My extended commentary on February’s Nevada gaming numbers is out in the Las Vegas Business Press. Here’s the start:
The February gaming revenue numbers for Nevada caused some cheer around the state and on Wall Street. Total casino win rose 13.9 percent, the first double-digit increase in nearly three years. But if this is cause for celebration, it should be a muted one; there are still signs that the state's gaming decline is far from over, and this resurgence is resting on an increasingly narrow reed.
For one, much of the increase was due to the calendar. The Chinese New Year, always a big gambling holiday, fell in February, while in 2009 it fell in January. With much of the increase in win coming from baccarat, a favorite game of visiting Asian high rollers, it is likely that the true organic increase in gambling was far more modest.
I wrote this as an counterbalance to what I perceive as the overly Panglossian view that you often get from reading other people’s interpretations of the numbers. Even in the face of decline, some were asserting that this was still the best possible result in the best of all possible worlds. And this isn’t much of a resurgence, since if you look at the actual levels of play for most games besides baccarat, they’re not that impressive.
I’ve been thinking a lot about something Tyler Cowen said at the APEE conference I attended last week. He talked about 4 different kinds of potential recovery from the recession: U, V, W, and L-shaped. Both U and V are rapid returns to the status quo ante bust, while W is a “double-dip recession.”
Well if you thought double-dipping was the worst scenario, you’re wrong: Cowen raised the possibility of an L-shaped recovery, which means that we’re not really going to recover at all–we’ll just limp along for the next 20 or 30 years with no economic growth. Ouch.
I don’t know what the prognosis for the national economy is, but it seems to me that there’s a very real danger that we’re looking at an L-shaped recovery for Las Vegas. I don’t want to spoil your mood too much so I won’t even mention Cowen’s pessimism about the local real estate market, but the tourist economy is facing some real obstacles to growth that won’t be willed away.
I’d like nothing more than to be proven wrong, and for the big increase in baccarat to lead to a revival of growth on the Strip. But until a broader base of people have more discretionary income, it’s hard to see how overall visitation to Las Vegas can increase.