Volume II Issue I. The Impact of International Visitors on Southern Nevada

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1 Volume II Issue I

2 Page 1 Applied Analysis was retained by the Las Vegas Convention and Visitors Authority (the LVCVA ) to review and analyze the economic impacts associated with its various operations and southern Nevada s tourism industry more generally. This is the eleventh in the series of reports; it is specific to the impact of international visitors on southern Nevada. FINDINGS IN SUMMARY Over the past two decades, southern Nevada has matured significantly as a destination. Whereas other parts of the United States have long existed as natural tourist destinations, such as the beaches on the eastern seaboard, ski resorts in the Rockies, or the cultural centers of San Francisco, New York or Washington D.C., southern Nevada was little more than a barren desert until gaming was legalized in 1931 and the first resort casino-hotels began being constructed in the 1940 s. A great deal of investment, as well as vision, was required to develop the area into the major destination it is today. The variety of products and experiences into which the region has expanded has made it attractive to a diverse group of travelers, both domestic and international. In southern Nevada, a remarkable array of golf courses; dining options; shows, performances and concerts; special events; gaming; nightlife and spa experiences await would-be travelers. To appeal to the higher-end traveler, the region s reach into the luxury market niche expanded as well. As a recent example of the heights to which the region has reached, Las Vegas was named home to 3 of the 54 prestigious Five Star award-winning hotels in the U.S., Canada, Beijing, Hong Kong and Macau in the 2011 Forbes Travel Guide. 1 The city also claims 9 of the 167 hotels receiving the outstanding Four Star award for Discerning travelers making plans to stay in the best accommodations in the world will find an impressive critical mass of luxurious offerings in Las Vegas. The 12 Four and Five-Star Las Vegas hotels appear on the same list as St. Regis Resort Monarch Beach in Dana Point, California; the Little Nell in Aspen, Colorado; and the Ritz-Carlton New York, Central Park. 1 Forbes Travel Guide, formerly known as the Mobile Travel Guide, is one of several sources of hotel ratings. The Guide states that it has provided the most comprehensive ratings and reviews of hotels, restaurants and spas in North America for over fifty years. It was created in 1958 following the introduction of the United States interstate highway system to encourage people to get in their cars and explore the country. In 2008, the Guide launched the international star ratings program for hotels and spas with the release of the inaugural Forbes Travel Guide Beijing and Forbes Travel Guide Hong Kong Macau.

3 Page 2 As Las Vegas offerings expanded to offer something for everyone, also drawing recognition for its luxurious offerings along the way, its global appeal grew. Along with the region s attractive product offerings, marketing efforts, targeted air carrier routes and visa assistance have all encouraged and facilitated the flow of international travelers into Las Vegas. In 2009, more than 5 million people comprising 14 percent of total visitors traveled to Las Vegas from outside the United States. 2 These international visitors spent an estimated $5.1 billion on lodging, dining, shopping, entertainment, sightseeing, local transportation and gaming, thereby directly supporting 43,400 jobs and nearly $1.6 billion in wage and salary payments. Including indirect and induced economic impacts, international visitors generated $7.8 billion in economic output, supporting 71,200 jobs and over $2.3 billion in wage and salary payments. 3 The economic impact of international visitors represents approximately 22 percent of total visitor impact on southern Nevada in Not surprisingly, international visitors stay longer and spend significantly more than their domestic counterparts. This may be partly due to the fact that 46.4 percent of international visitors surveyed in 2009 were first-time visitors, compared to 4.6 percent of southern Californians and 14.4 percent of other domestic visitors. Based on survey averages, 4 international visitors spend over 60 percent more than the average visitor per trip; as a result, this group accounted for nearly 22 percent of direct spending in 2009, even though they only represented 14 percent of visitation. Lodging, shopping, dining and entertainment are the key areas where international visitors spend more than domestic visitors. By contrast, they also tend to game less and contribute less, on average, to gross gaming win than domestic visitors. Only 2 percent of international visitors stated that the primary purpose of their trip was gambling, compared to 17 percent of southern California visitors and 13 percent of other U.S. visitors who came primarily to game. While Las Vegas has enjoyed added scheduled and seasonal air service from the United Kingdom, Canada and France in recent years, the number 2 Source: GLS Research, 2009 Las Vegas Visitor Profile Study Southern California and International Visitors Version, prepared for Las Vegas Convention and Visitors Authority and Las Vegas Convention and Visitors Authority, visitor statistics, year-end summaries In 2009, 6 percent of visitors to Laughlin and 9 percent of visitors to Mesquite were international; however specific data on spending patterns for these visitor subsets is not available. Therefore, the economic impacts quantified above are principally for Las Vegas, rather than southern Nevada. However, because 5 percent of international visitors surveyed in Las Vegas reported visiting Laughlin, and 3 percent reported visiting Mesquite, a fraction of the spending reported in this analysis likely occurred in those cities. Additionally, 67 percent and 36 percent of international visitors surveyed in Las Vegas visited the Hoover Dam and Lake Mead, respectively, meaning that the much of the southern Nevada region is impacted economically by international visitors. 4 The term survey averages refers to the GLS Research 2009 Las Vegas Visitor Profile Study, prepared for Las Vegas Convention and Visitors Authority.

