In 2008 Las Vegas faced the global financial crisis head on. More than most cities in the United States, Las Vegas was impacted across its entire society. Major tourism industry corporations were hours from going out of business. Commercial building projects ceased and never restarted. The housing market was impacted catastrophically with home values plummeting. Employment was devastated based upon the reduction of inbound travel to the city.
This time the Corona Virus is far more immediate in it’s destructiveness to the local economy when compared to the slow burn of the global financial crisis.
It took arguably, eight years for Las Vegas to fully recover from the impact of the global financial crisis with visitation and revenue finally returning to 2008 levels in 2013/14.
Twelve years after the global financial crisis and six years after the good times started to roll again, Las Vegas faces another crisis. This time the Corona Virus is far more immediate in it’s destructiveness to the local economy when compared to the slow burn of the global financial crisis.
Corona Virus vs. the GFC
Where can we draw comparisons between the global financial crisis and the CoronaVirus pandemic? Beyond the general economic impact, not a lot.
- The global financial crisis did not dictate the immediate closure of business
- The global financial crisis did not see the mass excising of the cities workforce virtually overnight
- While visitation to the city decreased it did not stop
- Demand for convention business declined but did not cease completely
- Global and regional travel did not stop
In fact in 2009, the year immediately following the global financial crisis, visitation to Las Vegas Boulevard declined by only 1 million visitors. Occupancy dropped 5.5% to 81.5% Still 16% above the national industry average. Revenue declined by USD 900M. 9% from the prior year.
The global financial crisis was considered a catastrophe for Las Vegas business, and had far reaching impacts in the broader community from employment through to housing affordability.
THE NEXT GENERATION
FOR THE MODERN HOSPITALITY & TRAVEL WORLD
The new Las Vegas normal
The new normal in Las Vegas is a far more extreme environment than the global financial crisis. The powerhouse corporations that drive Southern Nevada’s economies are closed for business. As much as $10.3B dollars in wages for the local economy.
Despite years of solid business performance and revenue growth, almost without exception gaming companies massive workforce’s could not be sustained in some cases for even one week. 350,000 workers have filed for unemployment in the state. 25% of the workforce.
Not in six months. Six weeks.
At the height of the outbreak the City of Las Vegas’ Mayor called for a reopening of Southern Nevada for business. No plans or structure. Purely that without the staple industry the prognosis for the city and citizens was dire. It became an international news story demonstrating the economic impact of the pandemic.
For the third time in 20 years the viability and survivability of the tourism industry and Las Vegas’ broader economy has been impacted by a major global event, outside it’s control.
It does not stop there. Many Southern Nevada businesses directly support tourism operations in the city. No tourism. No business. The ripple effect in the local economy continues. Dependent upon the source as much as 41.9% of employment is related to tourism.
Eggs & Baskets
What did the various cities, counties, state and the business community learn from the global financial crisis? Not much.
For the third time in 20 years the viability and survivability of the tourism industry and Las Vegas’ broader economy has been impacted by a major global event, outside it’s control. The end result being immediate and lasting economic damage to the Las Vegas valley.
When the good times are rolling tourism is an extremely valuable bedrock industry for the the Las Vegas valley. As the good times have continued to roll limited focus and impetus has been applied to the diversification of the Southern Nevada economy.
On this occasion the recovery will be longer than the prior two. Already, stringent operational guidelines are being established that hospitality operators will need to adhere to for the safety of the workforce and the traveler. The overall impact of the guidelines dictates that tourism businesses will operate at well below normal capacities. The roll on effect being slow return of demand, slow revenue growth and slow return to full employment for the city.
The greater risk in a highly visitor dependent destination is a secondary outbreak of the virus. A secondary outbreak after lock downs have been lifted will have a major impact on recovery of the tourism sector and set back any momentum that may be initially gained in traveler confidence.
There is much at stake in the management of these guidelines.
It’s no longer the 1950’s and Las Vegas is not a small city on the way to nowhere. Currently one of the largest inbound migration cities in the country, the greater metropolitan area of Las Vegas is a city of more than two million people.
A city the size of Las Vegas requires a broader industry base to support the local economy and to remain attractive to future migrants. Las Vegas possesses a vibrant tourism industry under normal circumstances, underpinned by mining and military industries present across the state. Less volatile industries are required to reduce the impact of uncontrollable events on the local economy.
The new build market for hospitality technology is estimated to be worth $20B USD in technology products over the next 5 years.
