Las Vegas poised for big economic rebound


Perhaps no city assesses its economy more closely than Las Vegas. Because we have one dominant industry, it isn't hard to measure how things are going. We get monthly tallies of visitor volume, hotel occupancy, airport traffic, retail sales and gaming revenue.

We also keep tabs on our second-largest industry by tracking housing starts, home sales and commercial construction.

By the looks of these numbers lately, the speeding Las Vegas economy is pumping the brakes. Las Vegas is feeling the effects of the real estate bust, the rising price of gasoline and food, and the resulting belt-tightening of would-be tourists across the country.

But it's important to put these trends in perspective. The monthly declines in gaming revenue are newsworthy, sure, but modest by any measure outside the record growth of Las Vegas over the past 20 years. Statewide gaming revenue in March was just 1.52 percent lower than March 2007. Las Vegas visitor volume for March was down 1 percent from the same month a year earlier.

Casino industry accountants certainly recognized the drop in business, but most lay observers would find it difficult to notice anything out of the ordinary. On the contrary, if you take a leisurely drive down Las Vegas Boulevard South, as I did last week, the strongest impression you get is that the resort corridor is a hive of activity. Tourists remain ubiquitous, but more notably, construction projects line the street.

At the north end, the $3 billion, 3,800-room Fontainebleau resort is coming along nicely, still scheduled for a fall 2009 opening. Across the street, Boyd Gaming is in the early stages of its $5 billion Echelon project.

Back on the east side of the street, Steve Wynn is on pace to complete his $2.1 billion Encore resort in time for a late '09 opening.

Venture south and the massive CityCenter project fills the windshield. MGM Mirage's $9 billion "casino community," set to open in 2010, is reportedly the largest private construction project in America, and it shows. A topping-off ceremony for the 57-story Vdara Condo Hotel occurred last week, and five more towers at CityCenter will hold topping-off ceremonies this year.

And don't forget Harrah's $1 billion expansion of Caesars Palace, part of which will open next year.

Major construction is not limited to the Strip, either. By year's end, Station Casinos will open its newest neighborhood resort, the $675 million Aliante Station, in North Las Vegas. Meanwhile, a 100-acre mall complex is under way in Summerlin that's likely to become the new all-purpose destination on the valley's west side.

These are clear signs that Las Vegas is poised for a massive rebound from the recession we are grappling with today.

Yet quick-draw skeptics abound. In the wake of the recent Tropicana bankruptcy filing, out-of-town journalists eagerly declared Las Vegas to be in a tailspin. "Economic Troubles Affect the Vegas Strip," The New York Times blared, although it grudgingly admitted that "much of the Strip looks like a giant construction site, with crane lights competing with casino neon." The Times treated the Tropicana bankruptcy as a Strip bellwether, when it should have realized the Tropicana's problems have more to do with Atlantic City than Las Vegas.

More dramatically, a writer for the Times of London announced the "imminent death" of Las Vegas. "These days it's hard to avoid the feeling that Sin City put its future on black just before the spinning ball of the economy landed on red," he wrote.

Of course, we have been through all this before. It's comical, in hindsight, how many times Las Vegas' obituary has been drafted. Time and again, Las Vegas has proved its skeptics wrong.

The most recent example would be the predictions of Las Vegas' demise following the Sept. 11, 2001, terrorist attacks. Las Vegas did suffer a major economic blow in the weeks following the attacks, prompting a few detractors to predict that in the post-9/11 world, few people would be frivolous enough to visit Las Vegas anymore.

These prognostications, issued during a period of national mourning, proved ridiculously off base. Las Vegas recovered rather quickly after 9/11 as the nation collectively sought to return to normal life.

Now, to be fair, the recession has had and will continue to have devastating effects for many Las Vegans. In the face of the rising cost of living and unemployment, it's no doubt difficult for some to see a silver lining.

Still, faith in the long-term future of Las Vegas remains high, as evidenced by two other news items from recent weeks.

-- The Fertitta brothers, owners of Station Casinos, announced ambitious plans for 110 acres they have assembled on Tropicana Avenue just west of Interstate 15. The Viva project, with a jaw-dropping price tag of $10 billion, will include multiple hotel-casinos and possibly an arena.

-- Steve Wynn outlined what he intends to do with the sprawling golf course behind the Wynn and Encore resorts: a 5,200-room hotel complex linked with a massive convention center. Amenities will include a large lake similar to the one he built at The Bellagio.

These projects reflect a defiant confidence that Las Vegas will weather the economic downturn and soon return to what we have come to consider normal.

But beyond this rosy forecast, there is a lingering cause for concern: the long-term impact of hundreds of millions of dollars in state budget cuts.

We know from the painful experience of Gov. Bob Miller's cuts in the early '90s that it could take many years to restore funding just to 2007 levels. And with Gov. Jim Gibbons, R-Mars, at the helm right now, we cannot expect any substantive efforts to rectify the situation.

Instead, Gibbons is directing the dismantling of a variety of state government services, and calling for even more severe cuts next year.

Some belt-tightening is only right and natural in a recession, but gouging and lopping are mistakes with long-term consequences. This is all happening at a time when Nevada ranks near the bottom among the states in terms of adequately funding public services, especially education. When the recession recedes, we are going to be even further behind than we already are.

So, in the end, the message is mixed. My crystal ball suggests Las Vegas will slingshot out of the recession in 16 months or so, re-energizing an economy that had been the envy of the nation until very recently. But the state government, already woefully underfunded, will be ill-prepared to provide the resources required of its newly fast-growing population.

Geoff Schumacher (gschumacher@ reviewjournal.com) is Stephens Media's director of community publications. He is the author of "Sun, Sin & Suburbia: An Essential History of Modern Las Vegas" and "Howard Hughes: Power, Paranoia & Palace Intrigue." His column appears Sunday.

 

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