Nevada’s gaming revenues have increased for a fourth consecutive fiscal year, bucking industry trends that have negatively impacted regional markets since the 2008 economic crash.
In June, the Las Vegas Strip recorded a whopping 22% increase in gaming revenue over the previous year, generating $532 million. Downtown Vegas casinos also saw a 12% rise, reaching $41 million. However, the other major casino markets in the state, Reno and South Lake Tahoe, showed no growth, with a decline of 2% and 3%, respectively.
Usually, these figures would be considered typical, considering that casino earnings are expected to grow. However, the US casino industry has been engulfed in a six-year battle that has led to numerous casino shutdowns, declining revenues, and thousands of casino workers being laid off.
It seems that the rules don’t apply in Sin City.
So how does the gaming industry, particularly in Las Vegas, Nevada, continue to progress?
Nevada’s gaming industry by the numbers
The gaming revenue figures of Nevada sharply contrast with those of nearly all other parts of the country:
- In 2013, the state reported an increase of 2.6% in casino revenues from 2012, amounting to $11.14 billion. This was the first time since 2009 that the annual revenues surpassed the $11 billion benchmark.
- Revenues surpassed the $11.2 billion mark for the 12 month period ending June 30 (fiscal 2013-14), indicating an even higher increase.
- Casinos on the strip reported revenues of $6.6 billion in the last fiscal year, pushing the industry ever closer to the peaks it experienced before 2008.
- In June 2014, casinos on the Las Vegas Strip saw a 22% increase in revenues compared to the previous year. In contrast, Atlantic City’s casino revenues dropped by 5.7% over the same period. Similarly, the casino industry in Connecticut also experienced a significant decline.
- Nevada’s emerging iGaming industry is starting to make significant progress. In June, the two primary online poker rooms in the state earned more than $1 million, setting a record as it’s the first time in the 14-month history of the market that it has exceeded the one million mark.
Okay, so Nevada’s iGaming revenues definitely benefited from the presence of the live-WSOP. However, the main point is that Nevada, unlike other casino markets, has the ability to attract traffic to its online sites through live special events.
The Las Vegas advantage
Vegas possesses numerous unique benefits compared to other casino markets, some of which reduce its dependence on gaming revenues for profitability.
Advantage #1: International Tourism
On average, international tourists are unlikely to journey 7,000 miles to explore Atlantic City or Mississippi, but they are willing to traverse such a distance for a vacation in Las Vegas. In fact, in 2013, 20% of those visiting Las Vegas, also known as Sin City, were from countries outside the United States.
The Great Recession did not impact countries such as China and South Korea as severely as it did the United States. The strong economic downturn in the US compelled Americans to cut back on their expenses, consequently reducing their gambling budgets.
Foreigners have demonstrated a higher propensity to spend money on gambling and other forms of entertainment than their counterparts from the States.
Benefit #2: Reduced Dependence on Revenue from Gambling
Contrary to common perception, Las Vegas is more of a holiday spot than a paradise for gamblers. Last year, just 15% of those surveyed stated that their main reason for visiting the city was gambling.
With a plethora of nightclubs, high-quality restaurants, music and entertainment venues, Las Vegas lures a more diverse crowd than any other gambling city worldwide. What’s more, the majority of tourists in Vegas are repeat visitors.
Interestingly, catering to non-gamblers has surprisingly boosted gambling activity. Consider this: Even those who don’t normally gamble might be tempted to test their luck at blackjack or roulette if they’re already on vacation in Vegas.
Why would these same tourists visit destinations where gambling is the only form of entertainment? Likely, not much reason.
This philosophy of prioritizing entertainment over gambling is what continually attracts tourists. In Vegas, gambling is merely one of the numerous activities available.
Third Advantage: More Rigorous Regulations in Macau
We previously referred to China, but as Macau loses its allure for high-rollers, Chinese tourists are now visiting Vegas more frequently than ever.
Regulatory changes sanctioned by the Chinese government, which have made it challenging for tourists to bring significant amounts of money into the city, have triggered Macau’s struggles.
Las Vegas is becoming more and more welcoming to its Chinese tourists. Chinese New Year-themed promotions and shows influenced by Eastern culture are now commonplace. This has attracted wealthy Chinese businessmen, who are investing large sums of money in new Vegas ventures.
The Baccarat business on the Vegas Strip has experienced significant growth due to the influx of Chinese high-rollers. In 2013, Baccarat revenues soared by 16.2% to reach a new record of $1.6 billion. To underscore the importance of Baccarat to Nevada’s resurgence, it’s worth noting that if Baccarat revenues had stayed the same year-over-year, the industry would have seen a mere 0.6% growth instead of 2.9%.
Benefit #4: What is Cannibalization?
Do you recall when New Jersey was the powerhouse of the East Coast’s gambling scene? Just ten years ago, Atlantic City was viewed as the sole real competitor to Las Vegas. However, casinos started springing up in Pennsylvania, Maryland, and Delaware.
The casino industry in Pennsylvania would swiftly prosper, drawing business from Atlantic City. However, even Pennsylvania would not be immune, as it would also experience a loss in business to new casinos in Ohio and New York State. Such is the cycle.
However, in Nevada, cannibalization effects are minimal to non-existent. Take its neighboring states into account. Arizona, Oregon, and Idaho are not particularly renowned for their thriving casino scenes.
What about Utah? Ha!
Indeed, the only potential threat to Nevada could be California, given its vibrant gambling community. However, it’s important to remember that commercial casinos are not legal in California.
Certainly, casinos in Las Vegas do take business from each other, but that’s the extent of it.
So, you’re asking what will happen when online gambling becomes legal in California and if it will negatively impact Las Vegas revenues? While it’s possible that a thriving iGaming industry in California might slightly affect Nevada’s casino revenues, I sincerely doubt it will have any significant impact. Here’s why I think so, based on two reasons:
- In California, both iGaming bills currently under consideration are exclusively for online poker.
- The evidence has already confirmed that there’s minimal overlap between online and brick-and-mortar gamblers.
It appears that Vegas is not in immediate danger, at least not in the foreseeable future.
