Las Vegas businesses, employees, and economy are still being hit by the state’s initial shutdown. Is the city ready for another?
On Wednesday, Governor Steve Sisolak said he would “very soon” announce new measures to contain the spread of the novel coronavirus. It is unclear how severe these restrictions will be or when they will come into effect, but experts say a second shutdown could have an adverse impact on a number of industries within the state, putting the state into deeper economic trouble.
“It’s not good for Nevada,” said Stephen Miller, director of the UNLV’s Center for Business and Economic Research. “We were one of the hardest hit metropolitan areas in the country in terms of the downturn because we are very dependent on the sectors that require merging.”
Sisolak hasn’t specified what additional restrictions would look like yet, but economists agree that Nevada’s personal industries – like food and beverage, beauty, and hospitality – would likely be hardest hit by a potential second shutdown. Service staff, in particular, would likely suffer badly if they were unable to interact with customers and collect tips.
Nevada’s economy showed signs of recovery from the March-April “collapse” when gambling revenues fell to essentially zero, Miller said.
“It was like falling off a skyscraper,” he says.
Economic barriers
On March 17, the day Sisolak announced the first shutdown, Nevada had reported 55 COVID-19 cases and one death. On Thursday, the state’s Department of Health reported a record number of 2,416 new cases, as well as six more deaths.
The spike in cases comes just weeks after Sisolak said he was interested in easing gathering restrictions early in the new year. Now local officials are urging Nevada residents to avoid large gatherings. On Thursday, the Washoe County health officer recommended that public and private gatherings across the state be limited to no more than 10 people.
“We are at an unprecedented, uncontrolled, and dangerous time in this epidemic,” said Michael Parkinson, a past president of the American College of Preventive Medicine, who spoke at a US Travel Association news conference Thursday.
As of Thursday, the country had topped 11.5 million cases with more than 250,000 deaths. Parkinson said that people who fail to follow face mask recommendations and continue to attend large social gatherings have led to an increase in the numbers.
“Part of that is the post-Halloween gathering epidemic,” he said. “It’s almost like clockwork, two weeks later when you see an increase.”
Uncertainty about what new restrictions are coming puts companies in a temporary bind, said Tom Harris, professor of economics at the University of Nevada, Reno and director of the University Center for Economic Development.
“If you are a restaurant, will you only have take-away or do you only have to be limited to 50 to 25 percent (capacity)? Is the volume enough to be profitable? Nobody knows, ”said Harris.
Other states’ travel restrictions could also feed into the Nevada tourism industry, particularly California guidance for anyone entering the state to be quarantined for 14 days, Harris said.
Nevada is “an export economy,” even though its main export, tourism, “is consumed at the place of origin,” added John Restrepo of RCG Economics.
Promising developments in COVID-19 vaccines could help the state’s long-term recovery if the vaccines are effective and widespread, the economists said.
A point of no return
Some Nevada-based casino companies are already affected by second-round restrictions in other states.
Illinois, Michigan, New Mexico and Philadelphia have closed casinos completely. Other gambling markets – including New Jersey, Ohio, and Massachusetts – have introduced curfews that restrict pedestrian traffic at resorts.
According to the American Gaming Association’s online casino tracker, 99 out of 994 tribal and commercial casinos across the country will be temporarily closed as of Thursday.
These closures are already having an adverse impact on casino staff.
On November 6, after Massachusetts put a nightly curfew on its three casinos, Wynn Resorts Ltd. – that Encore Boston Harbor operates – that it could take up to 1,000 employees on leave. MGM Resorts International, which operates MGM Springfield, said it laid off 250 employees or cut hours.
If the Nevada casinos were to close again, said Brendan Bussmann, director of government affairs at Global Market Advisors, it could bring the industry to a point from which it may not be able to recover.
“A lot of different things can happen from downsizing to financial bottlenecks for these companies,” he said. “While currently liquid, (another shutdown) continues to strain your resources.”
