Las Vegas’ Economy: How Much Do the Casinos Contribute?

Oct 16

It’s fairly common knowledge that tourism is the lifeblood of Las Vegas. It is what makes it tick. It is what makes it ebb and flow. It is what makes its heart beat. Tourists from all over the world converge in Las Vegas to bear witness to the Broadway-like song and dance show, concerts, magic shows and all manners of entertainment spectacles.

It really does not take long for Las Vegas to enthrall as first-time visitors are greeted from the get-go by the city’s bright, glittering lights before they get to experience all the nightclubs, the fine dining and of course, the shopping.

But anyone who has ever been to Las Vegas knows what most people come to Sin City for: the gambling. There are many hotels in the city and they do more than just provide a roof over tourists’ heads. Virtually every hotel has its own gambling facility. In Las Vegas, hotels and gambling go together like white on rice. You cannot stop anyone from betting through that simple slot machine. It is tempting and once your hooked, your world changes entirely.

Obviously, the casino industry of Las Vegas contributes a substantial amount to the flourishing economy. It is part and parcel of the city’s income-generating trades. It has become ingrained deep into the culture.

Gambling activities in Las Vegas have also evolved over the past several years. While casinos still play a huge role, these days, e-sports, sports betting, bingo, and keno have also claimed their own piece of the pie. Gambling has truly come of age with its transition to digital platforms.

Las Vegas is a Tourism Hotspot

As mentioned above, casinos have an enormous impact on the economy of Las Vegas. And this is primarily because of the thousands of tourists that flock to the city each and every year. According to research done on the subject matter, statistics indicate that the Las Vegas Metro area in Nevada produced a GDP per capita of $44,810.

Although tourism numbers took a dip back in 2017, forecasts for the coming years have been bullish especially with Las Vegas’ propensity to attract some of the biggest live events in the world such as sports events and concerts.

Southern Nevada Casinos would witness a 3.7% in gross gaming revenue (GGR). In 2019, it is an additional 2.5% GGR increase. Experts have seen businesses in the country — including casinos — have a moving effect during the recession from 2008 to 2012. But according to the Nevada Gaming Control Board, there has been a turnaround based on research done by the University of Nevada-Las Vegas.

Even this year, property costs have fluctuated, going through different peaks and valleys. The prices of properties have actually been trending higher since the beginning of 2014. It was said that there would be a major property boom in Las Vegas earlier this year according to forecasts done by the most respected analysts.

20% of all jobs in Sin City are gaming related. An amount of $33.7 billion was for visitor spending. A report from the Nevada Resort Association (NRA) said that 301,700 workers in Las Vegas are employed in the gaming industry. The indirect employment was responsible for the other 68,900 jobs in Nevada.

Major casinos in Las Vegas, with a focus on Clark County, employ a lot of workers numbering anywhere between 4,000 to 8,500. This estimate comes from data provided by the Nevada Department of Employment. This is to show how crucial the gambling industry is for employment and economic gains.

Across Nevada, stretching over 272 casinos, there was a net income growth of 59.1% reported. Six massive projects have so far been aligned until 2020. That’s how crucial casinos are to the success of Las Vegas and Nevada. This means a room availability surge of 6%, which is equivalent to 9,000 new rooms. Included in this project is a Marriott resort with 4,000 rooms, a Resorts World Las Vegas casino that features 3,000 rooms, and Paradise Park with 1,500 rooms. The Hard Rock Hotel & Casino would be acquired by Virgin Hotels at the end of 2019 and would undergo a complete renovation.

Clearly, the casino industry brings a lot to a city’s GDP. Yes, there are ups and downs in an economy but Las Vegas builds its revenue through tourism and casino.

The Economic Impact of Gaming

For as long as commercial casino gaming has existed in the United States, Nevada, and particularly Las Vegas, has been the largest commercial casino gaming market in the nation. According to the American Gaming Association, Nevada is home to 46.7 percent of the country’s commercial casinos as of 2017.

In addition, 55.5% of all casino employees are employed in Nevada, and 54.3% of all wages, tips, and benefits paid by casinos are paid to employees in Nevada ($18.7 billion out of $34.3 billion). In 2017, Nevada generated $11.6 billion of commercial casino gaming revenue out of a national total of $40.3 billion, accounting for 28.8 percent of all commercial gaming revenue in the United States.

On a statewide basis, casino gaming has become a progressively smaller share of total revenue at resort properties compared to non-gaming amenities. While casino gaming revenues have surged in the last few years, non-gaming revenues such as room, food, beverage, and entertainment have increased at a more rapid pace, accounting for an increasingly larger majority of total revenue earned by hotel-casinos.

Over the last ten years, non-gaming revenues have grown at a compound annual growth rate of 1.8%, while gaming revenues are off 0.4% during the same time frame. Despite the shift in consumer behavior and programming within resort properties, gaming revenues accounted for 42.8% of total revenue during the 2018 fiscal year. However, this figure has declined from 61.3% of total revenue in the fiscal year 1990.

The share of total revenue attributable to gaming has trended downward consistently since the 1990s, something that is primarily due to trends on the Las Vegas Strip, the state’s largest gaming submarket.

