Sorry!! The article you are trying to read is not available now.

U-Haul Rates Show Las Vegas Boom Really Is Over

Print comment Post Comments
Is Las Vegas destined to become the Detroit of the West? It’s a question our own Kevin Depew recently posed as Vegas and Nevada as a whole endure a deep economic downturn due to severe declines in gambling revenues and a bust in the construction industry.

The stats are brutal:

•Unemployment in Nevada is now 14.4 percent, the highest in the nation
•Unemployment in Las Vegas is 14.7 percent (unemployment in Detroit is also ~15%)
•For comparison's sake, unemployment in Nevada 10 years ago was just 3.8%
•Gambling revenues increased 3% in Q1 of this year, prompting short-lived sighs of relief in Vegas as they then plummeted 5% in Q2

“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, Las Vegas told The New York Times. “If you look at the gaming revenues, they have declined and continue to decline over the past three years. “

“Sept. 11 set off a two-year slowdown,” Mr. Schwartz said. “But nothing of this magnitude.”

Here’s another interesting indicator suggesting Sin City’s troubled future: U-Haul pricing.

Specifically, Alex Tabarrok of Marginal Revolution looked at the U-Haul pricing between Los Angeles and Las Vegas. Five years ago, it was way more expensive to rent a truck to go from Los Angeles to Las Vegas than from Las Vegas to Los Angeles.

One-Way Trip (August 2005)    Price
Los Angeles to Las Vegas       $454.00
Las Vegas to Los Angeles       $119.00

The distance is obviously the same. So the price difference was likely due to the fact that more people wanted to escape LA than leave Las Vegas.

Tabarrok explains that the key idea is to recognize that U-Haul wants the number of trucks at each one of its locations to be the same every day. Therefore, the company chooses prices on its links so that at the end of the day the same number of trucks comes into Los Angeles as leave. One way of doing this is reducing the price on Las Vegas to Los Angeles trips.

Ok, what are prices like today?

One-Way Trip (October 2010)    Price
Los Angeles to Las Vegas        $223.00
Las Vegas to Los Angeles        $234.00

So prices have halved on the LA to Las Vegas trip and doubled on Las Vegas to LA. “Yup, the Las Vegas boom is over,” says Tabarrok.
POSITION:  No positions in stocks mentioned.