Las Vegas Thrives as Consumer Spending Shifts From Goods to Experiences Amid Economic Boom

The economic downturn many predicted in 2023 never came to pass. Instead, the economy has experienced a boom fueled by consumer spending — and Las Vegas is reaping the benefits.

Economist Dr. Christopher Thornberg, founding partner of Beacon Economics, discussed the differences between the narrative of an economy in dire straits and the reality of a robust economy during a recent economic forum hosted by Bank of Nevada.

Last year, more than 60% of forecasters put the probability of a recession in the next 12 months at 60%. But the economy remains healthy, and that expectation has dropped to below 30% today.

As the economy returns to a more balanced state with COVID in the rearview mirror, consumers are spending freely, with a noticeable shift from goods to experiences.

During the pandemic, people purchased goods, including big-ticket items like cars, campers and boats. Now, travel and dining out are surging in popularity, and Las Vegas casinos are seeing record profits. Foreign travel is at an all-time high, and spending at restaurants has shot up 40% since the pandemic — a noticeable uptick, even taking into account inflation and wage hikes. Event promoter and venue operator Live Nation was “printing money” last year, Thornberg said, with nearly every event selling out — including VIP packages.

“It’s pretty obvious that Americans are having a tremendous amount of fun,” Thornberg said. “And of course, Nevada is continuing to see huge increases. Gaming revenues here in Las Vegas are at a record-high level.”

While entertainment is a big industry in Southern Nevada, it’s not what is driving the economy, Thornberg noted. “It’s actually other, external industries, including, of course, logistics and manufacturing. And it’s really good, steady growth. … Las Vegas looks like one of the strongest economies in the U.S. right now.”

The labor market remains tight, with an unemployment rate still below 4% nationwide and hovering around 5% in Las Vegas. A scarcity of labor drives economic and job growth, Thornberg said, noting that Nevada has been the eighth fastest-growing market over the last 40 years. Growth in the labor force is about 20% higher than it was a decade ago, with the logistics industry seeing a 44.5% increase since February 2020 and manufacturing up 20.2% in the same period.

Meanwhile, in another key indicator, the office market continues to struggle nationally, but the issue isn’t as severe in Las Vegas — and other sectors of commercial real estate are thriving. Retail vacancy rates continue to decline as businesses rent space. Industrial real estate remains a tight market in Nevada.

In the housing market, Thornberg noted, people rushed to buy when interest rates hit historic lows during the pandemic. Since then, both housing prices and interest rates have skyrocketed, largely due to low availability because potential sellers want to keep the low interest rates they’ve locked in.

“They’re not going to move unless you pay them enough money for them to be able to take on the higher interest rate on the new home they buy,” Thornberg said. “So, you have a very low-liquidity market. The low-liquidity market keeps prices high.”

Nevertheless, as Americans continue to embrace leisure activities and the economy finds its footing, the outlook appears promising for sustained growth and prosperity. Las Vegas, renowned for its entertainment prowess, has become a beacon of this trend.