Vol. 4, No. 8, August 2008
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Don’t Worry, Be Happy
But you know what? I’ve been through a lot worse times than this and things have always gotten better. And I’m not even talking about a world war or a depression.
Anyone who lived through the 1970s knows true confusion on many fronts. The Vietnam War was winding down but still a nightly feature on every news program. Gas prices in the early ‘70s skyrocketed (wow, gas was over $1!), due to a shortage. Mortgage rates began to rise in the mid ‘70s, topping out at 15 percent to 20 percent. “Earth Day” was established, protesting the disgusting pollution of the air, water and ground. And an unpopular president resigned from office.
If any of this sounds familiar, it should, because we are dealing with many of the same (or similar) problems today. While some things are worse, others are not. But my point to this entire exercise is that things got better. It took a while, but the ‘70s gave way to the ‘80s, when most things improved, and then to the ‘90s, when there was that legendary boom.
But lets get a little more specific and a little closer to home.
Few remember that in the late 1970s, Nevada was worried about the introduction of gaming into Atlantic City. Many city fathers in Las Vegas were afraid their East Coast market would dry up and people would simply drive to Atlantic City rather than fly to Las Vegas. For most of the early ‘80s, people in Vegas were waiting for the other shoe to drop. Then Steve Wynn returned to build the Mirage, and Las Vegas re-invented itself for the first time.
So life is a cycle. Things go up and go down. Things change and remain the same. With such negative media, it’s hard to escape the depressing news every day. But we can try.
Let’s focus on the problems facing Nevada, and why, while they are serious, they are far from fatal.
Real estate crash: Those of us who bought into the “sky is the limit” view of the Las Vegas real estate market and purchased a home at the top of the market (raising my hand here) may have been a little gullible. Try to sell that home at anything near the price for which you bought it. Can’t be done. I can attest to that.
But there are many people who bought their homes at a reasonable price before the market topped out and saw the value of their homes soar. Now those values are down a bit from the high, but are still probably more valuable than the original purchase price. And we’ve all got to live somewhere, so it only matters what the value of your home is at the moment you decide to sell it. So let’s not fret over a decrease in value if we’re not going to sell right away.
How long can this market be depressed? It’s my guess (and that of real estate investors much more knowledgeable than me) that it can’t last much longer. The opening of CityCenter next year will bring almost 20,000 new jobs to the Strip; Wynn’s Encore another 5,000. And then you have Boyd’s Echelon and Station’s Aliante and Durango Station. All those people need places to live and no one is building new homes any time soon. So, like the economy, the real estate market will slowly improve, but it will take time.
Competition: California’s Indian casinos are growing; there’s no doubt about that. The recently signed and ratified compacts mean that some casinos could have up to 7,500 slot machines in the Golden State.
But let’s examine the history of Indian gaming and its impact on Nevada. In Las Vegas, the small casinos were not much of a factor. As the casinos grow, they will become more attractive to visitors who normally come to Las Vegas, but it will be three to five years before they are all up and running, so we have time to absorb the impact. And for most Californians, it’s still a healthy drive to most Indian casinos, so they may opt to go all the way to Vegas as long as they’re getting into their car.
Reno is a bit more dicey. Already hard hit by quality gaming halls like Thunder Valley near Sacramento, several other large casinos are slated for Northern California. But again, it’s going to take time, and Reno’s leaders have shown a determination to do what is necessary to make that town more attractive to all visitors, not just gamblers.
And unlike the far-flung Indian casinos, the concentration of casinos in Las Vegas and Reno give visitors much more choice than they’ll find anywhere else on the West Coast.
Airlines: This one is a bit more difficult for the state because the “fix” is out of our hands. It is tied to the price of fuel and therefore is a decision the airlines make independent of our input. Cutting scheduled flights into Las Vegas can certainly be a long-term problem, but the Convention and Visitors Authority is already addressing it via innovative marketing programs like visitlasvegas.com, a website that bundles together special offers and discounts in one place.
Yes, losing scheduled airline service to many cities in the nation is a blow, but not insurmountable. By packaging discounts and attractions together, we can reduce the overall cost of a visitor’s vacation so the increased price of airline tickets will not be a major impediment to travel.
Plus, continuing to build “must-see” attractions like CityCenter, Echelon and Encore will encourage visitors to return again and again.
Unions: It seems that casino employees are starting to wise up, as evidenced by last month’s defeat of a dealers’ union at the Rio. Unions are clearly not producing the desired effect for the casino-floor workers who voted them in. And here’s their dirty little secret: they’re not even trying! The unions are more interested in signing up employees in other casinos so they can wield more power and negotiate one big contract rather than several small ones. So when you hear the unions say the casinos are not negotiating in good faith, be very suspicious. Remember, you’re not married to these unions. They can always be de-certified.
The economy: OK, this, in my opinion, is the biggie. Rising energy prices affect everything everyone consumes. So the cost of living itself is skyrocketing, and until that stabilizes, I believe even gamblers will cut back on what they love most: visiting Las Vegas.
But when that happens, Las Vegas is poised for a massive rebound. People are going to want to cut loose and go to a jurisdiction where they can do more than just gamble; a jurisdiction that has great restaurants, wonderful entertainment, outdoor recreation, fantastic hotels and much more. And that, my friends, is Nevada in a nutshell, which will be more than ready to surmount all these challenges and more.
So let’s put our heads down, do our jobs, and we’ll all be happy when this difficult period is over.
