“Few people have any next, they live from hand to mouth without a plan, and are always at the end of their line.” ― Ralph Waldo Emerson
[/su_pullquote]Nevada has, for at least 20 years, attempted to diversify its economy by attracting non-gaming businesses. The Silver State has had mixed results, however, they have successfully brought in the likes of Zappos, Google and their new data center in Henderson, Tesla with their new Gigafactory, and some others. However, casino gaming still dominates the Nevada economy. The Nevada Gaming Control Board states there are 441 casinos in the state and, of that total, 222 of those are in Clark County. At the time of writing, there are an estimated 206k casino employees out of work and this figure does not include employees associated with gaming, but not directly employed by gaming (a casino operator per se). One in four workers in the state of Nevada is an employee of the hospitality industry and, even more frightening, gaming taxes account for a great majority of Nevada’s revenue with 86% of gaming revenue coming from Clark County. Taxes from gambling are the second-largest revenue generator for the State of Nevada, second only to the Nevada Sales Tax. However, during a shutdown, sales tax is taking a hit with stores and retail outlets closed statewide. This is how it has always been.
Fast forward to our present and the Coronavirus. In two weeks we have seen the announcement of the potential bankruptcy of Cirque du Soleil, Gordon Biersch, furloughs at Penn Gaming (26k employees), the temporary layoff of Tao Group venue staff, Hakkasan Group laying off its entire 1,600 person workforce, both Caesars and MGM Resorts International has executed layoffs, Drai’s Nightclub, Beachclub and After Hours has laid off its entire staff, the shuttering of Sundance Helicopters, and the Nevada Department of Employment, Training, and Rehabilitation has reported the most unemployment insurance claims in Nevada history at a staggering 92,298. The list of layoffs and potential bankruptcies is long, not to mention the future impact on the Las Vegas housing market which won’t be discussed.
When will Nevada and Las Vegas learn it cannot focus the majority of the state’s economic well-being on one industry?
Let’s take a lesson from Detroit, Michigan. Citing Detroit Historian Kevin Boyle, Amy Padnani, author of “Anatomy of Detroit’s Decline” wrote “Though other cities experienced their own booms and busts, Detroit suffered more because it didn’t diversify”, “Places such as Chicago and Pittsburgh relied on other areas – like banking or education – beyond the industries that started their success.” Las Vegas’ gaming industry is Detroit’s auto industry of the ’70s and ’80s. Boyle goes on to say: “The auto industry “was like Silicon Valley in the 1980s, It was doing so well, he said, that Detroit officials didn’t see a need to do anything differently.” We see this today with Las Vegas. Boyle’s statement could very easily be reworded to The [gaming industry] is like Silicon Valley in the 1980s, it has been doing so well, that [Las Vegas] officials don’t see a need to do anything differently.
It is dire that Las Vegas reinvent itself. The recession sparked interest in Nevada economic diversification, however, the Coronavirus has created yet another watershed moment for Las Vegas. Reliance on one industry could begin the decline of a growing city. In light of the Coronavirus permanently wiping out thousands of jobs, the gaming industry will certainly shrink during this pandemic. A recession may follow and 2020 profits are unlikely.
What now?
[/su_pullquote]To the officials of Las Vegas: arenas, sports teams, and concert venues are not diversification – they are still hospitality (and tourism). Technology is a common denominator and “construction, government, hospitality, health care, manufacturing, and transportation are all, or are rapidly becoming, tech industries.” – Mark Vitner, Wells Fargo economist. Las Vegas should plaster this quote on the walls of all leadership: “”Past performance is no guarantee of future results.” Three years ago the Las Vegas Global Economic Alliance completed its “Target Industry Validation Study“. This, very comprehensive study, researched Las Vegas’ past and Las Vegas’ future and produced a list of industries to target for the diversification of Las Vegas. The LVGEA study identifies the ideal Las Vegas businesses (2017-2012) “Target Mix” as:
- Business Headquarters and Services
- Emerging Technologies
Logistics, Manufacturing, and Supply Chain Management - Autonomous Systems
- Finance, Banking, and Insurance
- Healthcare Services and Medical Education
- Gaming, Tourism, and Conventions
Firstly, why is “Gaming, Tourism, and Conventions” still on the list? It may be last on the list but, including the figures for the new Raiders Stadium, over two billion dollars have been spent in this sector. A suggestion: remove “Gaming, Tourism, and Conventions”, enough funds are already allocated to this sector.
As for the other categories, they seem more lip service than “targets”.
- Business Headquarters and Services – no significant progress.
- Emerging Technologies – no significant progress.
Logistics, Manufacturing, and Supply Chain Management – most will agree the growth of Amazon in the Las Vegas valley meets this target. - Autonomous Systems – Self-Driving cars have met this target.
- Finance, Banking, and Insurance – no significant progress.
- Healthcare Services and Medical Education – the opening of the UNLV Medical School has met this target.
- Gaming, Tourism, and Conventions – again, billions of dollars have been spent on this target.
The addition of the Vegas Knights and the Raiders are proof Nevada didn’t learn the “Recession Lesson”. The Target Industry Validation Study states “Southern Nevada stakeholders continue to pursue opportunities related to the relocation of professional sports franchises to Las Vegas. These opportunities bring significant tourism and related economic impacts to the region.” Note the word tourism. It is critical for Las Vegas and Nevada to have a diversified target industry mix to guide economic development efforts. Moreover, diversification across top-line industries will benefit from some level of integration or alignment across specific elements within each industry. “In fact, this type of cross-industry alignment serves as a strategy to help unite the success of multiple industries tied to emerging dimensions or categories the region is poised to cultivate.”
The Coronavirus has forever changed the landscape of our cities, countries, and world. For the citizens of Las Vegas, and every single-industry-driven city in the world, decisions made in the coming weeks and months will forever determine the success of millions of lives.
Las Vegas: Abandon the “entertainment and casino first” business model. The consumer has changed, the economic landscape has changed. Las Vegas is a beacon to travelers globally for the best food, attractions, concerts, events, conventions, and more. Don’t put the economic future of Las Vegas on life support with hospitality tunnel vision.
Price, M. (2020, March 25). Nevada bracing for budget hit with coronavirus hurting tourism. Retrieved March 29, 2020, from https://news3lv.com/news/local/nevada-bracing-for-budget-hit-with-coronavirus-hurting-tourism
Raz, N. (2020, March 27). Nevada sees record weekly unemployment claims. Retrieved March 29, 2020, from https://www.reviewjournal.com/business/nevada-sees-record-weekly-unemployment-claims-1992919/
Burke, T. (2020, March 27). Nevada needs Las Vegas tourism to survive shutdown. Retrieved March 29, 2020, from https://pvtimes.com/news/nevada-needs-las-vegas-tourism-to-survive-shutdown-82912/
Padnani, A. (2013, December 8). Anatomy of Detroit’s Decline. Retrieved March 20, 2020, from https://archive.nytimes.com/www.nytimes.com/interactive/2013/08/17/us/detroit-decline.html
Target Industry Validation Study. (2017, March). Retrieved March 29, 2020, from https://www.lvgea.org/research-center/target-industry-validation-study/
|
|
