Lower consumer spending, high unemployment and potential competition from online gaming is expected to pose significant challenges to Las Vegas' gaming industry.

A report in the New York Times last week highlighted the fact that the US gambling capital has been hit hardest during the recession and looks unlikely to experience a recovery any time soon.

“It’s been in bad shape before, but not this bad,” David G Schwartz, director of the Center for Gaming Research at the University of Nevada, told the newspaper. “If you look at the gaming revenues, they have declined over the past three years.

“September 11 set off a two-year slowdown but nothing of this magnitude.”

At 14.4 per cent, unemployment in Nevada is the highest in the US having risen from 3.8 per cent in just 10 years. The rate in Las Vegas is even higher at 14.7 per cent. The state has also led the country’s housing foreclosures for the last few years.  

The latest figures from the Nevada Gaming Control Board do not make for happy reading either. The state’s casinos reported total gaming win of $829.7m in July, 4.93 per cent lower than the previous year. Although the Las Vegas Strip held firm and recorded similar revenues to the previous year, casinos downtown have seen a 19.26 per cent decline and to the north of the city, operators’ gaming win has slipped 23.56 per cent.   

At the same time, hotel occupancy is down and rates are at bargain levels. New hotel projects and the opening of MGM’s City Center have also created an oversupply of accommodation.

Efforts to legalise online gaming have suffered setbacks in recent months but the need to generate additional tax revenues could prompt movement in the next 18 months. If fewer people are choosing to vacation in Las Vegas, then the worry is that more people will choose to gamble online if they have the opportunity to do so.

A recovery in Nevada, it seems, is a long way off.