- Closure of casinos to cost the southern Nevada economy $38.9bn
- AGA says 93 percent of U.S. casinos closed, 644,000 employees out of work
- Gaming companies tap credit lines to boost their cash positions
The closure of the state’s gaming industry will cost the southern Nevada economy an estimated $38.9bn, according to the Nevada Resort Association (NRA).
The NRA, which represents a majority of the state’s gaming industry, is urging Nevada’s congressional delegation to act swiftly to assist the Las Vegas region, which depends more on tourism than Alaska does on oil, Wyoming does on coal mining or New York City does on the financial sector.
In a three-page letter outlining the impact the state’s economy is facing from the casino shutdown associated with the coronavirus, NRA president and CEO Virginia Valentine said the impact of March and April meetings and convention cancellations is already approaching $2bn in lost economic activity.
She noted that the region’s convention industry alone supports more than 67,000 jobs for almost $11bn in economic impact.
“The significant economic loss to Nevada’s economy began in January when the outbreak in China affected visitation to Las Vegas for Chinese New Year and battered three of our largest Las Vegas-based companies with operations in Macau,” Valentine said.
MGM Resorts International, Wynn Resorts and Las Vegas Sands all operate casinos in Macau that were forced to close for two weeks in February as the government tried to flatten the curve of new coronavirus infections.
Valentine said an independent analysis has determined that 320,000 employees relying on $1.3bn in wages and salary payments are at immediate risk. Those numbers are nearly twice those reported in the state during the Great Recession, the analysis found.
Nevada Governor Steve Sisolak, a Democrat, announced Tuesday the 30-day closure of all non-essential businesses in the state, including casino-resorts. As of Sunday, there were 190 confirmed coronavirus cases in Nevada, with 2,909 tests performed, according to the Nevada Health Response state website.
In the letter, the NRA asked that the gaming industry be included in an $850bn to $1trn federal economic stimulus being considered by Congress.
“This is an unprecedented economic situation that will have catastrophic financial ramifications for individuals, families, businesses and state and local budget across the state,” Valentine wrote. “As you can see, unequivocally, Nevada is being hit hardest by the economic fallout caused by [coronavirus], and we respectfully urge Congress to consider providing immediate economic relief and recovery to the lifeblood of Nevada’s economy.”
The NRA, along with the American Gaming Association (AGA), has been lobbying Congress for the gaming industry to be included in any federal support for U.S. industries.
The AGA said Sunday that 93 percent of all commercial and tribal casinos in the U.S. are closed, leaving an estimated 644,000 casino employees nationwide out of work, the majority of whom are in Nevada.
“These mass closures will rob the U.S. economy of $43.5bn in economic activity if American casinos remain closed for the next two months,” the AGA said in a statement.
Last week, AGA president and CEO Bill Miller said the federal government “must act swiftly and comprehensively to get America’s hospitality employees, and small businesses that support them back to work.”
Valentine said Nevada’s tourism industry is responsible for 40 percent of Nevada’s general fund, supports 450,000 jobs — one in three in the state — and provides $20bn in wages and salaries annually, $1.8bn in industry-specific fees and taxes and $75bn in annual economic output, or 45 percent of the state’s total.
In addition, state and local governments will lose $500m in hotel room taxes, $380m in gaming taxes, $73m in entertainment taxes, $46m in local payroll taxes and $19m in local business taxes.
Nevada is the nation’s largest gaming state, generating more than $12bn in casino revenue in 2019. The Las Vegas Strip produced $6.87bn in gaming revenue.
The NRA’s letter was sent to U.S. Senators Catherine Cortez Masto and Jackie Rosen, both Democrats, and Representatives Dina Titus, Susie Lee, Steven Horsford, also Democrats, and Republican Mark Amodei.
Steven Miller, director of the Center for Business and Economic Research (CBER) at the University of Nevada, Las Vegas, said events are changing rapidly as the coronavirus outbreak worsens in the United States.
“The U.S. and local economy will experience a huge hit,” Miller told VIXIO GamblingCompliance. “Congress and the [Federal Reserve] have swung into action. But they can only reduce the pain, they cannot control the downturn, which is driven by the virus and our reaction to it.”
Gaming Companies Tap Credit Lines
Caesars Entertainment and MGM are among the gaming companies accessing revolving credit as the industry deals with temporary closures nationwide due to the coronavirus outbreak.
Caesars said it will draw $975m, $161.4m and $15m from three revolving credit facilities, while MGM announced it was tapping $1.5bn worth of reserve loans.
Caesars and MGM operate the majority of resorts in southern Nevada, and both companies have closed their properties across the country.
In a filing with the U.S. Securities and Exchange Commission (SEC), Caesars said it has “fully drawn available capacity under each of the revolving credit facilities as a precautionary measure in order to increase its cash position and preserve financial flexibility in the light of the current uncertainty in the global markets.”
Penn National Gaming cited concerns over the coronavirus outbreak in drawing $700m in reserve loans.
“The company notes that it had sufficient liquidity prior to taking this action, it has no meaningful maturities due until 2023, and there are currently no plans to deploy the draw down funds,” Penn said in an SEC filing.