4 Page 3 of international air seats is limited relative to major U.S. ports of entry such as New York, San Francisco and Los Angeles. Currently, the majority of direct international flights involve travel to and from Canada, followed by Mexico and the United Kingdom. During 2009, over 1 million passengers enplaned or deplaned on direct Canada-Las Vegas flights, nearly half a million on Mexico-Las Vegas flights, and 300,000 on United Kingdom-Las Vegas flights. Over the past two decades, a number of small commercial and charter services providing direct international service into and out of Las Vegas have ceased operations or declared bankruptcy. Since 1996, nearly 100 different air carriers have carried international passengers directly into and out of Las Vegas front door. 5 However, only 31 carriers have transported more than 10,000 passengers over the ten-year span from 2001 to the present (October 2010). INTERNATIONAL VISITOR VOLUME From 2005 to 2009, Las Vegas international visitor counts hovered around 5 million, 6 which is more than twice the population of the region itself. The proportion of international visitors to total visitors has risen in recent years, and was estimated at 15 percent and 14 percent in 2008 and 2009, respectively, compared to 12 to 13 percent in 2005 through Please refer to the following table for details. Table I International Visitation Historical Trend, Year Total Visitors to Las Vegas 7 International Visitors as Percentage of Total 8 Estimated Total International Visitors million 12% 4.6 million million 13% 5.1 million million 12% 4.7 million million 15% 5.6 million million 14% 5.1 million 5 Data derived from McCarran International Airport enplaned and deplaned international passenger reports. 6 Source: GLS Research, 2009 Las Vegas Visitor Profile Study, prepared for Las Vegas Convention and Visitors Authority. 7 Source: Las Vegas Convention and Visitors Authority, visitor statistics, year-end summaries Source: GLS Research, 2009 Las Vegas Visitor Profile Study, prepared for Las Vegas Convention and Visitors Authority

5 Page 4 ECONOMIC IMPACTS OF INTERNATIONAL VISITORS Because international visitors spend over 60 percent more than the average visitor per trip, they accounted for nearly 22 percent of direct gaming and non-gaming visitor spending in 2009, even though they only represented 14 percent of visitation. Based on survey responses, international visitors spend more than double the average visitor on nongaming expenditures, accounting for 26 percent of total non-gaming visitor spending annually. However, because international visitors primarily travel to Las Vegas for vacation/pleasure rather than for gaming, they accounted for only 14 percent of total gaming spend using survey averages. A side-byside comparison of average expenditures based on unadjusted survey responses by major category for international versus southern California and domestic visitors is shown below. Table II Average Expenditures by Major Category - Unadjusted Survey Responses 9 Expenditure Category Southern California Visitors Other Domestic Visitors International Visitors Lodging (per person per trip) $100 $136 $169 Food and Drink $208 $246 $345 Local Transportation $12 $57 $110 Shopping $74 $87 $215 Shows $23 $39 $73 Sightseeing $1 $2 $29 Other $15 $4 $9 Non-gaming Subtotal $433 $571 $951 Gaming Budget $373 $420 $374 Total Unadjusted $806 $991 $1,325 In 2009, an estimated 5.1 million international visitors spent nearly $5.1 billion on lodging, dining, shopping, entertainment, sightseeing, local transportation and gaming, thereby directly supporting 43,400 jobs and nearly $1.6 billion in wage and salary payments. 10 Including indirect and induced economic impacts, international visitors generated $7.8 billion in economic output, supporting 71,200 jobs and over 9 Source: GLS Research, 2009 Las Vegas Visitor Profile Study Southern California and International Visitor Version, prepared for Las Vegas Convention and Visitors Authority. Average expenditure includes all survey responses, rather than only those who spent money in a certain category. 10 As in previous reports in this series, when calculating economic impacts, survey-based visitor spending totals were benchmarked (adjusted downwards) to reflect known expenditure levels. See EIS 1.1, Tax Contributions of Southern Nevada Visitors and EIS 1.7, Impact of LVCVA/LVE-Sponsored Special Events on the Southern Nevada Economy.

