Has anyone looked at the fiscal year 2008 Gaming Abstract for Nevada? It paints a picture that somehow manages to be more grim and scary than the majority of news reports coming out about the state’s leading industry. According to the Gaming Control Board, Nevada’s casinos with revenue in excess of $1 million had a combined net income before taxes and extraordinary items of $721,181,848 in fiscal year 2008. It sounds pretty good until you compare it with the figure from fiscal year 2007, a year in which income was $2,297,481,525.

That is a whopping 68 percent decrease. The last time there was such a dramatic drop in net income was in fiscal year 2002, a reporting period that included September 11, 2001. Net income in that year was actually a negative number, with casinos losing a combined $33,541,881. Compared to the $554,428,416 in fiscal year 2001, that was a 106 percent drop. If you remove that one anomaly, you find a period of constant growth stretching back to 2000.

More troubling still is that those numbers only include the first half of 2008. The fiscal year runs from July through June, and considering that the last part of 2008 was worse than the beginning of the year, it seems reasonable to expect the fiscal year 2009 numbers to be worse, too.

So is the ride finally over? Is Las Vegas overbuilt?

This question comes up every time numbers from Las Vegas or Nevada are bad. So far, the answer every time has been a resounding “No.” Las Vegas has always proved the skeptics wrong and come back bigger, better and stronger than ever.

I was recently talking with Oskar Garcia, a reporter for the Associated Press, who put that same question to MGM Mirage CEO Jim Murren. Garcia noted that perhaps at some point that statement could actually be true. Murren responded that the global population is increasing as well, that demand will grow accordingly and that ultimately he doesn’t think Las Vegas is overbuilt.

I don’t have the same expertise as Murren, but the way it looks to me is that the number of casinos seems to be growing at a pretty good clip, too. The directory in Tribal Government Gaming—a Casino Connection International publication—lists some 300 tribal casinos in the U.S. alone.

Gaming is no longer limited to Nevada, Atlantic City or Mississippi. And even states with no tribal presence are getting in on the game, too, as more and more municipalities look to gaming as a way to fill city coffers to provide essential services without increasing taxes. Add this to the growth of markets like Macau and Singapore and the new Wild West that is online gaming and you’ve got the possibility for supply to easily outpace demand.

That seems to be the major difference between now and the last time anyone asked if Las Vegas is overbuilt. When Life magazine asked the question in 1952 and concluded that the city was in fact overbuilt, it was the only gaming jurisdiction in the country. That is no longer the case.

There are some strong indications that at least in the short term, Las Vegas certainly is overbuilt. One needs to look no further than the corner of Flamingo and Las Vegas Boulevard for proof.

Harrah’s Entertainment is holding off on completing the 600 rooms in its sixth tower at Caesars Palace until demand increases. I can’t think of any better indication that the market is over-saturated than when a leading company like Harrah’s delays the introduction of more product.

Just because the answer to the question has historically been “No” does not guarantee that the answer will always be “No.”

The answer to the question of whether the sun will rise tomorrow has been “Yes” for several billion years (or at least 6,000 years if you think the verdict is still out on that whole science thing). The answer will continue to be “Yes” for some time to come, but some day it will be “No.”

Similarly, at some point, it is possible that Las Vegas will be overbuilt.

I find little comfort in the notion that history always repeats itself. To me, at least, it seems logically flawed. Past events do not necessarily provide any indication of what will happen in the future. They can be used to draw inferences and to build predicative models; past events can be used as supporting evidence in best-guess scenarios, but that is about the end of their utility.

We can learn a great deal from history. I do not intend to dismiss the cliché that those who don’t learn from history are destined to repeat it. This aphorism is quite different, however, from saying that history repeats itself.

Hopefully, as it pertains to Las Vegas, I am wrong. I wouldn’t expect proof to come in the fiscal year 2009 numbers, but maybe as the current round of development comes to a close we’ll see demand increase and the 10,000-plus rooms being introduced this year and next will be absorbed into the market.

I’m not saying that I hope Las Vegas is overbuilt. It is my home, too, and as it goes, so do I.

All I am saying is that it is possible that at some point Las Vegas will be overbuilt, and it is possible that we have already reached at that point.

By Greg Jones

Greg Jones is managing editor of Casino Connection Nevada, as well as associate editor of Global Gaming Business magazine.