Nevada’s Casino Sector Turns a Profit for First Time Since 2008
Posted on: January 16, 2017, 05:00h.
Last updated on: January 16, 2017, 12:53h.
Nevada’s casino industry is back in the black for the first time since the Great Recession. According to the Nevada Gaming Abstract, a comprehensive new review of the industry’s financial results, the state’s 273 biggest casinos generated $979 million in income in 2016.
That’s compared with a net loss of $662 million in 2015.
It’s been a long road back to profitably for the sector, which has suffered seven straight years of losses since the recession bit hard into the Las Vegas hospitality industry in 2008.
It used to be said that the gambling industry is recession proof. It isn’t. The collapse of the housing market hit Vegas particularly hard. The city had seen a whirlwind of building and speculation in the lead up to the crisis, but then the bottom dropped out of the market. Housing prices lost 40 percent of their value, and the gleaming new apartment blocks were left empty due to lack of demand.
Rising unemployment and an increase in house-price-to-income ratio across the country resulted in a decline in tourism and discretionary spending. It’s no wonder that Vegas was dubbed the ground zero of the economic crisis.
The sector had peaked in 2007, the year before the recession, when casino earnings reached more than $1.2 billion. In 2008, as the economy began to slow, they dipped to $721 million, and the following year, at the height of the crisis, they were $6.7 billion in the red.
Combined revenue across all departments was up for 2016, at $25.2 billion, compared to 24.6 billion last year, for an increase of 2.6 percent. Curiously, however, despite record visitor numbers, gambling revenue, was down on the previous year, falling from 43.2 percent of total revenue in 2015 to 42.6 percent.
This was even more marked on the Strip where it represented just 34.2 percent of overall revenue in 2016. The discrepancy emphasizes the degree to which Las Vegas has successfully diversified its revenue streams over the last decade, according to gaming board Analyst Michel Lawton.
“Gaming revenue has increased five of the last six years,” Lawton said. “But it still remains well below peak levels. In fact, it’s 13.8 percent below the peak levels recorded in fiscal year 2007, while room revenue is at an all-time high. We have recorded records for room revenue in three consecutive fiscal years.”
Nevada Casino Sector Income or Loss: