The Las Vegas casino industry, and the city itself, is in a real pickle. For nearly 40 years before the downturn of 2008, the gaming industry had been touted as "recession-proof." But, as the economic downturn intensified and the national gambling spend declined, it became clear that consumer demand for casino gambling was indeed sensitive to larger economic fluctuations. In Las Vegas, the drop-off in both visitor arrivals and gaming revenue was heralded as particularly surprising. Though the city has faced adversity before, most recently after 9/11, this was seen as an unprecedented decline that augured a grim, uncertain future.
The 2008 downturn, however, was not unprecedented. In the early 1980s, the city suffered the triple-whammy of competition from Atlantic City, the 1978-1982 national economic downturn, and the MGM Grand fire, which was a major public relations nightmare in the city's newest, largest resort. Some thought that Las Vegas had seen its best days, and nearly everyone agreed that the future would likely be grim.
The alarming success of Atlantic City, which was drawing more than double the visitors of Las Vegas in the early 1980s, sparked anxiety in the desert. More than 3,000 new high-end hotel rooms had just come online in the desert resort, and it now seemed that gambling junkets and conventions from the East Coast might not be coming to the party in Las Vegas, but instead might play closer to home.
The world's economic troubles also hurt Las Vegas-gambling revenues, which had soared throughout the 1970s, were suddenly reflecting the dismal economy. In 1980, the inflation rate almost exactly matched the increase in gaming revenue, so that the gaming industry essentially was stagnant. The next year, accounting again for inflation, Clark County gaming revenues declined by almost seven percent. Rising fuel costs and gas shortages had severely cut into the drive-in market, and the dismal national economy and a dampening market for air travel similarly restricted traffic at McCarran International Airport -- from a high of about 10.6 million passengers in 1979, visitor totals dropped slightly in 1980 and more dramatically in the next two years. In 1981 and 1982, less than 9.5 million passengers used McCarran airport. In the latter year, hotel occupancy rates dropped to 76 percent, the lowest rate since 1971, and the first dip into the seventies since that year.
There was a very visible symbol of the ongoing crisis. On Nov. 21, 1980, a deadly fire ripped through the MGM Grand Hotel Casino, then Las Vegas' newest and most modern resort. Eighty-seven people died, and footage of black smoke billowing from the casino entrance-and trapped guests in the hotel towers desperate for rescue-aired on the national news. The fire, which was made far worse by the casino's failure to install sprinklers, was a public relations nightmare for Las Vegas. If guests couldn't be safe in this ultra-modern palace, could they feel comfortable in any Las Vegas hotel? Four months later, a fire at the Las Vegas Hilton-which killed eight people, injured 200, and left blackened scorch marks along the tower's facade-compounded the fiasco. Retrofitting the massive casinos of the Strip to mitigate such blazes would be costly, time-consuming, and would make far less impression on the public than the tragic fires.
But casino operators did not surrender themselves to an inexorable decline. Instead, they innovated. If the high roller market was drying up or moving to Atlantic City, they'd court a demographic described as "low roller" and "middle market." Described as the "Burger King Revolution," this shift allowed Las Vegas casinos to benefit from mass marketing and a larger pool of potential visitors. Though the new customers spent, on average, less than the old, there were more of them, and with their patronage Las Vegas quickly recovered.
At the time, the mass market brought a new audience for Las Vegas. Families who'd never think of coming to Las Vegas came, and left behind enough of their discretionary income to convince casinos that the future of the industry was growth, not decline. The result was the 1990s boom, which happened despite-or perhaps because of-an expansion of casino gambling nationally.
For today, the lessons of the early 1980s are clear: if business is down, the industry needs to identify and pursue new customers. In today's crowded casino market and challenging times, this will not be easy, but it may be the only way for the industry to thrive.
