Schuetz: The List Of Real Threats To Las Vegas’ Economy Is Growing

“There are two classes of forecasters: those who don’t know and those who don’t know they don’t know.”

– John Kenneth Galbraith

The Las Vegas Strip has suffered an economic slowdown in gross gaming revenues over the last six months. This is a hot topic for many content providers in the gaming space. One has to be aware that looking at such things, especially in Nevada, can be tricky. It is sometimes more of an art form than a down-and-dirty number-crunching exercise.

It is well established that specific categories in Nevada’s revenue reports are highly volatile. This is especially true concerning the game of baccarat. A relatively small group of players can generate significant revenue swings depending on what happens in a few private, very high-limit gaming salons. And, as a long-time casino executive, it is a lot easier to write about this than being at the casino watching a portion of your bonus walk out the door heading for a private jet in your company’s limo.

Special city-wide events, such as a Formula 1 race, can also cause variances in performance when compared to non-race periods, as can changing macroeconomic conditions, weather, the presence of weekends within the calendar, and the like. Again, using the Formula 1 example, some of these events can also make the local population go bat-shit crazy with rage (a bit of inside humor for my Vegas friends).

Higher pricing levels in certain non-gaming products within the strip resorts can also impact gaming numbers in that the guests who come to Las Vegas may have the same budget they had last trip, but less is spent on gambling and more on higher priced meals, parking, special fees, or one of the many other line items that increasingly populate the receipts in Vegas. 

I now live in Central Pennsylvania, and the main bitch I hear from people that have returned from Las Vegas is how damn expensive everything was.

It’s the economy, stupid

As I approached my junior year in college, I thought it was an appropriate time to think about graduating. This required that I needed a major, so I grabbed a copy of my transcripts to see what I had taken the most of. The answer was classes in economics. There were several professors around that I liked and so often took their classes, and they were economists, so low and behold, it appeared that I was becoming an economist.

When I opted to go to graduate school, it only made sense that it would be in economics, and for various reasons, I stayed in graduate school for an extended period. As a result of this, one of my pronouns became economist.

Within this commentary, I will attempt to apply my training in economics to future trends in Las Vegas, understanding that as an economist, I have my good days and bad.

It is clear from listening to and reading the news that many problems in this country and Las Vegas are not economic in nature.  I know that many of the issues confronting Las Vegas and the U.S. were brought on by the Biden Crime Family, wokeness, Obama, DEI, the price of eggs, a militarized Justice Department, Liz Cheney, and a lack of clarity as to where one is allowed to pee. Of course, these are the most significant causes of all problems in the U.S. today. Who didn’t know that? 

But sometimes, economic thinking can illuminate some additional issues.

Behavioral Economics is a multidisciplinary field that primarily addresses how people make decisions. I began thinking about this field of thought right after the recent tragic air collision between a commercial airliner and an Army helicopter in Washington, D.C. Historically, it takes a great deal of painstaking research to determine the matrix of causal factors involved in causing a midair collision between two aircraft. 

We are now blessed in this country with a leader who can quickly determine the cause of an air accident without visiting the site. As soon as the sun was up following the crash and when the media was assembled, he revealed the cause as DEI and woke policies, where the hiring of unqualified women, Blacks, and people of curious sexual preference took precedence, and Biden and Obama were to blame for it. He also assured the world that firing the top aviation official and the Transportation Safety Board officials earlier in the week made no difference. 

Air travel is just the tip of the iceberg

Of interest in all of this is the reality that a gentleman with a vast megaphone told the world that bad past policies in the U.S. had created a situation that could result in plane crashes. Moreover, most people probably understand it takes between 2 and 6 years to train an air traffic controller, so this U.S. airplane problem will take some serious time to fix.

For the people of Las Vegas, it might be interesting to note that Harry Reid International Airport welcomed 54.8 million passengers in 2024. Now that our government’s highest official has told the world that prior presidents and their destructive policies had made flying in America dangerous, one should consider the possibility that this level of passenger counts may fall.

Then there is the whole issue of tariffs. Without going into too much detail, based on the notion that one of the U.S.’s trading partners, who is targeted for the new U.S. tariffs, currently sells a lot of crude oil to entities in the U.S., we may have a problem. Those who buy that crude will have to pay more for it. This should result in higher gas and jet fuel prices in the U.S. 

The area of microeconomics tells us that an increase in the price of a product, in almost all cases, will result in a reduction in the demand for the product. In other words, airline and car travel could be reduced if we start farting around with tariffs that result in higher fuel prices. Unfortunately, this has already started.

