Las Vegas continues to operate at a fraction of normal capacity, as vaccine deployment brings hope to end the COVID-19 pandemic. This is the January Vegas economic update; here is my Vegas economic report from December 2020, discussing the likelihood of a K-shaped recovery.
Epitomizing Sin City’s economic situation, the annual Consumer Electronics Show that usually takes over the city in Vegas in January has gone virtual. In 2020, 170,000 people attended, bringing $169 million in direct spending and $291 million in broader economic impact, according to the Las Vegas Convention and Visitors Authority (LVCVA). In 2020, the CES’s financial impact, along with dozens of other conferences and conventions, has virtually vanished.
US overview: After revision, third-quarter Gross Domestic Product jumped an unprecedented 33.1%. “Upward revisions to non-residential fixed investment and residential investment were offset,” writes Stephen M. Miller, director of the University of Nevada, Las Vegas Center for Business and Economic Research (CBER), “by downward revisions to consumer spending, state and local government spending, private inventory investment and net exports.”
In other words, financial and real estate markets are doing a lot better than the rest of the economy.
The GDP jump mostly reflected a better-than-expected recovery from the pandemic-caused historically worst 31.4% second-quarter drop in GDP, “boosted by the CARES Act and the Fed’s unlimited Quantitative Easing,” according to Miller. GDP still remained 3.5% below its peak in the final quarter of 2019.
All data below comes from UNLV’s CBER and the US Bureau of Labor Statistics unless otherwise noted.
Unemployment: According to October 2020, data, Nevada’s statewide unemployment declined to 12% statewide and dropped from 14.5% to 13.9% in Clark County, which includes greater Las Vegas and two-thirds of Nevada’s 3.3 million people. That’s down two-thirds from its April peak of an unprecedented 34.2%, but still higher than any major US metropolitan area, and double the national average of 6.7%. In Vegas, leisure and hospitality continue to be hit the worst, with 21.4% less employment than a year earlier. Leisure and hospitality make up over 25% of Nevada’s employees, so that’s over 62,000 fewer jobs.
Average weekly wages in Clark County came out to $1026, compared to the US average of $1188, according to the US Bureau of Labor Statistics. Looking at selected industries, the Bureau of Labor Statistics estimates average hourly wages in the Las Vegas are currently $22.43, compared to $25.72 nationwide.
Public finances. Taxable sales dropped 6.6% year-over-year in September in Clark County and 4% statewide, the most recent data CBER had available.
Airport traffic. October air passengers dropped 56.8% statewide in October. At Las Vegas’s premier McCarran Airport, visitors continued to rebound from the spring shutdown but remain far below average. Total passengers served dipped 57% and visitor volume fell 50% year-over-year. Total visitation has dropped in half in 2020 from the over 42 million people who came here in 2019.
Hotel occupancy. According to the LVCVA, visitors for October dropped 49.4% year over year, and hotel occupancy rate dropped 43.1%. The average room rate came out to $104, down from $143 in 2019. Many premier resorts, like Palazzo, Mandalay Bay, and Mirage, are closing during the week or closing parts of their operations.
Gaming revenues statewide dropped 19.5% year-over-year in October.
Real estate gained 4.7% nationally year-over-year in October, with housing starts up 14.2% year-over-year, according to CBER. But in Clark County, residential housing permits/units dropped sharply – down 17.2% – relative to previous months and year-over-year. This is one indication the real estate market may be peaking.
Inflation. Prices have risen a little over 1% in the West, but food has risen 4.8% as pandemic-related challenges stress supply and demand.
Getting beyond the pandemic. “A potential second COVID-19 relief package,” UNLV’s Miller writes, and a successful vaccine deployment “could reinvigorate the economy in the near future.”
A K-shaped economic recovery appears underway. As the pandemic forces and accelerates technological and cultural changes, some industries and businesses within industries are thriving – like food delivery, digital services, and socially distanced activities like golf – while many others, including small businesses and event industries like music, sports, and conventions – suffer.
According to Fitch Ratings, Vegas can’t expect a full recovery until the convention business returns – and that depends on an end to the pandemic. Fitch forecasts 2024, but locals hope it’s a lot sooner.
Toward that end, Nevada is prioritizing casino workers to get vaccinated. The idea is, since they come into contact with so many people from all over the world, vaccination will interrupt the spread. And vaccination “will accelerate the consumer confidence needed to drive the visitor volume our economy depends on,” according to Virginia Valentine, president of the Nevada Resort Association.
Steve Hill, president and CEO of the LVCVA, hopes successful vaccine deployment will start Vegas’s convention recovery, starting with the approximately 50,000-strong World of Concrete gathering in June at the Las Vegas Convention Center’s new $980 million West Hall. The annual gathering brings in about $90 million annually, according to LVCVA. “I’m optimistic, and I’m really looking forward to World of Concrete in June,” Hill said. “It looks to us like visitation will be able to pick up by then. Once it does, I think it will stay.”