Economic Recession Means Las Vegas Going Down

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Las Vegas is the ultimate boom or bust location in the United States. When economic times are going well, Vegas thrives. But when money is tight, Vegas suffers. Greatly. 

Las Vegas as of right now has a great deal of problems, as Nevada’s unemployment rate hovers around 13 percent. Half-completed casinos, out-of-work card dealers, etc., abound in Sin City.

In the article, Lost Vegas: Vanguard by a writer at Market Skeptics, Vegas’ current woes are outlined:

“Lost Vegas” previews the terrifying future facing America. We are looking at a disaster unprecedented in recent history.

America’s flawed “pro-growth” economy
In the 1980s, the US adopted economic policies that favored cost cutting and global trade. And where the US used to be the manufacturing sector of the world, it stopped making goods, and instead started buying goods from Asia, where products were cheaper because people were paid less to make them.

The US was flooded with cheap goods, and Americans were encouraged to spend more money. And eventually consumer spending which used to account for 60% of the US economy had jumped to 70%. Factory workers in the midwest lost their jobs and many of them ended up leaving for growing places like Las Vegas.
–Quote from “Lost Vegas”

In the last twenty five years, the US has outsourced virtually its entire manufacturing sector. We as a nation have allowed ourselves to become totally dependent on foreign oil (those 11mph SUVs), and we have outsourced the productions of our most basic necessities to places like China. This means that a devaluation of the dollar will instantly wipe out America’s standard of living, leaving us as third world citizens. This dollar devaluation is now underway.

Hotel News Now gives an update on Vegas’ half-completed hotels that aren’t going anywhere:

The biggest eyesore for Vegas is the half-finished Fountainbleau resort on the north end of the Strip. It’s deserted and is a symbol of what’s happened to the economy during the past two years. It is sitting there about 60 percent complete and its owners don’t know what to do with it. The 3,812-room, 68-floor hotel/condo/casino project is being built on 24.5 acres where the El Rancho and Algiers casinos once stood.

According to reports, carpet, wallpaper and other finishings are in guestrooms that were outfitted up to the 30th floor before lenders pulled the plug on financing, forcing the project to seek bankruptcy protection in June.

Financier Carl Icahn, in the meantime, is moving ahead with plans to buy the project during an auction next month. Icahn has offered $156.2 million in cash and financing as the auction’s stalking horse bidder. Developed at an original cost of US$2.9 billion, it’s estimated that it will cost US$1.5 billion to finish the project.

BNET says:

So far, many industry analysts say that the higher-end rooms will force other midrange and luxury properties on the Strip to drop prices to compete with the ultra-new Mandarin Oriental Las Vegas, Vdara, Aria or Harmon hotels. “The economy is going to continue to be weak next year and so, even though visitation to Las Vegas will be up modestly, with all the new rooms there will continue to be pressure on room rates on the Strip,” Dennis Forst, a gaming stock analyst with KeyBanc Capital Markets, told the Las Vegas Sun.

In the last decade Las Vegas reinvented itself as a place to play — not just strip clubs and slots for the hoi polloi, but the high-stakes poker, exclusive parties and amenities for the rich. Why else have dance clubs with $1,000 bottles of Grey Goose or $10,000 a night suites? But now, in a full-blown recession, the rich and the not-so-rich aren’t as eager to part with their cash.

For instance, on Monday, Dec. 28, Mandarin Oriental’s prices start at $345 a night, Vdara’s prices start at $199 and Aria wants $299. None of those prices sound like they’re appealing to the budget-oriented crowd that are now visiting Las Vegas. (Earlier this year, the American Society of Travel Agents voted Las Vegas as their No. 1 budget destination.)