It was mentioned above that a ton of folks fly to Vegas. Even with just a slight percentage decrease in travel resulting from higher fuel-cost levels, it could add up to a large number of people, and I sense that Las Vegas may miss them.

It is also interesting to note that traffic counts of autos coming to the city are approximately 44,000 per day (or 16 million per year). Again, economics tell us that as the price of the product increases (visiting Las Vegas by car with higher gas prices), the amount consumed of that product should fall. 

It is also important to understand currency exchange rates. The recent threat of the U.S. imposing tariffs has lowered the value of the Loonie (Canadian dollar) to its lowest level since 2003. This means that Canadians are now paying more for U.S. dollar-denominated goods. When a foreign country’s currency loses value, this curtails spending by the citizens of that country, and Las Vegas trips could be caught up as one of the areas of curtailed spending.

Early indications are that recognizing things like Black History Month and celebrating Martin Luther King, Jr.’s birthday may be eliminated or reduced with respect to who can participate. What is essential to understand if you are a Las Vegan is that this holiday celebration for Dr. King is one that always falls on a Monday (specifically, the third Monday in January). People who understand the gaming business understand that a three-day weekend in January is a BFD for Las Vegas (BFD is an expression economists often use, mainly when talking about themselves).

There has also been some chatter that if Canada wants to escape a trade war, it can become a U.S. state. This is annoying many Canadians. From an early polling perspective, becoming a state is not something the folks in Canada are embracing. The annoying part is also starting to manifest itself in several ways, mainly in social media. 

Instances of booing the U.S. National Anthem at sporting events in Canada in a contest with a US team (a very non-Canadian thing to do) are growing more common. Also, a new growth industry is developing in Canada, featuring politicians and citizens who toss insults at American politicians and the U.S.

Turning allies into enemies

This patriotic fervor developing among Canadians may cause them to avoid visiting the U.S. or red states (a designation potentially relevant to Nevada with Governor Lombardo being such a big fanboy of the President). Mexico and Canada have mentioned that if tariffs are imposed, retaliation will be aimed at red states, and an oft-mentioned example is putting massive tariffs on Kentucky whiskey (you can see that this is now getting serious).

If a trade war starts, it is not too far-fetched to envision Canadian influencers, politicians, and the like adding Las Vegas to the list of products Canadians should not consume, reminding U.S. citizens of how much Canada supported the US after 9/11 as has symbolized by You Are Here: A Come from Away Story. 

If tariffs are imposed against Canadian goods, they will be less attractive to Americans because of the higher price. With a trade war, Canada will then levy tariffs against American goods, thereby reducing Canadian demand for American goods. People who have studied tariffs for a long time have realized that imposing tariffs is like starting a fire in your downstairs neighbor’s apartment to punish him.

The point is if tariffs are imposed on Canada (or Mexico), the most logical expectation is that a trip to Las Vegas will cost more for these foreigners, and if you believe that old demand function thing, that means less will be purchased. Oh, and did I mention that Mexico and Canada are the two biggest foreign markets for Las Vegas? 

Look, I could care less about your politics. In general, I am of the opinion that if a politician were to move in next door, my lawn would probably die. But I think it is stupid to generate one more historical data point to prove that tariffs are a fool’s errand.

Maybe I am wrong about all of this. Perhaps trashing the safety of the U.S. airline industry supposedly because of prior presidents’ policies will stimulate more air travel, allowing for growth in an airline-dependent industry like the Las Vegas strip. Maybe the importance of three-day weekends is just a casino industry myth.  Maybe a weakening of a foreign country’s currency against the dollar might not slow down foreign consumption. Maybe a long-recorded history of the total failure of tariffs will change, and economic historians will celebrate this time as when tariffs launched a vibrant new international order. 

Or maybe I am right, and the Las Vegas economy is facing some real threats in the near future. 

My preference is that I am wrong.

PS. Today it was announced that Type D1.1 of the H5N1 bird flu has been found in six dairy herds in Nevada. This is the strain that was associated with the first human death in the U.S.

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Richard Schuetz entered the gaming industry working nights as a blackjack and dice dealer while attending college and has since served in many capacities within the industry, including operations, finance, and marketing. He has held senior executive positions up to and including CEO in jurisdictions across the United States, including the gaming markets of Las Vegas, Atlantic City, Reno/Tahoe, Laughlin, Minnesota, Mississippi, and Louisiana. In addition, he has consulted and taught around the globe and served as a member of the California Gambling Control Commission and executive director of the Bermuda Casino Gaming Commission. He also publishes extensively on gaming, gaming regulation, diversity, and gaming history. Schuetz is the CEO American Bettors’ Voice, a non-profit organization dedicated to giving sports bettors a seat at the table.