Recently, an economic analyst told a group of Las Vegas real estate professionals that the uncertainty about the future of the economy is higher than it was during the pandemic, but it’s much better in reality, and that tourism to the Strip will rebound as that mindset lessens.
“There’s some uncertainty in the media, and we have come down a little bit from where we were,” said Brian Gordon, a principal at Applied Analysis who spoke at the CALV Educational Symposium at the Las Vegas Realtors association. “We’re starting to head in the right direction in terms of people’s perceptions of what’s going on in the economy.”
Gordon said six months ago that high interest rates, inflation, tariff policy and uncertainty was more challenging than it was today. He said the economy is heading on a good path but public policy at the state and federal level in the end will decide the fate of the economy and perceptions.
Of the top 70 economists in the nation in 2023, two thirds previously said the nation was headed for a recession over the next 12 months when inflation was rampant, Gordon said. It was 45 percent earlier this year and 33 percent in the most recent survey.
“We’re in much better shape than we were two years ago,” Gordon said. “The perception of the economy feels like a winding road and we don’t know where we are headed, but the reality is it’s a smoother drive of where we’re expected to go. It just feels a little difficult for a lot of people.”
None of the doom and gloom predictions by some has played out, and Gordon said the good news is the nation’s GDP number for the second quarter was upgraded to 3.8 percent growth. Wage growth has outpaced inflation since the pandemic although not by much, but the rate of inflation is slowing. While job growth is flat locally based on the August numbers, jobs related to tourism are up 2,700, he said..
“Leisure and hospitality is actually up in the last 12 months despite what we read in the newspaper and online and what we hear about the tourism industry and number of jobs,” Gordon said. “The number of jobs in the leisure and hospitality industry are still pretty positive relative to a year ago. We hear a lot of negativity about where we are positioned now from where we are positioned from a tourism standpoint.”
In the last 12 months, there were just under 40 million visitors to Las Vegas, which Gordon said is still a good number despite visitation being down nearly 8 percent for the year.
“This is where people are getting concerned,” Gordon said. “Over the last seven to eight months we’ve seen a pullback and shift take place in terms of overall tourism activity. Some of this is expected, and some of this is unexpected. We’ve had high-flying numbers in the overall demand for the tourism industry coming out of the COVID-19 pandemic and pent-up demand that existed, and now we’re seeing some softening, including on occupied room nights.”
Gordon read off some headlines calling Las Vegas overpriced — saying people feel the value proposition that once existed doesn’t exist any longer. That’s why the Las Vegas Convention and Visitors Authority came out with a national marketing campaign to lure tourists, Gordon said.
“The hotel industry is really entrepreneurial and doing all sorts of things designed to bring back people into this market,” Gordon said. “It will take some time but nonetheless we expect to see recovery as it relates to the overall tourism industry.”
Gordon said surveys show baby boomers will continue to travel, which is great for Las Vegas. The younger the generation the less they want to travel, he added.
“We have probably dropped a little bit more than some of the other tourism markets around the country,” Gordon said. “The media narrative about things being pricey doesn’t help.”
Gaming revenue is running ahead of last year on the Strip and for locals’ casinos, “which are doing fairly well and insulated from an impact standpoint” with $3.1 billion spent in neighborhood casinos, he added.
Gordon confirmed that there has been some pullback in the construction industry jobs, which are down 4,900 over the last 12 months. That can be attributed to the timing of major commercial projects on the Strip that ebb and flow and residential home construction permits slowing with elevated mortgage rates.
Gordon noted, however, that there are $30.8 billion in projects in the development pipeline.
“What is encouraging to me in Southern Nevada and an important thing to say is we have a significant amount of development activity either underway or in the pipeline,” Gordon said. “There are big numbers in terms of major projects out there, tourism-related projects, (including the $2 billion A’s baseball stadium on the Strip, and infrastructure projects.” I like where we are at. A lot of us are bullish on the Las Vegas market, and there’s a lot of real indicators telling us that there’s more stability on the horizon.”
Las Vegas continues to benefit from population growth that spurs economic activity, especially when it comes to the housing and real estate industry, Gordon said.
The region has traditionally ranked near the top in the country in terms of population growth and is the seventh fattest today compared to top three in the past. Over the last 12 months, just under 60,000 people moved into Southern Nevada from other areas around the country with just over one-third coming from California followed by Florida, Texas, Arizona and Washington state.
“I think that’s OK, but we are still continuing to see some growth,” Gordon said. “We probably have fewer people moving out because they’re locked into their homes with low mortgage interest rates. People who want to move in are facing the same thing, and they are less likely to move as a result of that. It will be a little bit slower than where we’ve been, but it will remain relatively stable.”
The average household income in Las Vegas is about $75,000, and the people moving in have an income of about $100,000, Gordon said. They are also more well-educated than the current population.
There are issues to overcome, he added. Las Vegas is No. 3 in the nation when it comes to the highest unemployment rate, according to Gordon.
“The good news is we’re not No. 1 anymore,” Gordon said. “We’re not below California and Michigan. We’re making up a little bit of ground nationally, but we have a long way to go.”
