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Nevada to Face a Colossal Economic Loss of $38.9 Billion if the Shutdown Continues
By Jeff Osienya Mar 25, 2020 IndustryThe continued shutdown of Nevada’s beat-up tourism and hospitality industry will incur a projected loss of about $38.9 billion. Nevada is now appealing to Congress for economic aid.The congressional delegation of Nevada is calling on Washington to come to the rescue as the state continues to crumble down economically. Sin City, which is reportedly more dependent on tourism than Detroit on automobile manufacturing, is now an economic bubble growing day by day, waiting to explode.
This state of economic chaos started when Governor Sisolak ordered the immediate closure of non-essential businesses across the state until further notice. This was the first time the Las Vegas strip went dark after a complete shutdown of operations since JFK’s tragic assassination in 1963. While the governor’s mandate was a move for the state’s self-preservation in the wake of the Coronavirus, the state’s ecosystem is getting asphyxiated after it’s lifeblood Sin City’s was cut off.
Nevada On the Brink of Gigantic Losses
Virginia Valentine, the CEO and Association President of the Nevada Resort Association, wrote a letter painting the horrific picture of the havoc the state’s economic future is inevitably facing due to COVID-19 pandemic. In the letter, she revealed that they recently hired an economic analysis firm to evaluate the full economic impact of Coronavirus on the state.
Their analysis found out that over 300,000 workers who depend on $1.3 billion in wages and salaries every month are at risk. If those figures did not sink in hard enough, these statistics are nearly double what was reported when the United States was faced with the Great Recession.
Valentine’s letter also reported that should the tourism industry in the Silver State stay dormant for the next one to three months, up to over 150,000 jobs could be lost right away.
Other than the blow on the state’s employees, the state’s tax revenue will also be severely impacted. Nevada should, therefore, brace itself for losing $500 million from hotel rooms, $380 million from gambling, $73 million from entertainment, $46 million from locals on payroll and $19 million from businesses. This brings the total to a staggering $1 billion-plus of lost taxes by the state.
Las Vegas Casinos Roll Snake Eyes
From the onset of COVID-19 pandemic, Las Vegas casino operators have been battered and bruised by the economic meltdown that came as a result. Right now, a lot of operators are already struggling to stay afloat following the devastating shutdown.
The S&P 500 Casino & Gaming subsector index has watched painfully as its market value plummeted by 47% since 17th January. This was the last trading day before the Coronavirus was first reported in the U.S. On the other hand, Titans in the gaming business such as MGM Resorts have also watched their stock prices go down by a whopping 75%.
As we speak, it is uncertain how long the closure of the casinos will last. Consequently, now more than ever, the question is who has the liquidity that will allow them to weather this storm? Well, according to a Barry Jonas, an analyst at SunTrust Robinson Humphrey in New York, the likes of Las Vegas Sands, Wynn Resorts and MGM are fairly insulated for over one year should they resort to cutting down over 70% of their costs. And this is in an absolute worst-case scenario.
Whatever the case, even when Las Vegas lights up once more, it may take some time before Sin City as we knew it roars back to life.
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