EDITOR'S LETTER: Tapped Out
Las Vegas’ unemployment rate hit a record 14.5 percent in June, reflecting the loss of some 19,000 jobs since June 2009. The number of jobless in the metropolitan area now exceeds 140,000. In percentage terms, unemployment in the world’s casino capital is right up there with Detroit and Flint and Yuma, Ariz., and a dozen or so of California’s worst municipal basket cases.
When we consider that it wasn’t so long ago that Las Vegas was the poster child for American economic dynamism, it takes only a little reverse mental engineering to comprehend the magnitude of its collapse. As a nation we were all off on a mad gamble, a big, fat metaphorical “Vegas, baby”. We’d be there still if the financial legerdemain that was bankrolling runaway speculation in residential mortgages could have sustained our zany, debt-fueled lifestyles. But it came time to pay the house.
We know the rest.
The Press of Atlantic City last month reported that thousands of slot machines are disappearing from casinos in established markets across the Northeast - from Atlantic City, Connecticut, Delaware, Rhode Island, West Virginia and parts of New York - principally in response to the emergence of Pennsylvania and metropolitan New York (i.e. Yonkers) as major competitors.
“There are over 21,000 slot machines within a three-hour drive of Atlantic City that weren’t there four years ago,” said Shawn McCloud of Spectrum Gaming Group, the consulting firm that compiled the numbers cited by The Press. The story didn’t specify the corresponding decline region-wide (although it appears Atlantic City alone has shed about 13,000 devices in the last five years). It does seem clear, however, that in the largest concentration of drive-up population in the country just about everyone’s slice of the pie is going to get thinner.
Last year, the resilience of most regional markets offered a glimmer of light in the gathering economic darkness. They still do, but the light is dimming. Revenue at Louisiana’s casinos was down 8.3 percent in the financial year that ended June 30. In what may be a more telling statistic, the thousands of video poker machines allowed in the state’s bars, restaurants and truck stops were down almost 10 percent. Foxwoods’ win for the year was the lowest since 1997. Mohegan Sun’s was the lowest since 2002. In Missouri, back out Pinnacle Entertainment’s River City casino which opened in St. Louis County in March and fiscal 2010 win is down about 1 percent, or at best maybe flat if you factor in all the days that flooding closed the President. And Atlantic City’s woes continue. Gambling revenue there was down more than 8 percent through the first half, down 11 percent in June, the final month of the resort’s regional monopoly on table games.
On the battered Las Vegas Strip, where same-store GGR was down 3.2 percent in the fiscal year through May on easy comps - it was down 15.3 percent over the same period in 2009 - they’re looking for culprits in the ravaged finances and diminished expectations of people 50 and older, the folks who make up the industry’s core demographic. This was examined in some depth recently by analysts at CB Richard Ellis. Their findings, reported last month by the Las Vegas Sun, weren’t surprising; they weren’t pretty either: a shaky jobs market, declining home prices, lost equity, stock market losses, shrunken nest eggs, insufficient savings, grim retirement prospects.
Those who have profited from the waves of blue hair that funded the casino boom of the last 20 years take note:
Without a big increase in home prices - “the single factor accounting for a large chunk of retiree wealth” - the report says there can be no significant rebound in gambling revenue.
“Recent retirees have had to reset their consumption expectations (if they have been able to retire at all),” it concludes, “and as such their gambling spending habits could be negatively impacted for years to come.”