Diversification key to protect Nevada from future economic crises

Las Vegas has an addiction. It’s intoxicated by rising rooftops and rising room rates. As our regional economy finally begins to improve, remember that blindly worshipping these two narrow slivers of the national economy landed us in the worst economic crisis we’ve ever scrapped our way through.

But change isn’t easy. What’s easy is slipping into our old ways and getting comfortable with resort ribbon-cuttings and rooftops.

Here’s the challenge: Buck the conventional wisdom. Don’t get intoxicated by this tired, old formula. Dynamic global metropolitan economies will leave Las Vegas idling in the 20th century if we do not wake up and make the necessary investments to diversify our economy.

Nobody in the business community today should be comfortable with where Las Vegas stands among the world’s cities. While we’re fortunate to have this industry, we can’t put too much pressure on tourism to carry our future. Yet many in this community will still not face the structural instability that comes with our overdependence on a single industry, which fuels the second-leading industry.

By relying solely on tourism in a co-dependent relationship with housing construction, Las Vegas bets its very existence on Americans’ most nonessential discretionary spending, quick to retreat at the first signs of a slowdown.

We all know how that tale ended; Las Vegas became the poster child for the recession — the hardest hit and still among the slowest to recover. A few good quarters should not let us forget that.

Las Vegas should instead heed the examples set by other tourism based-economies. Orlando, home to destinations such as Disney World, also boasts a thriving aerospace sector and is home to the country’s second-largest college campus at the University of Central Florida.

For decades, central Florida focused on the Disney visitor but knew that was not sustainable. The region created a strategic framework that helped to diversify its economy with multiple industries for long-term economic sustainability. Those industries include: aerospace, higher education, life sciences and health care.

Las Vegas and Orlando are the two economies in America most dependent on tourism. Las Vegas has undergone a noteworthy transformation from gambling capital to entertainment hub. That transition has made the city far less vulnerable. However, as a tourism-based economy, Las Vegas should be cautious. We can choose to stick to our old ways, relying on the two-legged-stool economy that helped this great city grow, or we can continue to diversify. We all know that a two-legged stool will not stand on its own.

Over the past five years, Nevada’s leaders have sought to re-envision development around a guiding principle of diversification. Led by Gov. Brian Sandoval, the state instituted a new governance structure driven by regional development authorities such as the Las Vegas Global Economic Alliance, where I have served as CEO since 2012.

Since then, the LVGEA and its partners have made critical investments toward a more resilient Southern Nevada economy, making the difficult structural changes necessary to attract new businesses and foster community development. In fairly short order, we grew the mission, budget and team of this revitalized economic development organization.

We increased the number of jobs we helped facilitate and led the community to a more holistic understanding of how development of the economy also dovetails with strengthening our education and workforce systems. We developed the first comprehensive economic development strategy for Southern Nevada, identifying key industries to help diversify Southern Nevada, and we have been executing on that plan for two years now.

We cannot, however, be lulled into a false sense of complacency by growth in the tourism and housing industries. We may feel good about these indicators, but they’re not medicine; they’re intoxicants. We’ll have a much more resilient future if we break ourselves of this habit, take the groundwork this community has laid in its fundamental assets, and do the hard work to build sustainable new industries.

We are just now beginning to reap the benefits of this years-long investment. Now is not the time to relent on our efforts. Perhaps the greatest risk to this progress is our own mistaken view that the old model is working. This community must think beyond room rates and rooftops. The LVGEA plays only a small role in what must be a valleywide understanding that we expose ourselves to enormous risk by doubling down on the familiar notion that our co-dependent economy of tourism and housing construction is sustainable. We need a third leg for our economic stool for long-term economic sustainability in our region. Two-legged stools won’t stand.

Tom R. Skancke is the outgoing chief executive officer of the Las Vegas Global Economic Alliance, the regional community and economic development organization for Southern Nevada. His last day is July 1.