With the Economy Taking, Why Is Las Vegas Soaring?

Back in 2008 when the stock market was way down from the housing bubble, I remember casinos trying to entice people to come to play. In fact, with a little modest play from my wife and me, we received five comped nights at Palazzo. The stock market now seems every bit as bad as then, but now hordes of people are throwing down fists full of cash at even worse games (triple-zero roulette, 6-5 blackjack, etc.) and bigger buy-ins everywhere you look. What gives?

There’s a gaping disconnect between what’s going on in gaming and in the stock market. Several factors are in play and we’ll try to sort them out.

First, the crash of 2008 took Big Gaming somewhat, or even mostly, unawares and several companies (notably Caesars Entertainment and Station Casinos) were badly exposed in terms of debt. Were the scenario to repeat itself, God forbid, Caesars might be caught out again from all the debt it took on for its merger with Eldorado, but everyone else in the industry is paying down debt and keeping leverage to a manageable degree.

Second, consumers have more disposable income right now, in spite of gas prices and other manifestations of inflation and global turmoil. They’re playing (and losing) more than they did last year — and more than in 2019 by double-digit margins. The casinos are seeing unprecedented demand. That, along with the return of international travelers, have them sitting in the catbird seat. Thus, a Las Vegas trip to Global Gaming Expo that would have cost around $800 last year was quadruple the price this year.

In such a market, the casino industry has no incentive, none whatsoever, to offer bargains or better odds. Quite the opposite. Buffets? Gone. Sports books? Better plan to pay for that chair, in the triple digits to boot.

Third, the consumer is better positioned to ride out the current bear market, particularly in Las Vegas. Remember the adjustable-rate mortgages that left so many people underwater on their houses in 2008 and beyond? People have gotten wise to those and, in Vegas anyway, they represent a tiny fraction of the housing inventory. The average gambler is savvier with regards to mortgages and credit card balances. Such fiscal discipline doesn’t carry over to the casino floor, in general, but the players seem determined to make hay (for the casinos) while the sun shines.

Should discretionary income dry up — as it shows signs of doing in some regions — or a recession break out in earnest, casinos might ease up on the money grubbing, but it won’t happen overnight or without a great deal of reluctance and resistance in the C-suite.

Take it from your QoD correspondents, who read about many a quarterly corporate-earnings call. The guys at the top think their customers are chumps (though they're a bit more polite with their slang for suckers while talking to analysts) and don’t hesitate to treat you that way.

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Kevin Lewis Oct-29-2022

False premise

"With the economy tanking..."  of the health of is akin to a a question beginning "With the planet being overrun by purple radioactive giraffes..." The stock market isn't the economy, and the fortunes of the fo of the health of the latter.

The casinos are gouging because they can. The lemmings are pouring into Vegas, frantically waving pawfuls of money. Disposing of their disposable income at the world's largest money disposal facility.

Reno Faoro Oct-29-2022

poe peeps

coming soon , bankruptcys--  individuals -  gouging is EVERYWHERE -- VALET AT CAESARS -- $50. ?? RESORT WORLD -$25 ?   ALL PARKING WAS FREE -  YES -- WAS . ANY $5 CRAPS TABLES ???? --- ONLY AT THE GRAND - however tables  only  open at 11 am ? no help ?

Srgntpep Oct-29-2022

Rich people are still rich

The world has changed since 2008, and rich people have rigged the system even more than before to ensure that they stay rich.  Poor people are no longer Vegas' target demographic.

Bob Nelson Oct-29-2022

Poor memory

The stock market today is no where near as bad as during the 2008-2009 recession.  From the market peak in Oct 2007 to the bottom the Dow Jones and the S&P 500 indexes were down around 54% and 57% respectively.  In 2022 since the market peak at the very end of 2021 to the bottoms for the year those indexes were down in the 24-27% range and have since recovered some of those losses, currently around 18% for the S&P and 11% for the DJ. In the case of the S&P 500 it has never dipped below its pre-pandemic peak since the end of 2020.  The DJI did drop slightly below that pre-pandemic peak but is currently well over that peak.  Perhaps the question was asked at the lowest point of this year but even that would be clearly far better than the losses suffered during the 2007-2009 recession.

As noted the stock market isn't the economy, however it does tend to be a leading indicator for the economy.  It often reflects what the economy will be doing 6 months in the future.

Doc H Oct-29-2022

market

Beyond the village idiot lewis comment of "The stock market isn't the economy," who appears clueless that stock=ownership in a company and companies are indeed the barometer and essence of our economy. Not surprising given he's for his clueless clown buddies and masters and believes the arrogance of just shut up and buy an electric car with soaring gas prices and buy a new brand of raisin brand with soaring food prices, the QOD of the day is valid in its reference. So why are so many average people with soaring inflation, gas prices, food, beyond seemingly rich elite people like lewis who isn't impacted by soaring prices, still throwing money away in las vegas? What the QOD didn't bring up that I think is the #1 matter: people were locked down to an insane degree for years and finally have had enough, aren't buying the nonsense anymore Lewis type buddies want to push on the population, and time to live and behold, what better way to cut loose than las vegas?

gaattc2001 Oct-29-2022

You can't blame the casinos...

for maximizing current income at the expense of long-term customer good will, especially after the pandemic shutdown. It's a business decision, and their decision to make; and they were doing it for years even before. But I continue to believe that some day it will all come back to bite them.

In the meantime, I'm concentrating on other gaming venues--and lining up other recreational options for when it all implodes. 

I haven't been back to Las Vegas since July 2020, possibly the longest hiatus since my first visit in 1969. My comp points at a well-known "off-strip" resort chain expired in the pandemic, and they didn't offer any extensions. To rebuild it all from scratch would take several trips, paying full room rates and resort fees, and so far I've decided against that. Besides, the place seems to be doing pretty well without my help.

And as usual, Kevin has his finger on the pulse of the situation.

Cheers.

Roy Furukawa Oct-29-2022

Haves and Have Nots

This is what has happened when there is no real middle class anymore. The Haves can go spend because they have discretionary income, but the Have Nots are barely scraping by right now and there's not much in between the two. If we go a little longer with this economy, all that spending by the Haves will also stop.

Lotel Oct-30-2022

LVA= fake news now?

"With the economy tanking. WTF?   Wages up , lowest unemployment in history. interest  rates still at historic lows, Prices are going down,  federal budget deficit going down. etc. etc. We tried to go out an eat yesterday. all restaurants  full and hour wait. in our small mid west city. end up up at Texas road house only 45 min wait and the place was full. If people are struggling they sure do have a lot of money to spend.  football games, concerts, movies etc.  have no problem  selling tickets. all are full

Question of the Day - 29 October 2022

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