What would a second COVID shutdown imply for the Las Vegas economic system?

Las Vegas businesses, employees, and the economy are still surging from 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 curb the spread of the novel coronavirus. It is unclear how severe these restrictions will be or when they will take effect, but experts say a second shutdown would have an adverse impact on a number of industries within the state and could put the state in deeper economic trouble.

“It’s not good for Nevada,” said Stephen Miller, director of the UNLV Center for Economic and Economic Research. “We have been one of the hardest hit metropolitan areas in the country in terms of the downturn as we rely heavily on the sectors where we need to congregate.”

Sisolak hasn’t yet determined what additional restrictions would look like, but economists agree that Nevada’s personal industries – like food and beverage, beauty, and hospitality – would probably be hardest hit by a potential second shutdown. Service reps in particular would likely suffer badly if they weren’t able to interact with customers and collect tips.

Nevada’s economy showed signs of rebounding from the “collapse” of March through April when gaming revenues essentially dropped to zero, Miller said.

“It was like falling from a skyscraper,” he said.

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 Department of Health and Human Services reported a record number of new cases, 2,416, and six more deaths.

The spike in cases comes just weeks after Sisolak said he was interested in easing restrictions on collecting early in the new year. Now local officials are urging Nevadans to avoid large gatherings. On Thursday, Washoe County’s 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 epidemic,” he said. “It’s almost like clockwork two weeks later where you can see an increase.”

Uncertainty about what new restrictions are coming is putting businesses in temporary trouble, said Tom Harris, professor of economics at the University of Nevada, Reno and director of the University Center for Economic Development.

“If you’re a restaurant, do you only have take-away or do you only need to be limited to 50-25 percent (capacity)? Is that enough volume to be profitable? Nobody knows, ”said Harris.

Other states’ travel restrictions could also affect the Nevada tourism industry, particularly California’s guidelines for people being quarantined for 14 days, Harris said.

Nevada is “an export economy,” although its main export, tourism, is “consumed at the place of origin,” added John Restrepo of RCG Economics.

Promising developments in COVID-19 vaccines could aid 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 the second round restrictions in other states.

Illinois, Michigan, New Mexico and Philadelphia have closed casinos completely. Other gaming markets – including New Jersey, Ohio, and Massachusetts – have introduced curfews that limit pedestrian traffic in 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 shutdowns are already having a detrimental effect on the casino staff.

On November 6, after Massachusetts put a nightly curfew on its three casinos, Wynn Resorts Ltd., which operates Encore Boston Harbor, announced it could employ up to 1,000 people. 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 where it may not be able to recover.

“There are a myriad of different things that can happen from downsizing to financial bottlenecks in these companies,” he said. “While they are currently liquid, another shutdown continues to drain their resources.”

The spokesmen for MGM, Wynn, Caesars Entertainment Inc., Boyd Gaming Corp., Las Vegas Sands Corp. and Red Rock Resorts Inc. did not return requests for comments.

During the initial shutdown, which ran 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 even reported record margins in the third quarter – but a second shutdown could still hurt businesses.

Keith Smith, President and CEO of Boyd, said during an earnings call last month that a recovery in COVID-19 cases “could pose a risk to the company.”

The shutdown time would be in the middle of the traditional slow season in Las Vegas. Pedestrian traffic is already low at this time of year – the lack of entertainment, airlift and group business has made it grim, especially during the week. If the state puts restrictions on the gaming industry, traffic could be hit even harder, said Greg Chase, founder and CEO of Experience Strategy Associates from Las Vegas.

“It’s not a good prospect,” he said. “There are a lot of casinos out there right now trying to stop financial bleeding. Closing it will certainly cause additional losses, and nobody wants to see that. “

Heightened restrictions wouldn’t be easy for casino operators, many of whom are still recovering from initial stalls 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 we say we’re going into a slow phase. Where can we decide to downsize or close some of our operations, even in the gaming or hospitality environment? “

Shutting down ‘Top of Mind’ for nonprofits

The United Way of Southern Nevada said that during its weekly Zoom meeting with over 200 local nonprofits Thursday, the possibility of a second shutdown was a priority for many organizations.

Most local nonprofits raised concerns about long-term support such as funding and supplies during Thursday’s call, said CEO Kyle Rahn. Another shutdown will most likely affect the personal volunteer.

Some nonprofits aren’t sure what another shutdown or increased 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 of exposure than the average person.

“We are concerned about the impact in our community, but we are doing our best 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 impact will continue well beyond the reopening and our community will seek support and services,” added Rahn.

Other nonprofits like Three Square said they will be prepared if another stalemate hits.

“We are very aware and will stay informed,” said Larry Scott, Chief Operating Officer at Three Square. “When we were affected by this first shutdown, it was so sudden that our agency partners, many of whom had to be closed, had to reinvent themselves with drive-thru sales locations. However, when we shut down again, that infrastructure will be built so we are far better prepared this time. “

The grocery bank distributes 5.6 million pounds of groceries each month and sees more than 400 cars a day in each passage. The non-profit organization operates 16 transit locations every week.

Scott said another shutdown will surely affect unemployment across Nevada, which is closely related to the demand it is seeing.

“I think without question you will see demand,” he said. “If you look at the demand that took place after the initial shutdown and see the cars lined up on Sahara Avenue for five to six miles to get food at Palace Station, you will know how immediate they were high unemployment and how it affects our responsibilities. “

The review journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson. Las Vegas Sands operates The Venetian and Palazzo on the Strip.

Contact Bailey Schulz at [email protected] Follow @bailey_schulz on Twitter. Contact Mike Shoro at [email protected] or 702-387-5290. Follow @mike_shoro on Twitter. Contact Jonathan Ng at [email protected] Follow @ByJonathanNg on Twitter.

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