6 Page 5 $2.3 billion in wage and salary payments. 11 See the following table for details. Table III Annual Economic Impact of International Visitors, 2009 Direct Indirect Induced Total Impacts Impacts Impacts Impacts Employees 43,400 11,900 15,900 71,200 Wage and Salary Payments $1.6 billion $0.4 billion $0.4 billion $2.3 billion Wages per Employee $36,200 $30,800 $25,500 $32,900 Economic Output $5.1 billion $1.2 billion $1.5 billion $7.8 billion Output per Employee $116,700 $103,500 $93,100 $109,200 BEHAVIORAL DIFFERENCES: INTERNATIONAL VS. DOMESTIC VISITORS There are a number of behavioral areas where, as a group, international visitors tend to diverge from the average domestic visitor. Importantly, many of these factors contribute to higher average expenditure levels. Differences in the average international visitor s behavior related to trip planning, reasons for visiting, and even whether a person is a first time visitor may all have a material impact on spending patterns, and ultimately, the segment s economic impact. To start, it is interesting to note that 46.4 percent of international visitors surveyed in 2009 were first-time visitors, compared to 4.6 percent of southern Californians and 14.4 percent of other domestic visitors. Please refer to the illustration on the following page. 11 In 2009, 6 percent of visitors to Laughlin and 9 percent of visitors to Mesquite were international; however specific data on spending patterns for these visitor subsets is not available. Therefore, the economic impacts quantified above are principally for Las Vegas, rather than southern Nevada. However, because 5 percent of international visitors surveyed in Las Vegas reported visiting Laughlin, and 3 percent reported visiting Mesquite, a fraction of the spending reported in this analysis likely occurred in those cities. Additionally, 67 percent and 36 percent of international visitors surveyed in Las Vegas visited the Hoover Dam and Lake Mead, respectively, meaning that the much of the southern Nevada region is impacted economically by international visitors.

7 Page 6 Other Domestic Visitors First visit 14% So. California Visitors First visit 5% Repeat visit 86% Repeat visit 95% International Visitors Repeat visit 54% First visit 46% For comparison purposes, the 2009 Visitor Profile Survey categorizes visitors into three distinct groups: southern California (Las Vegas key drivein market), other domestic visitors and international visitors. The following sections highlight additional key differences between the average international visitor and the average domestic and southern California visitor. 12 Reason for Visiting A primary example of a difference between these groups lies in their reasons for visiting. Seventy-two (72) percent of international visitors stated that the primary purpose of their trip was vacation/pleasure, a stark contrast to 32 percent of southern Californians and 35 percent of other domestic visitors who answered similarly. Only 2 percent of international visitors stated that the primary purpose of their trip was gambling, compared to 17 percent of southern California visitors and 13 percent of other U.S. visitors who came primarily to game. 12 Source: GLS Research, 2009 Las Vegas Visitor Profile Study Southern California and International Visitors Version, prepared for Las Vegas Convention and Visitors Authority.

8 Page 7 Seventeen (17) percent of southern Californians and 16 percent of other domestic visitors stated that they primarily came for friends/relatives, compared to only 7 percent of international visitors. Eighteen (18) percent of southern Californians and 19 percent of other domestic visitors came for a convention, corporate meeting or other business, compared to only 9 percent of international visitors. Eight (8) percent of southern Californians and 5 percent of other domestic visitors came for a special event, compared to only 4 percent of international visitors. International visitors were much more likely to say that shopping was an important factor in deciding to visit Las Vegas (3.3 on a 5 point scale with 5 meaning very important ) compared to visitors from southern California or other domestic locations (both rated the importance of shopping at 2.6). Trip Planning and Length of Stay For obvious reasons, international visitors also tend to plan their visits further in advance. Forty-four (44) percent of international visitors planned their trip more than 90 days in advance, compared to 7.8 percent of southern Californians and 16.5 percent of other domestic visitors. Additionally, international visitors tend to use the Internet to plan their trip (63 percent) or a travel agent (37 percent) compared to southern Californians (30 percent used the Internet and 4 percent used a travel agent) and other domestic visitors (50 percent used the Internet and 12 percent used a travel agent). International visitors tend to book accommodations along the Strip corridor (91 percent), compared to an average of 75 percent for all domestic visitors. International visitors stay an average of 4.4 nights per visit, compared to southern Californians (2.9 nights) and other domestic visitors (3.6 nights). Gambling In 2009, only 79 percent of international visitors surveyed said they had or would gamble while in Las Vegas, compared to 84 percent of domestic visitors.

