Just a few weeks ago, Las Vegas’ economy was riding high.
After years of clawing back from the gutter of the Great Recession, locals could point to billions of dollars’ worth of real estate projects. Tourism numbers were strong, the unemployment rate kept tumbling, and the housing market, after slumping in 2019, blasted off with huge boosts in sales totals to start the year.
But then the coronavirus hit — and with Las Vegas and much of America rapidly shutting down to contain the spread, Southern Nevada is starting to feel sharp economic pain.
Job losses are about to start climbing. Casino giant MGM Resorts International told employees Friday that business demand has “decreased significantly,” that it has suspended operations of all nightclubs and dayclubs, that its spas and salons will suspend operations Monday, and around 150 food and beverage outlets will close Monday, according to a letter to the company’s workforce that was obtained by the Review-Journal.
Furloughs and layoffs will start next week, said the letter from MGM Resorts President and Chief Operating Officer Bill Hornbuckle.
Overall, people are quickly cutting back on air travel and big gatherings over fears of the virus, threatening the bedrock of Las Vegas’ economy: a place where tourists and conventioneers fly in from around the country and world to gamble, party, eat, shop and network, sometimes elbow-to-elbow.
It’s too early to tell exactly how the coronavirus will affect Southern Nevada’s real estate industry. That probably will hinge on several factors, including if there are widespread job losses, if lenders cut back on funding future projects or if the overall economy starts spiraling, prompting developers to pull the plug on their projects.
At least one thing is certain: You can’t overstate how important tourism is to Las Vegas and to its housing market, given all of the people across the valley who work in the industry, supply it or otherwise feed off it.
According to a report by consulting firm Applied Analysis for the Las Vegas Convention and Visitors Authority, visitors spent $34.5 billion in Southern Nevada in 2018, directly supporting more than 234,000 tourism jobs.
Las Vegas’ lucrative convention business already has taken several body blows the past few weeks. As of Friday afternoon, organizers had pulled the plug or shelved at least 23 conferences, comprising an estimated 424,600-plus attendees, a running tally maintained by the Review-Journal shows.
The coronavirus, which causes a respiratory disease known as COVID-19, is known to have infected a fraction of the local population and U.S. at large. But it has spread around the globe, sparked fear and hoarding and led to tidal waves of canceled events and other closures.
Ken Simonson, chief economist for the Associated General Contractors of America, was in Las Vegas this week for his group’s annual convention, held at the Bellagio. He said Friday that he was constantly asking if contractors were experiencing any spillover effects of the virus.
None said they had, but there were plenty of reports of other people facing delayed or unavailable materials or products coming out of China and Italy, which have the most and second-most confirmed coronavirus cases, respectively, as tracked by Johns Hopkins University.
Simonson expects real estate projects in the pipeline around the U.S. to get shelved or nixed altogether.
He figures commercial development might be “more vulnerable” than the homebuilding market, as low mortgage rates could spur more house sales. But would-be homebuyers might have been hit by the stock market turmoil or are now worried about their jobs, he noted.
Simonson’s upcoming work schedule, meanwhile, also shows why Las Vegas’ economy could be in for a rough, if not brutal, stretch.
He travels regularly for work, but all of his business trips in the next several weeks, and the events he was supposed to speak at, have been canceled.
Frankly, he said, he’s relieved.
“It’s an unnecessary risk to bring a lot of people into close proximity,” he said.