An Economic Sensitivity Analysis of Las Vegas Gaming Revenues

Abstract

The gaming industry has long been considered recession proof. However, the industry expanded exponentially over prior decades in addition to increasing its exposure to the lodging and conventions industries. The industry also struggled with declining gaming revenue during the recession in 2007. This study uses the Las Vegas region to investigate gaming revenues’ exposure to economic change between the two most recent recessions (e.g. 2001 & 2007). The results show that casinos were more exposed to economic conditions in the latest recession and more sensitive to economic downturns. The results further suggest that increased exposure to lodging may reduce the economic sensitivity of gaming revenue. This study contributes to the industry literature by examining the economic sensitivity of casinos’ gaming revenue considering exposures to lodging and convention industries. The study results can be leveraged to optimize expansion investments and operational decisions in the casino industry.