Posted on: March 8, 2022, 11:11h.
Last updated on: March 8, 2022, 11:36h.
With the recently announced US ban on Russian oil, already rising gasoline prices are likely to jump even higher in Las Vegas and elsewhere. That may lead to would-be casino visitors rethinking travel plans, economists warned. Many Southern Nevada gas stations already are charging to close to $5 a gallon, or even higher.
On Monday, one Las Vegas station on Flamingo Road was charging $4.98 a gallon for cash customers. Credit card customers were paying $5.08 a gallon.
The state average in Nevada on Monday was $4.59 for a gallon of gasoline, according to the region’s AAA, which serves Alaska, Arizona, Northern California, Nevada, Montana, Utah, and Wyoming. The Nevada average a year ago was $3.10.
The US average gasoline price set a record of $4.10 a gallon on Monday, according to GasBuddy, an online site that monitors prices. The prior record was $4.10, set in 2008.
Higher gas prices mean that some casinos may see fewer visitors. Potential visitors may decide that prices at the pump are simply too high to drive in for the day or the weekend, casino sector analysts said.
Many Vegas visitors come from nearby locations, like Southern California. Metropolitan Los Angeles is at least four hours away from Las Vegas by car and planned high-speed train service is at least a few years away.
People can postpone their trip to Vegas and decide to visit less frequently,” Stephen M. Miller, director of research at UNLV’s Center for Business and Economic Research, told Casino.org when asked about gasoline prices.
The increases will impact the wider Las Vegas economy, too, he predicts.
“The number of drive-in visitors should fall almost immediately, and continue at a lower level until some relief occurs with additional crude oil supply,” Miller said. “This will be a setback for the recovery in Southern Nevada.”
Higher gas prices could also impact Vegas’ employment, according to Miller. With higher gas prices, employees may have a more costly (and harder) time traveling to work. Las Vegas lost 172,000 jobs in leisure and hospitality between February 2020 and May 2020. It has recovered 110,000 jobs, or 64% of the lost jobs, leaving a deficit of 62,000 jobs, he said.
Regional Casinos More Susceptible
The Rev. Richard McGowan, a finance professor at Boston College further predicts rising gasoline prices will impact regional casinos, such as MGM Springfield in Massachusetts, as well as Foxwoods and Mohegan Sun, two tribal casinos in Connecticut.
They depend mostly on day-trip customers,” McGowan explained. “Higher gasoline prices mean less funds for entertainment so that includes casino trips.”
The lower number of visitors will lead to lower demand for supplies, food, etc. at casinos, Miller adds. Higher gasoline prices also will mean expenses may increase for casinos. Inflation was already impacting the cost of doing business at gaming properties.
There are some ways Las Vegas casinos can attract those visitors who drive to properties. They could provide them a subsidy on gasoline as a “promotional gimmick,” Miller speculated. “They could lower their room rate to offset to some extent the additional transportation cost for drive-in visitors.”
Regional casinos may lure these patrons by offering free meals or even free gas, McGowan added.
Impact of Ukrainian Crisis
Rising prices at US gasoline stations were happening even before the Russian invasion of Ukraine. But increases jumped following the violent outbreak.
As long as the Ukrainian conflict continues, it will have a “significant impact on the global oil market,” Aldo Vazquez, a spokesperson for the AAA, told Casino.org.
Prices are increasing because of the increased cost of crude oil, Vazquez explained. Crude oil makes up about 60 percent of the price of gasoline, which is now closing at about $115/barrel.
North Carolina State University economist Michael Walden further predicts the longer the Ukrainian conflict goes on, the higher fuel prices will go, and the more vulnerable vacation travel and activities will become.
Obviously for people who travel to Vegas by car, such trips have become more expensive,” Michael Walden, Reynolds Distinguished Professor Emeritus of Economics at North Carolina State University, told Casino.org. “But sometimes people forget jet fuel is also derived from oil. So higher oil prices are making it more expensive for people to reach Vegas, however they travel.”
Walden points out, too, that if travel is more expensive, “people tend to cut back on their discretionary travel in order to keep their needed travel going. Vacations and conventions in Vegas would be considered by most to be discretionary — certainly looking forward.”