Fueling the Economy

Gas prices are up, so what’s the effect on a city that depends on people driving here?

Average daily auto traffic has been a relative constant for the Las Vegas tourism economy since a record 39.2 million visitors came here in 2007. Airline travel collapsed from a record 47.7 million people who got on and off planes at McCarran International Airport that year to 39.8 million last year. (That number is higher than the total visitors because airline travelers are often counted twice—once when they get on a plane at McCarran and once when they get off.) But average daily auto traffic has hovered between 82,000 and 86,700 vehicles on an annualized basis during that same period, according to figures compiled by the Las Vegas Convention & Visitors Authority. The actual month-to-month figures have ranged from 73,800 to 99,958, with the summer months typically the heaviest for Southern Californians and others seeking Strip travel deals. So it was particularly troubling to read last week that a gallon of gas could hit $3.75 by Memorial Day, according to Oil Price Information Services, which tracks petroleum industry prices.

Of course, the political uncertainty in the Mideast is driving the price spike. Libya is the 17th largest oil-producing nation in the world and has the largest proven oil reserves in Africa, according to the U.S. Energy Information Administration. Bahrain does not rank among the world’s top 20 oil producers, but there are worries that instability there could spill over to nearby Saudi Arabia, the world’s second-largest oil producer behind Russia. There are also fears that the political turmoil in Egypt could disrupt the flow of oil through the Suez Canal, which links European and North American markets to the Persian Gulf. And that says nothing of what this could mean for oil giants Iran, Kuwait and the United Arab Emirates.

So what about those Las Vegas numbers? In 2007, midweek hotel occupancy rates in Southern Nevada hit 88.7 percent while weekend occupancy rates were 94.3 percent, according to LVCVA figures. The average daily room rate was $132. Last year, that midweek hotel occupancy rate was 76.8 percent, reflecting the collapse of the convention and trade show business. The weekend occupancy rate was 88.4 percent. The average daily room rate was $95.

Gas prices hit $4 a gallon in April 2008, and average daily auto traffic declined month-to-month by 3,400 along all major highways into Southern Nevada, to 83,253. The previous year’s average daily auto traffic increased 3,400 to 89,757 between March and April when Las Vegas gas prices stood at $3.02 a gallon, according to the Lundberg Survey and LVCVA figures. (Remember, the actual month-to-month figures fluctuate beyond the LVCVA’s annualized averages for the highs and lows.)

While it can be difficult to determine what causes month-to-month peaks and dips in visitation numbers, one thing is certain: Southern Nevada’s travel and tourism sector is dependent on weekend drive-in traffic from Southern California and nearby states. The political uncertainty in the Middle East may be a tribute to democratic forces on the Arab streets, but the uncertainty could hurt the recovery of capitalist forces on the Strip halfway around the world.