Economist: "Supply creates its own demand"

The Economist looks at the gambling industry in Las Vegas and generally concludes that while profitability will be strained by recessionary factors and by increased supply, the gaming industry is pretty good at stimulating demand:

The casino Titans are adept at dealing with shifts in demand, however. Led by Harrah’s, whose boss, Gary Loveman, is a former economics professor, they have become experts in collecting information about their customers and using it to tailor promotions. Gambling firms also have a knack for carving out new markets. And they are ramping up marketing efforts abroad. The attractions of a weak dollar are clear, even to the unluckiest of European gamblers. “It’s great. Every dollar I lose is only 50 pence,” says Neil Gregory, a British property developer struggling to contain his deficit on the Luxor’s roulette tables. Transatlantic business has also been boosted by boxing extravaganzas featuring European fighters.

Optimists reckon a weak economy and currency could boost domestic demand, too. If past downturns are a guide, a substantial number of Americans will head to Vegas rather than taking expensive holidays abroad, says David Schwartz of the Centre for Gaming Research. And the “whales”, as high-rollers are known, really are immune to economic fluctuations. Some high-end casinos are doing even better this year than last, says Brian Gordon of Applied Analysis.

This leaves some convinced that Vegas will once again defy the sceptics, just as it confounded those who argued that it would be hurt by competition from Californian gambling dens, or that the wave of mega-hotel openings in the 1990s would create crippling overcapacity. History suggests that, in America’s gambling capital at least, supply creates its own demand.

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