Strength Seen for Local Economy, Economist Forecasts 8.8 Percent Jump in '04 Gaming Revenue

Larger-than-expected growth in Southern Nevada's gaming revenue and visitor volume suggests the economic expansion will continue through the next 18 months, a local economist said Monday.

Gross gaming revenue is forecast to grow by 8.8 percent this year to $8.5 billion and by another 5 percent in 2005 to nearly $9 billion, Keith Schwer, director of the Center for Business and Economic Research, said at his Midyear Economic Outlook.

With gaming revenue up by more than 11 percent through the first part of the year, it will only take 6 percent growth for the rest of the year to reach the 8.8 percent projection, Schwer said.

He outlined Southern Nevada's economic strengths, including increased demand for business travel, higher disposable income, robust construction activity and a number of new projects coming on line.

The number of visitors to Las Vegas will increase by 5.3 percent this year and 4.2 percent next year to nearly 39 million as domestic travel picks up, he said.

The risk to Schwer's forecast, as it was in December, is more terrorism.

"We just keep putting that out there," he said. "Our community is on the list, not at the top of the list, but we are vulnerable because of who we are."

Declining housing affordability is another weakness for the local economy.

Mary Riddel, associate director of the research center at University of Nevada, Las Vegas, said the phenomenal rise in home prices over the last couple of quarters has furthered the notion that a housing "bubble" exists.

"It was sudden and swift," she said of the increase. "The first thing to suggest a bubble is a rapid rise in prices that are not sustainable in the long run."

Las Vegas is not alone in this phenomenon.

The Office of Federal Housing Enterprise Oversight shows Las Vegas at 16.4 percent appreciation in 2003, between Bakersfield and Orange County, Calif. The national average is 4.7 percent.

Orange County, Reno and Las Vegas were the leading Western metropolitan statistical areas in three-year appreciation rates at 48.3 percent, 32.1 percent and 31.6 percent, respectively.

"The caution flag is out on housing," Schwer said. "Affordability is going to be an issue going forward."

Glenn Christenson, chief financial officer of Station Casinos, said the information he gathers from the economic outlook is "extremely helpful" when he goes to Wall Street with his company's earnings report.

"We continue to have great confidence in the local economy," he said. "This is arguably the strongest economy in the United States and based on this information, it gives us confidence as we go forward, as we continue to invest in the Las Vegas economy."

Riddel said tourism directly or indirectly accounts for about half of the employment in Southern Nevada, which has grown by more than 4.4 percent in each of the first four months and is projected to continue that pace throughout this year and 2005.

Las Vegas added more than 12,000 rooms in 1999, but growth has been relatively flat since then. Net room additions is projected at 1,818 for this year, climbing to 5,000 next year, including 2,700 at Steve Wynn's new resort.