Question of the Day - 30 March 2022

[Editor's Note: The epic two-part answer to this question is written by our Stiffs & Georges business blogger, David McKee.]

It’s a moving target and, although we interviewed several experts, no one had a definitive opinion.

There are many variables to consider. For instance, could the inflated price of gas (and airfares and rental cars) crimp drive-in business from Utah, Arizona, and California? Already, Wall Street analysts are seeing indications that players are preferring to play close to home.

We asked economist Brian Gordon of Applied Analysis and he had this to say. “There are a couple of key elements to the recovery curve, if you want to think about it that way. Clearly, the leisure segment of the market has been coming back relatively strong, despite what’s been happening in the world, so we’ve strong demand on the weekends. Special events are really helping drive a lot of the demand that we’ve seen in this past 12-month cycle.

“I think two key components will help ensure that visitor volumes get back to pre-pandemic levels,” Gordon elaborated. “One is convention-related travel. That typically accounts for about 16% of all the visitors in Las Vegas throughout the course of a year. We’ve started to see some recovery in the convention segment of the tourism industry, but clearly employers are hesitant to bring back some meetings and travel for their employees. So that segment has been slower on the recovery curve. But the outlook is pretty positive that bookings are happening and the industry will ultimately recover.”

However …

“The second element that is important is the international traveler. Pre-pandemic, international travelers accounted for about 14% of all visitation to Las Vegas. So you’ve got a big component between those two that really hasn’t recovered yet and when they do that will help fill some of those midweek timeframes that have been somewhat sluggish of late. Those two will be critical in the market’s ability to return to pre-pandemic levels, if we're inching closer to that. But some of that midweek demand will be needed to fill the gaps. It could be somewhere on the order of within the next 12 months or beyond when we can hit back to those pre-pandemic levels.”

So far, so good.

But despite the heated gambling revenue seen in Las Vegas in the past year, some markets, like North Las Vegas and Laughlin, have rebounded weakly and four major casinos remain closed: Texas Station, Fiesta Rancho, Eastside Cannery, and Fiesta Henderson. Casino employment also continues to be anemic, hovering between 70% and 85%.

“The hotel-casino operators are still navigating this new dynamic that’s unfolded over the last two years. Clearly, gaming spend has been extremely high relative to where we were,” says Gordon.

“Like I said, special events are contributing to what’s happening in terms of the tourism industry. There are a lot of positives that are contributing to the financial performance of a lot of these properties, but it’s also provided operators an opportunity to evaluate their businesses from top to bottom and assess profitability, and where they’re seeing demand, and assess different segments of the market. All of that’s being done on a case-by-case basis and that will continue to evolve over the next 12 to 24 months. So the timing of all that will ultimately dictate how the market responds.”

That’s little comfort to the displaced worker, particularly the thousands of Culinary Union members that the local says are still out of jobs.

“Like all companies, [casinos] took an approach of trying to focus on opportunities to maximize revenue and overall profitability as they were seeking to recoup some of the losses they incurred at the height of the pandemic,” recalls Gordon. “Some of that includes making investments in technology and some of that includes focusing on the more profitable segments of the business. Sometimes that can translate into fewer employers. But at the end of the day, the industry is focused on ensuring that they service the guests that they have and providing a safe operating environment for their guests and employees.”

Tomorrow: What's happening with restaurants and entertainment?