Northern Nevada has demonstrated success in attracting the prominent and high value technology industry to the Reno and Carson City area. Las Vegas’ similar proximity to San Francisco and Southern California as well as Seattle offers an equally attractive destination.
Las Vegas’ tourism sector whilst an operational asset, is also a global center for expertise in hospitality, food & beverage, meetings & events, gaming and entertainment. The city also boasts a leading tertiary education base supporting the industries various disciplines through the University of Nevada – Las Vegas and the College of Southern Nevada.
Southern Nevada already houses a well established technology industry for casino gaming. Several global headquarters and regional offices are based in the city. Tech companies serving the local market like IGT, Aristocrat and Scientific Games also reach beyond the United States exporting product & expertise to the global gaming industry. They also employ a significant technology workforce.
Using the gaming technology example, Las Vegas combines the worlds leading industry regulatory body in the Nevada Gaming Control Board, the top university program for the industry at the University of Nevada – Las Vegas, global operational industry expertise via Wynn, Sands, Caesars, MGM, Station & Boyd, and a leading think tank, the International Gaming Institute.
Gaming technology is an excellent case study of how Las Vegas can leverage civic industry expertise as a platform to attract the expansion of a local tech sector through a comprehensive industry ecosystem. Gaming expertise is only part of the Las Vegas industry acumen. There are other low hanging fruit offering a similar model for an ecosystem and providing an even larger global market for products and services.
Low hanging fruit
Alongside, gaming, Las Vegas’ additional areas of expertise are the hospitality and entertainment sector. These are broken up into the the sub-sectors of hospitality and accommodation, food & beverage and event management.
Examining the specifics of these industry elements presents a similar and compelling case for tech sector growth. UNLV offers the number one ranked program for hospitality in the United States and is in the top 5 globally. Specific majors focus on hospitality, food & beverage and event management in addition to gaming and sports management.
Government economic development programs and investment must now take leading role to provide the binding ingredient for technology sector growth.
Las Vegas’ operational industry delivers an enviable breadth of industry leadership, experience and operations in each of these sectors. Major industry operators are headquartered or have a strong regional presence in Las Vegas. The MGM’s, Wynn’s and other casino operators crossing each sector as well as focused operators like Diamond Resorts, Hakkasan in food and beverage, Cirque du Soleil in entertainment and major industry event company’s like GES, AEG and Levy accompanied with the Las Vegas Convention Center. Las Vegas is currently the number one event destination in North America with additional state of the art venues entering the industry in the next 12 to 24 months.
The gaming industry has a significant global presence and it is growing around the world. However, gaming represents less than 5% of the broader hospitality industry. The tourism sector already contributes almost 10% of global GDP and employment and is forecast to grow significantly in the coming decade due to the entry of new travelers to the global market place. There are more than 10,000 hotels currently under construction globally and the industry avoids the tight regulations of the gaming sector.
In the accommodation sector alone there are 190,000 hotels (20+ Rooms) globally. Customer demand and now the global pandemic, is driving industry toward technology solutions and digital transformation. The same is true of the food and beverage and event management sectors. The new build market for hospitality technology is estimated to be worth $20B USD in technology products over the next 5 years.
The addition of the hospitality technology sector to the Las Vegas economy represents low hanging fruit that leverages off existing industry, workforce and education expertise. It is an industry that already exists at scale and generally has proven to be stable over a long period of time, notwithstanding global events. The gaming technology experience demonstrates the development of a successful ecosystem of technology and industry working in partnership to influence industry operations on a global scale.
Testbed Vegas understands that various levels of government programs aim to expand beyond traditional areas of civic expertise to increase diversity in the city. These are admirable targets. Although these initiatives require the from ground up construction of a sector and ecosystem. They are longer term projects.
The first step is to leverage the existing expertise and tax payer infrastructure to fast track industry growth. Alignment at state, county and city is required to develop an attractive model to draw the hospitality technology sector to Las Vegas. All of the necessary ingredients are here. Government economic development programs and investment must now take leading role to provide the binding ingredient for technology sector growth.
An aggressive timeline for action will ensure that when the next global event occurs Las Vegas’ economic diversity will have expanded on the back of the industry expertise we already bring to the global economy.
INDUSTRY CREATION FOR LAS VEGAS.
Las Vegas is the prime location for technology companies who are focused on delivering products for the travel, hospitality and entertainment industries.