The Housing Chronicles Blog: Las Vegas feeling impact of recession

Thursday, July 3, 2008

Las Vegas feeling impact of recession

For years Las Vegas managed to continue growing despite national peaks and troughs in the economy, but today a combination of higher gas prices, pricier airline tickets, a shift away from gambling revenue towards high-end restaurants and shops and new competition abroad is taking its toll. What does that mean for Sin City? A story in the Wall Street Journal speculates:

The gambling slowdown that began early this year is taking a serious toll on Las Vegas, with banks, investors and private-equity funds growing as tightfisted as the consumers who are gambling less in the slumping economy.

Once believed to be recession-proof, casinos are proving to be highly vulnerable to the economic downturn, which is striking the industry at a bad time. Las Vegas is entering its lethargic summer season, and a boom-time frenzy of grand expansion plans and private-equity buyouts has left casinos laden with debt...

The industry is facing what insiders and analysts call its biggest challenge in years. Rising gasoline prices, the housing crisis and other economic troubles are prompting consumers not just to gamble less, but to spend less at the luxury boutiques and restaurants where casinos draw most of their profits. Struggling airlines are cutting service to Las Vegas. And pressures are building on casinos that cater to local residents, who have been hard hit by economic troubles...

The gambling industry has survived economic famine before. But the current consumer-driven downturn, coupled with a recent industry shift away from gambling and toward luxury amenities, high-priced entertainment and dining, has created a dangerous situation for Las Vegas.

The problems are weighing heavily on gambling companies that cater to the local Las Vegas population with low-glitz, high-profit casinos built away from the tourist zone known as the Las Vegas Strip. Those companies thrived on the boom in southern Nevada's population, as families flocked to the area for jobs in the casino industry. But now those customers are holding back, pinched by a housing crunch and rising unemployment.

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