How and Why Las Vegas Has Innovated Over the Past 10 Years

If you have been to the wonderful city of Las Vegas several times over the past 20 years, you will have seen many changes – hotels within hotels, new nightclubs, less double-denim and most definitely more people moaning about parking charges.

To those not close to Las Vegas, it may still seem the flashy, gambling haven that it has always been, but they would be very much mistaken, such were the innovation questions asked and solutions put in place in ‘Sin City’ in the past few years by hoteliers in particular.

In 2008, like much of the rest of the world, Las Vegas suffered greatly from the financial crisis with particularly bad years in 2008-2010 when gaming revenues dropped a huge 20% (PDF), hotel bookings dropped by 25% and visitors dropped by 5%. Many more people were NOT gambling and NOT staying for the night in these particularly frugal times. In fact, the amount spent per person during their time in the city dropped by the highest amount in history.

Even though things started to grow again a few years later, Vegas has never quite been the same, so, up against the wall, Las Vegas did what it’s very good at doing – it rapidly innovated. Money was at stake – and lots of it. Prior to the financial crisis, hotels on the strip, especially hotels like the Cosmopolitan of Las Vegas, were the envy of most of the world. Even so, hoteliers knew that there was still plenty more to do in improving hotel and room quality if revenues per visitor were to significantly improve. Being among the best hotel experiences in the world was simply not enough.

Even still, gambling revenues still continued to decrease after the recession and continue to do so – largely explained by Vegas experts as the lack of disposable income per household, and the rise of the millennial, who favour more skill based entertainment such as online gaming. This puts even more pressure on hoteliers to innovate in other areas.

Revenues from hotel rooms pre-recession was almost $800m LESS than today, whereas gambling revenues pre-recession was over $600m MORE than today which is why many casino projects have stalled or been scrapped altogether in recent times and more entertainment venues have been built, such as the T-Mobile Arena which is now host to Bruno Mars and other artists suitable for the younger crowd.

Concurrently with the lack of new casino builds there has been a shrinkage in the number of gaming tables, slot machines and huge decreases in the space taken up by poker rooms (PDF) – with the extra space being used for more non-gambling entertainment and the potential of e-gaming (think Call of Duty but inside an arena/gaming area).

So, how has Las Vegas innovated?

To innovate, the hoteliers of Las Vegas listened, studied and measured almost every aspect of how visitors used facilities, with even the most minute changes making millions of dollars extra revenue, such as digitising the giving of complimentary drinks to those who sit at the bar to gamble on video poker to remove any chance of losing money.

Even though room numbers in the city have almost stayed the same since 2010, revenue on rooms has increased by over 50% due to some of the most spectacularly brilliant marketing campaigns seen in any industry in many years in which messages explain how service and room quality has increased, yet prices ‘seemed’ the same. In reality, many add-ons hide the true total cost of a stay at a Las Vegas hotel. Extra ‘Resort Fees’ make for much of this increase, with other ‘hidden’ charges such as paid car parking – a recent Las Vegas development – also adding to the cost of a hotel stay.

A short-lived catering for a huge influx of affluent Asian gamblers in recent years helped to bring in great revenues, but this has decreased by a great number, partly due to Chinese anti-corruption crackdowns and the rapid growth of Macau as a gambling mecca.

So, you could argue that there hasn’t been a complete recovery, because Las Vegas simply hasn’t found a way to increase the amount of money spent on gambling by the average visitor – and probably never will do. It has, however improved its hotel and hotel room offering, which is expected to surpass the revenues made by gambling in the next 3 years, with a huge shift in revenue balance by the mid 2020s.

The future

The feeling among Vegas and economic experts is that an increased focus on hidden charges for hotel stays will stunt the amount of money spent per person on entertainment and food & drink, with recent indications that this is already the case with big drops in beverage revenues.

It may be the case that increased and hidden hotel stay costs is just a transient phase in a rapidly-changing city and revenues from other sources in the future could see huge drops in hotel rates once again.

Las Vegas will fight back and a potential swing towards entertainers appearing in the city during their heyday, not past it, is something that we could see more of in the next few years. You could argue that Britney Spears and Backstreet Boys are not exactly in vogue, but Bruno Mars is at the peak of his career and is enjoying a hugely successful residency in the city and at other MGM venues.

As has been seen by successful DJ residencies at clubs in Vegas by stars such as Deadmau5, Tiesto, Skrillex Steve Angello and David Guetta, earning millions in revenue each year, a younger crowd can be wowed, entertained and will crucially pay for relevant acts at the peak of their careers.

Watch this space for Las Vegas’ next innovations.