Spokesperson for MGM, Wynn, Caesars Entertainment Inc., Boyd Gaming Corp., Las Vegas Sands Corp. and Red Rock Resorts Inc. did not respond to requests for comment.
During the initial shutdown, which lasted from mid-March to June 4, Las Vegas-based casino operators burned up to $ 14.4 million in cash every day. Thousands of employees have been given leave and laid off, many of whom have not yet returned to work.
Companies have since taken dramatic steps to cut costs and increase liquidity – some, like Red Rock, reported record margins in the third quarter – but a second shutdown could still be detrimental to businesses.
Keith Smith, President and CEO of Boyd, said during a conference call last month that a resurgence of COVID-19 cases “could be a risk to business”.
The shutdown time would be in the middle of Las Vegas’ traditional slow season. Pedestrian traffic is already low at this time of year – the lack of entertainment, airlifts and group shops has made it bleak, especially during the week. If the state puts restrictions on the gaming industry, traffic could be impacted even more, said Greg Chase, founder and CEO of Experience Strategy Associates, based in Las Vegas.
“It’s not a good prospect,” he said. “Right now there are a lot of casinos trying to stop financial bleeding. The closure will certainly cause additional loss, and nobody wants to see that. “
Tightened restrictions wouldn’t be easy for casino operators, many of whom are still recovering from initial closings and low attendance rates, but Chase said they could be worthwhile for the industry in the long run.
“The biggest priority that everyone needs to focus on is saving lives,” he said. “Now is a time when we say we’re going into a slow phase. Where can we choose whether we want to downsize or close some of our operations, even in the gaming or hospitality environment? “
Closing “Top of Mind” to nonprofits
The United Way of Southern Nevada said that during its weekly Zoom meeting with over 200 local nonprofits on Thursday, the possibility of a second shutdown was a priority for many organizations.
Most local nonprofits expressed concerns about long-term support such as funding and supplies during Thursday’s call, CEO Kyle Rahn said. Another closure will most likely have an impact on personal volunteers.
Some not-for-profit executives aren’t sure what another shutdown or tightened restrictions on the essential services they provide would look like, Rahn said. Other nonprofits said they were concerned about exposure to COVID-19 as they are often on the front lines and at higher risk than the average person.
“We are concerned about the effects in our community, but are working flat out to support those in need,” said Rahn. “Nobody can appear when they are sick. If the restrictions are tightened, it will protect everyone from the spread of infection. “
“The economic effects will continue well beyond the reopening and our community will be looking for support and services,” added Rahn.
Other nonprofits like Three Square said they were prepared if there was another shutdown.
“We are very attentive and kept up to date,” said Larry Scott, Chief Operating Officer at Three Square. “When we were hit by this first shutdown, it was so sudden that our agency partners, many of whom had to shut down, had to reinvent us with drive-thru sales locations. But if we experience another shutdown, this infrastructure will be set up so that we are much better prepared this time. “
The grocery bank distributes 5.6 million pounds of groceries each month and sees more than 400 cars a day at each pass. The nonprofit operates 16 drive-through locations each week.
Scott said another shutdown will surely affect unemployment across Nevada, which is closely tied to demand.
“I think you will see demand without question,” he said. “If you look at the demand that took place after the first shutdown and you see how the cars are lined up eight to ten kilometers on Sahara Avenue to fetch food at Palace Station, you know how immediate the high one Unemployment affects our responsibility. “
The review journal is owned by the Las Vegas Sands Corp family. Chairman and CEO Sheldon Adelson. Las Vegas Sands operates The Venetian and Palazzo on the Strip.
Contact Bailey Schulz at bschulz@reviewjournal.com. Follow @bailey_schulz on Twitter. Contact Mike Shoro at mshoro@reviewjournal.com or 702-387-5290. Follow @mike_shoro on Twitter. Contact Jonathan Ng at jng@reviewjournal.com. Follow @ByJonathanNg on Twitter.
