or Harrah's a Fortune 300 company
Harrah's Entertainment 244
http://money.cnn.com/magazines/fortune/f...
Yeah your right no Fortune 500 companies would ever set up shop here.
Oh heck let's just give props to all our companies.
Las Vegas Sands 681
Wynn Resorts 731
Boyd Gaming 898
All of those companies have revenue from outside Nevada. Let's see MGM, Sands, and Wynn are in Asia. Boyd is in NJ. MGM is in MI, MS, and NJ (with boyd). Harrah's is all over the country.(just off the top of my head.)
Uh, ok. I thought it went without stating, but I guess not. Let me clarify. A NON-GAMING corporation. Of course the gaming giants are located here. Only further proves my point. Name a non-gaming corporation from the list that has moved here and I'll be much more impressed with your research.
Harske...you do not understand.
Once we raise....I mean "restructure"... taxes on non-gaming corporations then they will be a flood of those coporations just waiting to move to Nevada.
Buckley has a list of 1,000 of them. They are justing waiting for her to past the new...I mean "restructured"...taxes and boom they are here in 2 seconds.
I guess you're right. I don't understand. I know who Barbara Buckley is, but I'm not sure of the power she holds over the restructuring of the corporate tax structure within Nevada. If you can point me to an article that will catch me up I would be most appreciative.
Don't misunderstand my post. I am one of the largest optimists I know. I have high hopes for Las Vegas, and Nevada as a whole. But in looking at all the facts and figures, I just think people need to be a bit more realistic in their expectations. Odds are Las Vegas will recover just fine. But to brush 2008 off as just an aberration is foolish.
I would love to be proven wrong. I'll be the first to stand up and say "I was mistaken" if a year from now things are significantly better than they are now. But in my opinion, be prepared for it to get alot worse before it gets better.
Great article and comments. I would like to agree with concern about Vegas overpricing itself. I've come to LV for the past many years with friends from all over the country. It used to be you could stay at what I call a very nice (not Bellagio nice) hotel for low 100s a night. In May, the cost of rooms was outrageous. My room at Flamingo (not exactly Bellagio) was well over 200 a night. I think on Friday and Saturday it had to be over 300. That's pretty tough to stomach when you remember 10 years ago staying at the same place for 80 bucks a night, even on weekends.
Also, table minimums like somebody said Thursday-Saturday are a joke at the relatively nice Strip hotels. We were shocked Monte Carlo still offered nice n cheap 5 dollar minimum craps on a Saturday night; most every place on the Strip you were lucky to see a 10 dollar craps table. 25 was more the norm.
I mean give the gambler a chance to lower his/her bet when the luck is low. 25 buck craps; forget it.
I remarked to a friend: "I don't know how recent college grads can afford to come here for 3 nights as we did as when we were recent college grads — the time of our lives when we fell in love with this town and decided to return every summer."
My friend said, "They can't afford to come out here and gamble, and nobody in the casino business cares. They can fill the rooms with people who will pay 25 buck craps." If that's the case, fine. If you guys in Vegas only want high rollers, good for you. There was a time you wanted the average Joes whose relatively miniscule losses (compared to high rollers) supposedly added up. You hooked a lot of young adults into loving your town and coming year after year and losing a good sum every year while having a great time.
My question is: Does Vegas only want the high rollers? If so, good luck to ya. I know you have discouraged the little guy from coming with those high hotel costs and table minimums.
I know, I know; you can stay at Imperial Palace for 50 bucks a night, you can stay downtown and you can eat 1.50 hot dogs at Slots a Fun. I'm just saying it used to be a very cheap place to visit compared to other cities; now it is not necessarily so.
Las Vegas is reaping the reward of converting the city to cater to the Brittany Spears crowd. All the people who made Vegas what it is are now priced out with the casino's 5 star restaurants, tight machines, repulsive entertainment, and room rates that are beyond what working Americans can afford. I used to go to Vegas at least 5 times per year and now I don't go at all. All the casinos that I liked are now gone! The ones that remain have been remodeled into disasters. Most of the reel type slots are being replaced with some video arcade looking monstocities that appeal to young wannabees who don't have any money to gamble anyway.
Maybe if this place hadn't gone corporate in every regard we wouldn't be so worried about having no soul.
Las Vegas is reaping the reward of converting the city to cater to the Brittany Spears crowd. All the people who made Vegas what it is are now priced out with the casino's 5 star restaurants, tight machines, repulsive entertainment, and room rates that are beyond what working Americans can afford. I used to go to Vegas at least 5 times per year and now I don't go at all. All the casinos that I liked are now gone! The ones that remain have been remodeled into disasters. Most of the reel type slots are being replaced with some video arcade looking monstocities that appeal to young wannabees who don't have any money to gamble anyway.
Great post. Can't argue with a word of it.