LAS VEGAS – As the fear of Covid-19 consumes the globe, governments, and employers around the world are handing out advice that’s tough for the tourist mecca of Las Vegas; stay home.
What consequences could coronavirus travel bans have on Vegas, a city that depends on tourists traveling there all the time?
“It’s a little hard to predict right now,” mused Stephen M. Miller, an economist at the University of Nevada, Las Vegas. “If coronavirus is around for three months, it could have a huge effect on tourism, gaming revenue, taxable sales, and employment in the hospitality industry.”
Let’s take a look at a few of the potential outcomes of Covid-19 paying a visit to Las Vegas.
Fewer Tourists
Health officials in Southern Nevada recently revealed that a man in his 50s tested positive for coronavirus, Nevada’s first case. The Reno-area man has been connected to the Grand Princess cruise ship coronavirus outbreak.
Despite the threat, flights continued to land at McCarran International Airport, where more than 50 million tourists arrived in Sin City just last year.
When McCarran Airport officials were asked for statistics indicating whether or not the coronavirus outbreak has curtailed the number of visitors, they did not have those numbers, just yet.
“The airport’s passenger numbers aren’t released until the end of the following month,” commented the airport’s public information administrator, Joe Rajchel. “So we won’t have February’s numbers for a few more weeks.”
However, Southwest, the country’s biggest domestic airline, has seen a definite decline in bookings, and the decline continues daily, according to Southwest’s CEO Gary Kelly.
Likewise, as a result of the coronavirus, companies around the world are advising their employees to avoid nonessential travel, as well as big gatherings such as conferences; conferences are a cornerstone of the huge Las Vegas convention market.
Canceled Conventions
Close to 24,000 conventions come to Las Vegas every year. Naturally, most of the attendees stay in hotels on the Strip. For example, 20% of rooms at MGM Resorts properties, are booked for convention-goers.
Despite the outbreak of Covid-19, many Las Vegas conventions are proceeding as usual, but some events, such as a summit of the Association of Southeast Asian Nations, as well as the live portions of Adobe’s annual conference, have been postponed or canceled.
Chad Beynon, a gaming analyst at Macquarie Securities, referred to the third quarter of 2018, when conventions in Vegas were down.
“There weren’t any big events or conferences, and revenue definitely declined for companies like Caesars and MGM,” Beynon said. “That represented a shortage of events in Las Vegas, not a national or international travel warning. If you have a travel warning, then we’re also talking about conferences, shows, and sporting events. It could be bad.”
Bad for Casinos, Good for Visitors: Discount Rooms
When something like the Covid-19 outbreak discourages a lot of people from flying to Vegas, occupancy rates in the hotels on the Strip plummet. That means, room rates drop, which is good for anyone wanting to visit Vegas. And so far, room rates have dropped more than 10%.
However, what’s good for a tourist is bad for the casinos.
“This is a service industry, where labor is a big part of the operating cost for the casino and hotel companies. With unstable demand, there’s little you can do when it comes to costs,” Beynon observed. “The casino and hotel employees are still getting paid. They’re still working, so you just burn that money. That can be a scary thing.”
The Precedent of 9/11
To understand the implications of a worldwide threat combined with a fear of flying, it helps to look at 9/11.
While there is not a lot of precedences when it comes to events impacting travel to Las Vegas, the years between 2001 and 2003 do represent a public afraid to travel.
Following the 9/11 attacks, the number of tourists traveling to places like Las Vegas plummeted. In fact, the number of passengers coming into McCarran International Airport dropped from 36.9 million to 35.1 million.
Casino revenue also plunged. In 2000, Las Vegas generated a record-breaking $7.7 billion in revenue. However, by the end of 2001, that number dropped by $35 million.
That drop was the first of its kind in thirty-years. It wasn’t until 2004 that visitor numbers resumed pre-9/11 levels. According to analysts, the fear today is similar to what happened after 9/11.
“You have the age-old dilemma of ‘we have nothing to fear but fear itself,’” observed Hugh Anderson, financial advisor and managing director at HighTower Las Vegas. “It’s human emotion at this point, and people are fearful for their health and the health of others. When you have that element, you have the recipe for a declining economy.”
The Possibility of Recession
The 2008 recession that hurt Las Vegas tourism was perhaps the city’s greatest test, as well as a barometer of Vegas’ ability to overcome financial disasters outside of its control.
The financial collapse that occurred between 2007 and 2009 caused a previously unknown upset in consumption-related businesses. During that time, for example, MGM Resorts’ stock price dropped from $99.75 a share to just $1.89 a share.
Visitors to Las Vegas dropped by nearly 3 million. Even worse, Nevada’s unemployment rate hit 11.8% and close to 20,000 workers in the hospitality industry lost their jobs.
Fortunately, a robust economy gave Las Vegas a strong start this year, leaving Sin City better poised to navigate any coronavirus fallout. If the number of coronavirus cases levels-off and begins to decline, Las Vegas will have little trouble regaining whatever revenue was lost during the outbreak.
“As the worst fears of a horrible epidemic begin to abate,” Anderson noted, “you’ll see Las Vegas snap right back.”
Vegas is a Survivor
Anthony Curtis, the founder of LasVegasAdvisor.com, has made it his business to evaluate the feelings of tourists visiting the Strip since the 1980s.
“People are completely nervous about this,” said Curtis, who typically stops in local bars on his way home. However, on one trip this week, the bars were empty. “I stopped in at three bars. Each one only had one or two customers. I spoke with the bartenders asking, ‘Is coronavirus what’s going on here?’ Nobody was sure.”
However, Curtis has few concerns about the future of business here in Sin City. Covid-19 might slow down this glamorous vacation town, but it certainly won’t shut it down.
“Vegas was really hard hit by the recession, but Vegas didn’t close,” Curtis said. “Vegas can survive anything.”
