Locals Casinos Are Back in Business

Crushed by the recession, these venues are finally on the upswing

Illustration by Cierra Pedro

Illustration by Cierra Pedro

Since the recession, the locals casino market has endured some tough times, but the 2015 numbers so far suggest those tough times might be over. In particular, North Las Vegas and Boulder Strip properties, after several rough years, are showing revenue increases. Is it because value-conscious visitors are venturing off the Strip? Is it a sign of a reinvigorated economy? Possibly a little of both. Whatever the cause, the stronger neighborhood casino market is a positive sign for Southern Nevada’s overall economic health.

It might be surprising to some, but locals casinos in a sense got the worst of the recession. The Las Vegas Strip was hurt, to be sure, by the decline in consumer spending, but the broader tourism slowdown had a devastating effect on establishments outside the resort corridor. Hospitality workers, including those laid off and those whose hours were reduced, obviously no longer had the same spending power. To make matters worse, stalled construction—both on Las Vegas Boulevard and around the Valley—deprived neighborhood casinos of one of their most valuable groups of customers.

With less spending and fewer potential customers, the recession’s impact was immediate. Through 2014, gaming revenues had fallen 16 percent from their pre-recession highs in North Las Vegas and 17 percent in the Boulder Strip reporting area, which includes eastern Las Vegas and Henderson. The Las Vegas Strip, by comparison, suffered a drop-off of less than 7 percent. In other words, off-Strip places were affected more than twice as much—and that revenue drag, until recently, had been continuing.

Further, neighborhood casinos haven’t seen the same migration of spending from gaming to nongaming that tourist-oriented properties have. For the past several years, gaming has continued to represent about 70 percent of total locals casino income; places on the Strip get about half that amount from their gaming floors. So the decline in gaming and shift to nongaming, which has been a boon for the Boulevard, has been a net loss elsewhere.

But here’s the good news: For the six months ending May 31, the Boulder Strip’s gaming profits were up by 9 percent—a better improvement than that for Las Vegas Boulevard or the state at large. Places in North Las Vegas posted similar growth.

Meanwhile, Station Casinos, which operates 19 properties in the Valley, boasted a 5 percent increase in operating revenues for the first quarter of 2015. Boyd Gaming reported flat revenues for its six non-Strip establishments for the same period, though its Downtown venues saw a slight uptick.

There are two theories for why the locals market is heating up, and both are probably accurate. First, as overall visitation rises, room rates are rising. So those still watching their wallets may be staying and playing off-Strip. This didn’t happen so much during the worst of the recession because many who couldn’t afford discounted Strip rooms also couldn’t afford rooms elsewhere, no matter how inexpensive. With rates now soaring from Mandalay Bay to SLS, other hotels, such as those Downtown, are positioned to benefit.

Second, the cranes have reappeared in our corner of the Mojave. Awaited as eagerly as the swallows returning to Capistrano, these cranes signal the start of major construction projects—not just on Las Vegas Boulevard but around the Valley—which means the return of an important revenue stream for neighborhood properties. During the boom years of the mid-2000s, construction workers were among the most valuable players at a host of non-Strip casinos. Add to that better prospects for small-business owners involved in the industry, and you have another good reason to be bullish about the locals market.

At the end of the day, though, it’s neither higher prices in the tourist corridor nor an improving economy that will guarantee continued strong results for the little guys. The men and women who operate such casinos must remain sensitive to what is bringing guests to them—whether it’s convenience, better prices or more intimate customer service—and continue to invest in it. The market is more crowded than it has been for years, and the one thing you can bet on is this competition for the local gambling dollar will remain fierce.

David G. Schwartz is the director of UNLV’s Center for Gaming Research.