The last Las Vegas Great Recession saw the economy nosediving with tourism, which is the city’s lifeblood, recording huge dips. Data from the Las Vegas Convention and Visitors Authority shows that between 2007 and 2009, there was a drop of more than 2.8 million visitors.
2010 Rankings from the Brookings Institution showed a Las Vegas drop in position to fifth in 150 metropolitan areas. According to the Bureau of Labor Statistics, the year also saw Nevada’s unemployment rate rising to 13.7%.
There was a yield curve inversion in August where the 10-year Treasury note went slightly below the 2-year Treasury yields. The event represents one of the economic pessimism signs and has preceded five or more US recessions experienced in the past.
With the past recession greatly impacting the city’s casinos, experts expect that there are more equipped to deal with the next economic downtown.
Lack of discretionary income
Michael Green, a UNLV associate professor, notes that casinos were among the hard-hit facilities citing the problem to ‘lack of discretionary income.’ He notes that the few people who gambled spent less.
There were halts to some of the progressing investments such as Fontainebleau, the now Steve Witkoff’s Drew Las Vegas and Genting Group’s Resorts World Las Vegas according to The Las Vegas Review-Journal. The $3.9 billion valued Cosmopolitan hotel was sold for $1.7 billion to The Blackstone Group after four years of its opening.
Roll on the years, the economy has slowly recovered and Green hopes that the casinos took lessons from the last recession.
On the principal analyst at Applied Analysis, Jeremy Aguero’s part, he believes that the post-recession phase saw casinos become more efficient and risk-averse by diversifying in the audience and widening other sources of revenue.
Derek Stevens, co-owner of the D Las Vegas, also shared the same sentiments and said that most casinos had better balance sheets currently as opposed to the year 2007. There have been several streamlining activities such as MGM Resort International who cut 1,070 jobs as part of their 2020 initiative.
Todd Simons, a Hidden Fruit managing partner, notes that increased lowering of costs in the current economy would hurt employees later on. He agrees that every operator wants to provide great guest experience, lower costs and eventually improve the revenue. He, however, notes that most companies have ‘no more fat to cut’ when the next downtown hits and they should explore other ways to cut costs such as automation.
Economist John Restrepo has questioned the casino preparations and said it is a matter of the ‘depth’ of the recession rather than if there will be one. With many economists anticipating another recession in the next few years, Restrepo, however, does not expect a severe one as the Great Recession.
He expects the operators to handle the recession well with minimal layoffs and urged casinos to reduce prices to keep the visitors interested.
Simons suggests incentives such as lowered hotel rates would attract more and more visitors. ‘It gets people interested and says, ‘Look, we know we’re in a recession, but you still have money to spend.’ Simons said.