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For virtually any other tourist hotspot, greeting nearly ten million visitors and earning $2.9 billion from the convention business in three months would be a cause for cheer. But for Las Vegas, those figures reflect the cold truth that, in a break from its history as a recession-proof oasis in the American economy, even Sin City is feeling the pain in the nationwide downturn.
Latest economic figures, released last week by the Las Vegas Convention and Visitors Authority, show that several important indicators went either flat or down in the first quarter of the year. The $2.9 billion in convention revenues represents a 7.1 per cent decline and is due partly to a 12.6 per cent drop in the number of conventions.
It all adds up to an unfamiliar feeling for a destination that has long prided itself on being impervious to the harshest sides of swings in the national economy. “This is different from prior downturns,”said Bill Lerner, a Vegas-based Deutsche Bank gaming sector analyst. “Now that there’s a lot more non-gaming amenities in Las Vegas, the visitation mix is leaning toward non-gamblers, and the consumer coming to Vegas is different now than it was
in prior recessions.”
Since 1970, Las Vegas saw gambling revenues fall only once - in the aftermath of the September 11, 2001 attacks, when gaming revenues in 2002 were less than one per cent lower than 2001. As in earlier tough times, Vegas resorts get creative in finding new niche markets to pursue. Casinos are focusing on lucrative overseas markets where the weak dollar makes coming to Las Vegas a bargain.
“Bachelor parties in Vegas are now all the rage for soon-to-be-wed fellows from Australia and the UK, for instance, because it’s so cheap to get there,” said Robert LaFleur, a gaming stock analyst for Susquehanna Financial Services. “If the Hispanic market’s been tapped... the cat-lover market’s been tapped, you go find business where you can find it. “Right now, it’s an easy sell to get people from overseas.”
As for the hard facts, gambling revenues for the top casinos were down 4.8 per cent in March for a three per cent drop so far this year; the average daily room rates dropped 2.7 per cent and the stock price of Las Vegas Sands, owner of the Venetian and Palazzo, fell 38 per cent. MGM Mirage, owner of Bellagio, Mirage and eight other Strip resorts, and which is setting up a non-gaming MGM Grand in Abu Dhabi, has seen its stock fall 42 per cent since November.
Dubai World had given MGM a $5 billion boost when it bought a 9.5 per cent stake in the company last year. Overall visitor volume is up 0.4 per cent so far this year, but experts say it would be down had it not been for the extra day in February for the leap year. The thinking in past recessions has been that gamblers tended to come to Las Vegas even when times were tough, hoping a win would ease the pressure. But the Las Vegas of 2008 earns just 40 per cent of its revenues from gaming sources and the rest from upscale leisure amenities such as restaurants, spas, nightclubs and shows that downturn-damaged Americans can’t afford for the moment.
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