The health of the global economy is deteriorating, and as is the case with the mysterious virus infecting states and nations in domino fashion, a cure is unknown.
Nevada, with its tourism-based economy, will be among the initial casualties.
Government officials are publicly urging Americans to avoid unnecessary travel. Airlines are cutting flights in response.
“The economic world is in turmoil — coronavirus fallout and now an oil-price war,” says Dr. Stephen Miller of UNLV.
“Las Vegas was devastated by the financial crisis (housing crisis) given our exposure to the real estate industry generated, in part, by our record growing population prior to the Great Recession,” says Miller. “Now, the coronavirus strikes Vegas through its other driver — the leisure and hospitality industry.”
“Information on the impacts is largely anecdotal at this point, but we know it is material given the changes in advanced bookings,” says consultant Jeremy Aguero of Applied Analysis.
“I would say that in the short term, the more a given market relies on international demand (or domestic fly in), the more pronounced the economic effects on the hospitality/tourism industry will be,” said Dr. Nathaniel Line of the Dedman School of Hospitality at Florida State University, via email. “Destinations with significant drive in demand may fare relatively better. However, if the situation does not improve soon, and the virus continues to spread into the summer, drive-in demand will start to decrease as well.”
An average of 45,402 cars travel across the California/Nevada state line daily, according to the Las Vegas Convention and Visitors Authority. About one in five Las Vegas tourists are from Southern California.
In the U.S., where the Dow Jones Industrials Average plunged more than 2,000 points on Monday, congressional leaders and financial experts are proposing a variety of therapeutics, from corporate tax cuts tailored for especially hard-hit industries to sick leave for the millions of workers who lack it.
“I guess you’d say everything’s on the table,” Senate Finance Committee Chairman Chuck Grassley told reporters, according to Bloomberg.
Grassley allowed for the possibility of allocating Federal Emergency Management Agency funds to cover hospital costs for the uninsured, according to news reports.
In a briefing Monday, President Trump advocated a payroll tax cut for companies. Vice-President Pence indicated workers who depend on receiving a paycheck will not be left behind.
People who resorted to gig work after full-time jobs went out of fashion with the Great Recession may be the most susceptible to the economic side effects of COVID-19.
“I had a conversation with some policymakers over the weekend about this exact issue,” Aguero said in an interview. ”We are rightly focused on the immediate public health issue, but preparing for the economic issue that will follow quickly and has the potential of affecting a broader population set.”
“Directly to your question, many people are simply not prepared to weather this challenge, including without limitation, those without access to benefits,” Aguero said.
Some experts fear the realities of living paycheck to paycheck could exacerbate the public health crisis by leaving sick people, including undocumented immigrants afraid of seeking health care, with no options but to work.
Uber is offering 14 days of paid leave to drivers who contract the novel coronavirus.
House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer wrote President Trump on Sunday, demanding paid sick leave for workers affected by COVID-19, according to news reports.
“In light of reports that the Trump administration is considering new tax cuts for major corporations impacted by the coronavirus, we are demanding that the administration prioritize the health and safety of American workers and their families over corporate interests,” the Democratic leaders wrote.
Schumer and Pelosi want unemployment benefits for those who lose their jobs as a result of the outbreak, and free testing and treatment for the uninsured.
The State Department has advised Americans not to take cruises or travel unnecessarily, and airlines are reporting a decline in bookings and increased cancellations.
United Airlines announced last week it will cut domestic flights by 10 percent next month and international flights by 20 percent. The company said in a statement it intends to make similar cuts in May.
The U.S. airline industry employed 582,000 in 2018, according to the Bureau of Economic Advisors.
The hospitality industry in America employs 1.5 million in hotels and 1.6 million in bars and restaurants.
The Bureau of Economic Analysis says the tourism industry generated direct economic output of $1.09 trillion in 2018. Each dollar produces 72 cents of indirect output.
Members of Nevada’s congressional delegation won’t say whether they’ll request a bailout for the state’s hotels and tourist attractions.
“These conversations are in early stages,” Kevin Gerson, a spokesman for Rep. Dina Titus, said via email. “I’ll keep you updated if/when we get a better sense of where they’re headed (or if they’re going anywhere at all).”
“I have long said that this industry has done an excellent job of diversifying its revenue stream — gaming, lodging, food and beverage, entertainment, shopping, clubbing, and most recently sports entertainment,” says Miller. “But, it doesn’t matter how diversified your revenue stream is, if visitors do not come, the industry gets hit.”
Miller says the trends in the spread of COVID-19 “don’t bode well for a ‘soft landing.’”
“The probability of a recession has gone up considerably, especially for those regions that rely on leisure and hospitality, as we do in Southern Nevada. In sum, we need accurate information on the extent of infection and its trend in Southern Nevada. This requires testing for the virus, something that it seems will occur over the next few weeks.”
“I agree that the impact on travel (and travel dependent economies is a concern). That said, the implications of the recovery curve is pure speculation at this point (pending more definitive information about the virus itself),” Aguero said via email. He added it’s “uncertain at this time” whether gaming companies with properties in Asia, which appears to be recovering from the virus, will be able to pick up the slack in the event of a domestic downturn.