Anthony Perry strolls along Tropicana Avenue on a sunny Sunday morning in June. The Memphis resident isn’t particularly fazed by the plans to bring the National Football League (NFL) Raiders to town, opining that the addition of an NFL team to a city like his would be much more impactful than adding professional football to a city already filled with entertainment options.
“You guys have got all of this,” he said while motioning toward MGM Grand, and beyond to the other casino resorts on the Strip. “You don’t really need it.”
Once primarily a destination for those wanting to draw to 21 or roll them bones, Las Vegas has seen its fair share of financial ups and downs. Las Vegas has experienced its entertainment portfolio multiply in recent decades with the rise of Cirque du Soleil shows and restaurants helmed by such luminaries as Emeril Lagasse and Mario Batali. These days, casino owners are as interested in selling swanky meals and show tickets and providing lush accommodations as they are in capturing gambling dollars.
The numbers bear that out – Clark County gaming revenue reached its peak of $10.87 million in 2007, and was $9.7 million in 2016. In those same years, room tax collections increased from nearly $220 million to $273 million.
In 2020, casino resorts will face competition from the NFL’s Raiders when the team moves to town to play in the new Las Vegas Stadium, for which the $750 million public subsidy relies largely on the backs of tourists in the form of a lodging tax increase.
That’s in stark contract to T-Mobile Arena, the soon-to-be-home for the Vegas Golden Knights, the NHL’s latest franchise that opens play in the privately built facility in the fall.
A visiting couple from Philadelphia, Sagua Shakya and Nora Rodriguez, exit New York-New York casino resort in front of T-Mobile Arena and walk through The Park, the pedestrian thoroughfare that leads from the arena to the Strip. The two say the addition of the Raiders will be exciting for the city, but it doesn’t affect them as they don’t watch much football.
They do, however, pay taxes, and noticed the addition to their bill during this trip to Las Vegas thanks to the increased lodging tax.
“I noticed it was much higher. Taxes are always too much, right?” Shakya said with a shrug.
Straw that broke the camel’s back?
Tourism continues to be strong for this adult fantasyland, but one has to wonder at what point the continued squeeze on tourists could affect visitation numbers. After all, gamblers face tougher games when blackjacks often now pay 6-to-5 instead of 3-to-2, diners looking for deals are finding those late-night steak-and-eggs specials increasingly harder to find, and drivers are now paying to park practically everywhere on the Strip.
Tourism numbers are currently strong at 42.9 million in 2016, having climbed from the post-recession lull of 36.3 million in 2009. But another recession – or increased costs that drive away some of those visitors – could see those numbers drop again, potentially hurting the city and county’s ability to pay the public portion of stadium construction.
A study of lodging taxes across the nation by HVS Convention, Sports, & Entertainment showed that Las Vegas had the highest such rate in the nation in 2015 at 18 percent – and that was before the recent stadium-funding increase.
Shuffling money from venue to venue
Economists warn that new sports facilities often don’t attract as much new revenue as projected, instead shuffling entertainment money from one venue to another.
Bill Robinson, an assistant professor of economics at the University of Nevada-Las Vegas, said that could be a concern in this entertainment-rich city.
“The issue with any stadium – for these things to be good for you – you’ve got to bring new money in,” he said. “If you don’t go to the Blue Man Group on Sunday and instead go to the stadium then there’s really no benefit.”
Marie and Charles Alleman, a couple from Denham Springs, Louisiana, sat on a bench holding their luggage while waiting on a ride from Tropicana to the airport. The avid New Orleans Saints fans would be eager to come see their team play the Raiders and seemed unconcerned about the rise in lodging tax.
“Everywhere you go you’re being taxed for everything anyway,” Marie Alleman said. “It won’t impact me coming or not. I’ve got a lot more to complain about.”
In 2007, competing plans called for building arenas either just behind the Strip or just off Fremont Street in the downtown area in hopes of attracting a professional sports franchise.
Jon Weaver, president of REI Group, LLC, the force behind that downtown charge that never came to fruition, told ESPN at that time an arena located near the Strip would rely on tourists more than locals for its fan base, a sentiment that is relevant today given the future location of Las Vegas Stadium just southwest of Mandalay Bay.
“I think it would be very discouraging have an arena to be filled by folks from out of town wanting to see their home team play in Las Vegas,” Weaver said. “I don’t think that would be a very successful model.”
Stanford University economist Roger Noll, author of “Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums,” bashed the economic studies from the Southern Nevada Tourism Infrastructure Committee that projects Las Vegas Stadium will draw 450,000 incremental tourists to the area annually by hosting 46 large-scale events per year. SNTIC estimates the local annual economic impact at $620 million.
“Selling one-third of the tickets to tourists might work if you’re playing the Rams, but if you’re playing Tampa, do you really expect 22,000 people to fly in from Tampa to go to the game?” Noll said. “If you pull out that component of the economic impact study, you’re left with basically a financial disaster. It does not come anywhere near to paying for itself. From my perspective as an economist, the financial plan is just not serious.”
Noll told Deadspin this could be the worst stadium deal in history, given the strong possibility that leisure money from tourists and locals could be shifted from one venue to another.
“There will be a diminutive effect on hotels and tourism with the new bed tax,” he said, “if these people aren’t spending money on gambling that’s a real hit to the public coffer and the state will lose a significant amount of money.”
Tourist taxes are ‘easy’
Perhaps there’s a legislative genius in paying for the public portion of the stadium with a lodging tax. Locals are more likely to complain about increased taxes, after all, while tourists are mostly happy to be on vacation and willingly take it on the chin.
Robinson called those tourists taxes “easy.” He pointed out that about half of the state budget is made up of such taxes, noting “it’s our tradition.”
This type of taxation to fund stadium construction has become the norm across the U.S. Dallas officials boosted hotel taxes by 2 percent and car rental taxes by 5 percent (among other tax increases) to fund the new Cowboys stadium that opened in 2009. To pay for Lucas Oil Stadium, which opened in 2008, bureaucrats implemented a 3 percent increase in hotel taxes in Marion County, as well as a 2 percent boost in the car rental tax rate (again, among other tax boosts). A car rental tax hike of 3.25 percent and a hotel tax increase of 1 percent helped fund University of Phoenix Stadium, home of the Arizona Cardinals since 2006.
Whether or not putting the burden of the stadium construction on tourists is fair is debatable, Robinson said, since it’s unclear whether locals or out-of-towners will fill most of the seats. He can envision a scenario in which casinos grab up many of the season tickets to dole out to favored customers in the form of comps.
“We don’t know who’s going to go to the games, right? That’s the big issue,” Robinson said.
A study prepared for Clark County by Kimley-Horn and Associates has estimated the attendance for Raiders games would be split 50-50 between locals and tourists, but until play begins no one knows for sure.
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