The latest news that the February Clark County Stadium Hotel Tax Revenue was just $3,032,971, the second lowest take in the brief history of the collection of that money for the planned Oakland Raiders Las Vegas UNLV Stadium, is part of a continued trend of lower-than-expected money from the tax, which is at 88/100th of 1 percent of the hotel room rates on The Strip, and .5 of 1 percent for hotel rooms off-Strip.
The Raiders and the Las Vegas Stadium Authority planned to use those dollars to retire a bond issue that Clark County would float, and give $750 million to help pay for the construction of the NFL stadium. Something I’ve talked about many times, for example:
But the way this has gone, with average monthly revenue not large enough to meet the 1.5 to 1 debt coverage ratio for the bond, the Raiders may have to settle for a smaller subsidy from the public, unless Clark County Commissioners elect to piss off tax payers and go ahead and dip into the County General Fund to help. Those who say there is no revenue problem, seem to think these numbers are aberrations. But a look at statistics from the Las Vegas Convention and Visitors Authority (LVCVA) reveals what may be the beginnings of a long-term trend.
In 2016, Las Vegas drew 42,936,100 visitors, and that was an all time high, and reflecting constant, year-to-year growth in the number of people coming to Sin City. By all rights, Las Vegas boosters or even the casual observer had a right to expect the 2017 tally to continue a trend that goes all the way back to 1970, when 6,787,650 people came to Vegas, but with an interruption in the recession period between 2007 and 2009. But by the end of 2017, and the release of the data by the LVCVA, something happened for the first time in recorded history: fewer people came to Las Vegas.
The LVCVA reported that 42,208,200 visitors graced Las Vegas and Clark County hotels in 2017 – a drop of 727,900. And while the common habit was to blame the decline on the horrible events of the One October Mass Shooting, a closer look shows that the tragedy can’t shoulder all the blame for this development.
A simple comparison of monthly LVCVA visitor data from 2016 and 2017 shows that starting in January of 2017, there were more visitors than the previous January 2016, and this pattern continued, though not dramatically higher, until June of 2017. That visitor count for June of 2017 was less than that for June of 2016, and from that point to the end of the year, there was not one month in 2017 that surpassed 2016. So the loss of visitors was a problem before One October. Arguably, One October just exacerbated it. Still, Las Vegas boosters believed the numbers would rebound in 2018. But, and again looking at LVCVA’s statistics, that’s not the case.
Visitor count for January of 2018 was 3,393,900, where in 2017 it was 3,508,800, and in 2016 it was 3,471,700. In other words, January 2018’s visitor count was less than that for 2016 by 77,800 visitors, and less than 2017 by 114,900 people. The main culprit: fewer convention attendees: 736,000 in 2017 versus 612,900 in 2018. Moreover, gaming revenue was down for January, from $926,124,000 in 2017 to $892,064,000 for 2018.
And now we have the February 2018 Clark County Stadium Hotel Tax Revenue of just $3,032,971. While the LVCVA has not yet released the February 2018 visitor count, it’s a fair bet it too is below the level for February 2017.
The question is why and is this the making of a long-term trend for Las Vegas?
I think what’s happening is the confluence of a number of factors:
1) The development of World-class casino resorts in China since 2012, providing a dis-incentive for Asian gambling travelers to come to Las Vegas.
2) The constant increase in average room rate for big Las Vegas conventions, year-to-year, especially for CES Las Vegas. During CES, a room priced as low as $40 a night on The Strip, will be jacked up to $500 a night the next day. That has caused a number of would-be CES attendees to stay home over the last two years. I’ve covered CES Las Vegas for almost the last 10 years.
3) The high cost of living in California, a main provider of tourists to Las Vegas.
4) The uptick in the under-employment rate from 9.4 percent in 2016 to by some estimates around 12.4 percent in late 2017.
5) The large and growing number of local casinos in the United States, providing yet another disincentive for people in, say, Chicago, to go to Las Vegas, when there’s a casino in Hammond, Indiana – to provide one of many examples.
For the Oakland Raiders, the above events all add up to a case of very bad timing. Moreover, the stadium tax rate, which I’ve said is too low, was formed by the Las Vegas Stadium Authority consultants when they were in the same capacity for the Southern Nevada Tourism and Infrastructure Committee – the group formed by Nevada Governor Brian Sandoval to make the plans for the Raiders stadium, as well as for the expansion of the Las Vegas Convention Center.
That group, faced with a proposal to have a 1 percent stadium tax rate, tried to build a numerical justification for a lower rate: first 7 tenths of 1 percent, then eventually 88/100ths of 1 percent. And they used rosy guesses of future Las Vegas visitor growth, so optimistic, they were openly questioned by Las Vegas Mayor Carolyn Goodman.
The SNTIC ignored Mayor Goodman, and pressed on with the low rate, and a proposal for a bond issue that dips into the Clark County General Fund automatically if the stadium tax fails to bring in enough money to pay for the bond debt service and at the 1.5 to 1 debt coverage ratio required.
Now, and even after my warnings this would happen, the real revenue numbers are in, and there is a problem. The problem is that the Raiders are smack in the middle of an unprecedented decline in Las Vegas Visitor rates – and given the reasons, this looks to be a long term trend. One thing’s for certain: the Raiders need to figure out a way to pay $200 million more into the stadium construction process, or stay in Oakland.
But I have to candidly say, Las Vegas needs our help. It’s in trouble. I’m sounding the alarm now, and not waiting for these numbers to get worse. Remember, we’re not in an economic recession as of this writing. Maybe the Raiders can help, but the current plan is so poorly done that few in Las Vegas are really excited about it. That’s too bad – a reformation of Las Vegas’ economy is needed, and fast.
It’s not so much that Las Vegas is declining, but changing – its being forced to move away from its casino-oriented economy. The trouble is, the change is slow, and there’s nothing on the horizon to point to any recovery in the future. Las Vegas has watched the World create many alternative Las Vegases, and it’s starting to feel the impact of that process.
Stay tuned.