As of the fiscal year 2018, gaming accounted for 34.3% of total Strip casino revenue, down from 57.8% in the fiscal year 1990 and 39.7% in the fiscal year 2008. Additionally, non-gaming revenues on the Strip have grown at a compound annual growth rate of 2.4 percent since the fiscal year 2008.

The total economic impact number has fallen from the last report by $900 million because of a record-high visitation figure, more hotel room inventory, and hotel occupancy rates all higher in 2016.

According to 2018 report, gaming and tourism accounted for 37.5 percent of Nevada’s general fund revenue. The sector accounted for $1.8 billion in fees and taxes collected by Nevada, including gross gaming taxes, live entertainment taxes, and room taxes.

Hospitality and leisure companies made up 450,100 total jobs statewide, which includes resort and casino jobs, positions associated with tourism and jobs associated with vendors that service Nevada’s primary industry.

Gaming and tourism account for 25.8 percent of the state’s total employment figure. The jobs cover $18.8 billion in total wage and salary and payments.

In addition to the economic figures, the Resort Association’s Nevada Gaming Fact Book emphasized a number of elements of the gaming industry, including the development of legal sports wagering, the emergence of eSports and visitor trends.

The Rise of Sports Betting

Demand for sports betting is on the rise, and the Murphy vs. NCAA ruling in May 2018 has considerably changed the nature of sports betting laws in the United States. Previously banned in all but four states (sports betting has been legal in Nevada since 1949), states have been given the authority to legalize and regulate sports betting. So far, New Jersey, West Virginia, Rhode Island, Mississippi, Pennsylvania, Delaware, and New Mexico have joined the sports betting industry. New York and Arkansas have also passed legislation to allow sports betting.

According to data from the Nevada Gaming Control Board, revenue generated by sports betting accounted for roughly 2.4% of total gaming revenue for the state in the fiscal year 2018. Although this is a growing share of the revenue, the new legislation to allow sports betting in other states is not likely to have a substantial impact on Nevada’s gaming activity. Nevada provides competitive wager lines, and Las Vegas remains one of the top destinations to watch live sporting events being streamed. Where this legislation could have an impact is in other areas of Nevada’s resort operations, especially on major sports event weekends that attract large quantities of visitors.

These visitors, in turn, buy hotel rooms, take in entertainment, eat meals at restaurants and gamble on the casino floor when not betting on their favorite teams. Before making predictions with too much certitude, it is important to see how many states ultimately legalize sports betting. There is not yet enough data to determine with specificity how the legalization of sports betting in other states will impact Nevada in the future. However, a number of established gaming companies and sports betting operators have already begun to seize opportunities to penetrate new markets and explore possible avenues that have the potential to expand the reach of their brands.

Major players, which include MGM Resorts International, Caesars Entertainment and William Hill US, have established relationships with professional sports leagues and teams across the country that have helped to pave the way for new partnerships likely to be replicated by others in the future.

The Emergence of e-Sports

E-sports has recently gained significant attention as well as captured the interest of many destinations due to its popularity among a younger generation and its revenue-generating potential. Esports generated an estimated $655 million nationwide in 2017, and the industry is only set to grow. Prize pools rival those of some of the biggest traditional sports, with player earnings driving up the stakes of the emerging sport.

For example, Ninja, an esports gamer, has a Twitch account that reports an annual income of $12 million. Viewer audiences have also experienced robust numbers. By 2022, Goldman Sachs, an investment banking company, estimates esports will have an annual audience of 276 million viewers, a prize pool of $413 million and total monetization of $3 billion. Monetization is expected to surge due to greater demand for media rights and sponsorship, which are projected to account for 75% of total revenues in 2022. Most importantly, 79% of esports viewership is under the age of 35, which provides gaming companies with insight into what the younger generation is looking for in terms of entertainment. With the legalization of sports betting, possible esports wagering may follow in the future.

Hotel-Casinos are Considered High-Appraised Taxpayers

According to the Fact Book, hotel-casino companies hold seven of the top 10 spots for the highest appraised taxpayers in Southern Nevada’s Clark County and four of the top 10 spots in Northern Nevada’s Washoe County.

Hotel room tax revenue supports public education initiatives and school construction, transportation projects, local government projects, such as parks, promoting tourism, and is providing $750 million toward the construction costs for the $1.8 billion Las Vegas Stadium project. The 65,000-seat domed stadium is expected to open in 2020 and will house the re-located Oakland Raiders.

Nevada’s resort industry also has capital projects currently underway or planned in Northern and Southern Nevada, which total an estimated $20.7 billion.

The report highlighted the corporate and social responsibility work of Resort Association members that donated millions of dollars to local nonprofits, support and promote employee volunteerism programs and provide in-kind donations of goods and services to organizations. The report also highlights various environmental and sustainable programs.

The Washington D.C.-based American Gaming Association produced a nationwide report on gaming’s impact last year, which included tribal owed casinos and gaming equipment manufactures.

The report, the first since 2014, showed gaming having an economic impact of $261 billion, generating $40.8 billion in tax revenues to federal, state and local governments, and supporting nearly 1.8 million jobs across the country.