Las Vegas—A House of Cards Bound to fall
Las Vegas is a booming city with very low unemployment figures, and a robust, thriving economy. Over 6,000 new families move here every month, taking advantage of the abundant number of service sector jobs, and the city welcomes them with open arms. Regardless of where you look, construction abounds, as the city tries to keep up with this explosive growth -- building the infrastructure (schools, roads, housing, new casinos, high-rise condo projects, etc) to support this massive expansion.
The situation hasn’t changed much throughout the entire 11 years that I’ve lived here--it has been constant growth. Las Vegas has absolutely flourished in a vibrant U.S. economy, and has expanded to more than twice its size.
With that said, this thriving Las Vegas economy is completely dependent on the discretionary spending of vacationers (Airlines, Hotels, Restaurants, Shows, Gambling, Drinking, Strip Clubs, etc) and the city lacks any real or substantial diversification. Gaming is big money and people have been more than happy to live life to the fullest and part with their cash in a strong U.S. economy. Their spending has kept thousands upon thousands of people gainfully employed in this city.
Again, the last 10+ years have seen an unprecedented economic boon, but what will happen when the U.S. economy finally starts to contract, when millions of U.S. homes start to lose value, when consumers interest rates rise and payments double on credit cards, when gas & travel become prohibitively more expensive, when the American consumer is finally tapped out and no longer has the discretionary money to gamble away in Vegas?
I'll tell you the answer: Currently, Las Vegas hotel/casino occupancy rates are running ~ 90%. Each one of these highly profitable businesses is staffed with thousands of employees (desk clerks, maids, concierges, cocktail waitresses, maintenance workers, moneychangers, card dealers, security, managers, etc.), who depend on the jobs to pay their mortgages, rents, car payments, etc. When tourism & discretionary spending finally start to decline, gaming revenues will drop, hotel occupancy rates will fall, and thousands of layoffs will follow.
Those who find themselves unemployed will quickly find that they have very limited options, as the entire hotel & gaming industry will be feeling the same economic pains. The lack of industry diversification in the city will be a killer...
Once the LV layoffs begin, more homes will go into foreclosure, as people won’t be able to make their mortgage payments. Then businesses outside of the casino industry (local restaurants, retail, home improvements, beauty, health care, etc) will also begin to feel the pain. Eventually, a chain reaction of dominoes will begin to fall, and ultimately the number of outbound U-hauls will vastly exceed those inbound...