It’s likely that Las Vegas will experience a small dip in tourism for the next couple of years, according to a group of economic researchers at UNLV.
At a biannual forum put on today by UNLV’s Center for Business and Economic Research (CBER), researchers reiterated findings they presented in April — visitation to Las Vegas is likely to retreat in 2023 and 2024.
In 2019, before the coronavirus pandemic, Las Vegas attracted over 42 million tourists. This year, according to figures from the Las Vegas Convention and Visitors Authority, the city is likely to draw between 38 and 39 million tourists.
In 2023, however, UNLV researchers expect visitation to drop to between 37 and 38 million, mostly because of expected “softening” in the United States economy.
“The slight dimming that we see in the model is more because of what the model expects to happen on the national side,” said Andrew Woods, CBER’s director. “We see a softening in the economy and slower growth next year, especially during the first nine months of 2023.”
Woods said there will be a pullback on what the public spends on leisure activities, especially leisure travel.
Woods and Stephen Miller, a longtime economics professor at UNLV and director of research for CBER, had opposing viewpoints on whether the nation will fall into recession — generally considered to a period where gross domestic product output falls for two consecutive quarters — territory at some point in the next 12 months.
Miller said he believes there’s a 30% chance of a recession in the next 12 months while Woods said he believes there’s a 75% chance.
“I do think it will be more of a normal business cycle recession,” Woods said.
Such a scenario would be less painful for Las Vegas than what the city went through during the Great Recession of the late 2000s and during the pandemic-induced economic downturn in 2020 that the Southern Nevada region is still recovering from.
“I think that if you know that things are going to be softening for the next six to nine months, you can prepare for that,” Woods said. “In order for inflation to come down, demand has to come down, but a soft landing can be engineered.”
Miller and Woods said economists will be eager to see how the Federal Reserve maneuvers its way through the next year.
This year, the Fed has steadily upped its benchmark short-term interest rate. It’s now at 3.75% to 4%, its highest level in close to 15 years. Those steady increases this year have been in response to consumer inflation levels, which are at or near 40-year highs in the U.S.
The Fed’s goal is to reduce inflation, but it doesn’t want — if it can be helped — to throw the U.S. economy into a deep recession.
It’s a tightrope walk, Miller said, that could lead to any of three different outcomes — either a “soft landing, hard landing or delayed landing.”
As economists are known to do, Miller and Woods warned that a recession will take place again, though the trick is to know when that might happen.
“The Fed is between a rock and a hard place,” Miller said. “The rock is the inflation rate, and the hard place is a recession. The hope they have is that spending will slow down. Our forecast is that the Fed will manage to reduce the inflation rate without creating a recession.”
Recent national economic news that has come out has been positive.
Earlier this month, federal data revealed that the U.S. employers added 261,000 jobs in October, which put the country’s unemployment rate at about 3.7%, up just slightly from a five-decade low of 3.5% in September. On Wednesday, the U.S. Census Bureau reported that year-over-year retail sales across the country jumped by 1.3% in October after being flat in September. Many economists expressed surprise at October’s figure. “If the Fed hits it right in the middle, you get that soft landing,” Miller said. “That delayed landing, that happened two or three times in the 1970s. I lived through that. I remember when mortgage rates were in the double-digits.”
According to the latest federal figures from Freddie Mac, which has tracked weekly average mortgage rates since 1971, the average rate for a 30-year fixed-rate mortgage actually declined to 6.61% for the week that ended Thursday.
That was a significant drop from the week before — when the average 30-year rate was 7.08% — but the same rate was close to 3% a year ago.
“Housing is in a recession,” Miller said. “Now is the time to earn your spurs if you’re a real estate agent or a broker.
As far as the overall tourism economy outlook for Las Vegas, Woods mentioned that the pivot by LVCVA officials and others to sell the city as a sporting event destination town seems to have paid off.
In stark contrast to a long period where Las Vegas was viewed by pro sports league officials as an untouchable city, that’s all changed in the last decade.
Las Vegas now has a pro football franchise, pro hockey franchise, and is constantly talked about as a place that could eventually be home to Major League Baseball and NBA franchises.
It will also host a Formula One race — partially on the Strip — next year, and the NFL’s Super Bowl in 2024.
“Sports has, I think, really transformed the town,” Woods said. “There’s a new type of consumer coming to town. It’s bringing visitors and clearly (helping) our gaming and travel and leisure industries. Having the Formula One race and the Super Bowl will help our industries here. It’s good that we built (Allegiant Stadium) to bring events here.”