International edition
November 24, 2020

The first case in the city was confirmed last week

A healthier economy and a strong 2020 start poises Las Vegas to better overcome coronavirus fallout

A healthier economy and a strong 2020 start poises Las Vegas to better overcome coronavirus fallout
In the wake of coronavirus, companies nationwide are increasingly telling their employees to avoid nonessential travel or large gatherings such as conferences – a pillar of the vast Las Vegas convention market.
United States | 03/09/2020

The largest domestic airline is seeing a daily decline in bookings, with fhe fear thinning airplanes today being similar to what unfolded after 9/11, according to analysts. Room rates in Las Vegas have dropped more than 10% and many conventions have been postponed or canceled. If the number of cases levels-off and declines, Las Vegas could recapture what was lost during the outbreak, experts say.

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as Vegas officials confirmed Thursday the city’s first case of coronavirus, after which share prices for MGM Resorts International, Caesars Entertainment, Wynn Resorts and Las Vegas Sands fell sharply. As coronavirus grips the globe, government agencies and employers are now suggesting traveling less, which could be problematic for a tourist and gambling destination such as Las Vegas.

Stephen M. Miller, an economist at the University of Nevada, Las Vegas (UNLV) said the impact is a bit hard to predict. “If coronavirus sticks around for three months – a quarter of the year – it would have a significant effect on visitors, taxable sales, gaming revenue and employment in the hospitality sector,” he said in an analysis for The USA TODAY Network reported by Reno Gazette-Journal.

After the announcement from Southern Nevada health officials last week revealing a man in his 50s has tested positive for coronavirus, the Silver State’s first case, planes continued to land at McCarran International Airport, where a record 51 million people arrived last year. However, the nation's largest domestic airline, Southwest, has seen a noticeable decline in bookings – a decline that continues daily, according to CEO Gary Kelly.

In the wake of coronavirus, companies nationwide are increasingly telling their employees to avoid nonessential travel or large gatherings such as conferences – a pillar of the vast Las Vegas convention market.

Every year, nearly 24,000 conventions take place in Las Vegas. Most of the people attending end up in hotel rooms on the Strip. At MGM Resorts properties, 20 percent of rooms are booked for convention-goers. Coronavirus has disrupted convention plans there and around the world.

Many Las Vegas conventions are proceeding despite the coronavirus threat, but some events – like the live segments of Adobe's annual conference and a summit of the Association of Southeast Asian Nations – have been postponed or canceled. 

Chad Beynon, a gaming analyst with Macquarie Securities, referenced the third quarter of 2018 – a time when there was an absence of demand in Las Vegas. “There weren’t any big conferences or events, and profits declined for companies like MGM and Caesars,” Beynon said. “That was just a shortage of events in Las Vegas – not a big travel warning. If you have a travel warning, we’re talking about shows, sporting events, conferences. It could be pretty bad.”

When an event like the coronavirus outbreak dissuades a large number people from flying to Las Vegas, occupancy rates in hotels along the Strip drop. That means room rates drop, too. So far, room rates in Las Vegas have dropped more than 10 percent.

“We’re talking about a service industry where labor is a big portion of the daily cost for these companies, and when there’s irregular demand, there’s nothing you can do on the cost side,” Beynon said. “Employees are still getting paid. They’re still working, so you just burn cash. That’s the scary thing.”

There is not much precedence when it comes to global events significantly impacting travel in Las Vegas, but the era between 2001 and 2003 featured the same central ingredient: a public afraid to travel. After the 9/11 attacks, the number of people traveling to destinations like Las Vegas plunged. The number of passengers deplaned at McCarran International Airport dropped from a peak of 36.9 million to 35.1 million.

Casino revenue also plummeted. A year earlier, Las Vegas generated a record $7.7 billion in revenue. By the end of 2001, that figure dropped $35 million. The tumble was the first of its kind in three decades. It took until 2004 for visitor numbers to hit pre-attack peaks. The fear thinning airplanes today is similar to what unfolded after 9/11, according to analysts.

“You’ve got the age-old problem of ‘we have nothing to fear but fear itself,’” said Hugh Anderson, managing director and financial advisor at HighTower Las Vegas. “This is a human emotion at this point where people are afraid for their own health and the health of others. When you have that component, you have the mix for a declining economy.

The recession that crumbled Las Vegas tourism was perhaps the market's greatest test – and a barometer of the city's ability to overcome financial forces out of its control. The financial collapse between 2007 and 2009 caused unprecedented disruptions in consumption-related industries. During that time, MGM Resorts’ stock price dropped from $99.75 a share to $1.89 a share. Visitor volume dropped by almost 3 million. Nevada’s unemployment rate hit 11.8 percent – and more than 19,000 workers in the hospitality business lost their jobs.

A healthier economy and a strong start to the year has Las Vegas poised to better navigate coronavirus fallout, according to analysts. If the number of cases levels-off and declines, Las Vegas will have little trouble recapturing what was lost during the outbreak. “As the worst of the fears of a horrific epidemic outbreak begin to abate," Anderson said, "you’ll see Las Vegas snap back vigorously."

Anthony Curtis, founder of LasVegasAdvisor.com, has been tracking the feelings of tourists on the Strip since the 1980s. “People are completely bonkers nervous about this,” said Curtis, who often stops in bars on his way home. On a trip this week, the bars were empty. “I stopped at three bars. Each had one or two patrons. I talked to the bartenders and asked, ‘Is this what’s going on here?’ Nobody’s sure.”

Curtis has few worries about the future of business there. Coronavirus may slow this glittering vacation town, he said, but it will never shut it down. “Vegas was hit really hard with the recession, but Vegas didn’t close,” Curtis said. “Vegas survives everything.”

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