Gaming revenues in Nevada were up for a fourth straight fiscal year, defying industry trends that have plagued regional markets since the economic crash of 2008.
In June, the Las Vegas Strip pulled in $532 million in gaming revenue, up a staggering 22 % over the year prior. Downtown Vegas casinos also fared well, up 12 % to $41 million. The state’s other major casino markets, Reno and South Lake Tahoe, failed to exhibit growth – dipping 2 and 3 %, respectively.
Under normal circumstances, these numbers would appear par for the course. After all, aren’t casino revenues supposed to exhibit growth? But the US’s casino industry has been immersed in a six-year long struggle that has seen widespread casino closures, plummeting revenues and thousands of casino employees handed pink slips.
Apparently, the rules don’t apply in Sin City.
So how does Nevada’s, and in particular Las Vegas’s, gaming industry manage to keep moving forward?
Nevada’s gaming industry by the numbers
Nevada’s gaming revenue figures stand in strong contrast to those of almost anywhere else in the country:
- In 2013, the state reported casino revenues of $11.14 billion, up 2.6 % over 2012. It was the first time yearly revenues exceeded the $11 billion marker since 2009
- For the 12 month period that ended June 30 (fiscal 2013-14), revenues were even higher, eclipsing the $11.2 billion barrier
- Casinos on the strip would report revenues of $6.6 billion in the last fiscal year, elevating the industry oh-so-closer to the highs it enjoyed pre-2008
- In June 2014, Las Vegas Strip casinos were up 22 % compared to a year prior. Compare that to the situation in Atlantic City, where year-over-year casino revenues fell 5.7 %. Connecticut’s casino industry too has regressed sharply
- Even Nevada’s nascent iGaming industry is beginning to hit its stride. In June, the state’s two major online poker rooms won over $1 million, marking the first time in the market’s 14-month history that it has cleared the seven-figure benchmark
Alright, so the presence of the live-WSOP certainly didn’t hurt Nevada’s iGaming revenues. But the point is that Nevada, unlike other casino markets, is capable of driving traffic to it online sites via live special events.
The Las Vegas advantage
Vegas holds several distinct advantages over other casino markets, some of which lessen its reliance on gaming revenues to be profitable.
Advantage #1: International Tourism
The average international tourist isn’t going to travel 7,000 miles to visit Atlantic City or Mississippi, but they will travel that distance to vacation in Las Vegas. In 2013, 20 % of visitors to Sin City were from outside the United States.
Countries like China and South Korea were not as deeply afflicted by the Great Recession as the United States, where the strong economic downturn forced Americans to tighten their belts, and in effect, lower their gambling budgets.
Compared to their counterparts from the States, foreigners have shown a greater willingness to spend money on gambling and other forms of entertainment.
Advantage #2: Less Reliance on Gambling Revenue
Despite popular belief, Las Vegas is more of a vacationing destination than it is a gambler’s haven. Last year, only 15 % of those profiled listed that their primary purpose for visiting the city was to gamble.
Offering a bevy of nightclubs, fine eateries, music and entertainment venues, Las Vegas attracts a broader range of visitors than perhaps any other gambling city in the world. Better yet, most Vegas tourists are return visitors.
Interestingly enough, catering to non-gamblers has actually helped increase gambling activity. Look at it this way: Even some non-gamblers may feel inclined to try their luck at the blackjack or roulette tables if they’re already vacationing in Vegas.
What reason do these same tourists have to visit destinations where gambling is the only form of entertainment? Not much.
It’s this entertainment first, gambling second philosophy that keeps tourists coming back for more. In Vegas, gambling is just one of many things to do.
Advantage #3: Stricter Regulations in Macau
We already mentioned China before, but with Macau now losing its high-roller appeal, the Chinese are traveling to Vegas more than ever before.
Macau’s struggles were precipitated by regulatory changes authorized by the Chinese government that have made it difficult for tourists to bring large sums of money into the city.
Meanwhile, Las Vegas welcomes its Chinese tourists with increasingly open arms. Chinese New Year themed promos and Eastern influenced shows have become commonplace, prompting wealthy Chinese businessmen to invest exorbitant amount of money in new Vegas ventures.
With so many Chinese high-rollers frequenting Vegas, the Strip’s Baccarat business has boomed. In 2013, Baccarat revenues ballooned 16.2 % to $1.6 billion; a new record. To emphasize just how critical a role Baccarat has played in Nevada’s revival, consider that if year-over-year Baccarat revenues remained flat, the industry would have only grown 0.6 %, as compared to 2.9 %.
Advantage #4: Cannibalization, What Cannibalization?
Remember when New Jersey dominated the East Coast’s gambling industry? Merely a decade ago, Atlantic City was considered the only true alternative to Las Vegas. Then, casinos began propping up in Pennsylvania, Maryland and Delaware.
Pennsylvania’s casino industry would quickly thrive, siphoning business away from Atlantic City. But even PA wasn’t safe, as it too would lose business to new casinos in Ohio and New York State. So it goes.
But in Nevada, the effects of cannibalization have little to no effect. Consider its neighbors. Arizona, Oregon and Idaho aren’t exactly known for their burgeoning casino scenes.
What about Utah? Ha!
In fact, the only would-be threat to Nevada is California, which does boast an active gambling community. But lest we forget, commercial casinos aren’t legal in the Golden State.
Sure, Las Vegas casinos cannibalize business from one another, but that’s where it ends.
Well, what about when online gambling goes live in California? Won’t that hurt Las Vegas revenues? A flourishing iGaming scene in California could certainly have a very marginal effect on Nevada’s casino revenues, but I hardly think it’ll have any impact at all, for the following two reasons:
- Both iGaming bills on the table in California are online poker-only.
- It’s already been proven that there’s little overlap between online and b&m gamblers.
Looks like Vegas is in no immediate danger, at least not for the foreseeable future.