9 Page 8 Sixty-seven (67) percent of international visitors who gambled played for 2 hours or less per day, while domestic visitors averaged nearly 3.5 hours per day. Among international visitors who gambled, 77 percent played the slot machines most often, 9 percent played blackjack most often, and 10 percent played other table games most often. Foreign visitors also tend to visit more casinos than domestic visitors, with 42 percent visiting 7 to 10 casinos and 32 percent visiting 11 or more, for an average of 9.3 casinos visited. Visitors from southern California average 4.6 casinos per trip and all other domestic visitors averaged 6.1 casinos. DIRECT INTERNATIONAL FLIGHTS AT MCCARRAN AIRPORT The majority of international visitors traveling to southern Nevada connect elsewhere in the U.S., as McCarran International Airport is not a major international hub. However, a significant number of visitors do arrive and depart Las Vegas via direct air routes abroad. While the air carrier data released by U.S. Customs officials at McCarran International Airport (McCarran) does not reflect international passengers who initially arrived at another U.S. airport and connected on a domestic flight to Las Vegas (i.e., a visitor who took an American Airlines flight from London to New York where he/she went through Customs, and then took a domestic connection to McCarran), it does capture trends among international direct flights into and out of the region. During the past two decades, a number of smaller carriers, and in particular international charter companies, operated direct international flights into and out of Las Vegas for a span of only a few years. Since 1996, nearly 100 different air carriers have carried international passengers directly into and out of Las Vegas front door. 13 However, only 31 carriers have transported more than 10,000 passengers over the ten-year span from 2001 to the present (October 2010). Passenger counts from the 31 carriers transporting 10,000 passengers or more over the past ten years and providing direct international service into and out of Las Vegas have been grouped by the area of the world from which they bring visitors, and are presented in the summary table that follows. 13 Data derived from McCarran International Airport enplaned and deplaned international passenger reports.

10 Page 9 Table IV Passengers Enplaned/Deplaned on Direct International Flights at McCarran 14 Detail for Selected Years and Total, (thousands of passengers) (through October) 2010 (through October) Total ( ) Canada ,136 1,265 1,033 1,039 8,790 Mexico ,950 UK/Britain ,041 Philippines Japan Germany S. Korea Singapore France Note that enplaned and deplaned international passengers on direct flights total only approximately 2.3 million in 2009, compared to the 5 million international visitors estimated to have visited Las Vegas during the same year based on survey responses (see Table I). As discussed previously, the disparity is due to the fact that the air passenger data above does not include international visitors who connected elsewhere in the U.S. prior to arriving in Las Vegas. Additionally, enplaned and deplaned international passenger counts include a mix of local residents returning home and international visitors. METHODOLOGY Information on domestic and international visitor volume and consumer spending was obtained from the Las Vegas Convention and Visitors Authority, the Nevada Commission on Tourism and the Nevada Gaming Control Board. A discounted measure of total visitor spending and international visitor spending was utilized; refer to Volume I, Issue II in this series, The Economic Impact of Southern Nevada s Tourism Industry and 14 Counts include air carriers that have carried more than 10,000 passengers over the 10- year span from 2001 to Carriers providing direct service from Canada during the time frame presented above include: Westjet, Air Canada, Alaska, Skyservice, Sunwing, Air Transat, HMY/Harmony, Canada 3000, JETSGO and US Air Express. Carriers providing direct service from Mexico include Aeroliteral-Aeromexico, Mexicana, Aeromexico, Aviacsa, Vivaaerobus, Allegro, Aladia, and US Airways. From the United Kingdom: Virgin Atlantic, British Airways, British Midland, My Travel/Airtours International, Thomas Cook Airlines and MAXjet Airways. Carriers providing direct service from Japan, the Philippines, Singapore and Korea include Japan Airlines, Philippine Airlines, Singapore Airlines, and Korean Airlines, respectively. From Germany, carriers include LTU and Condor Flugdienst.

11 Page 10 Convention Sector. Additional data on industry-specific employment levels and wage and salary payments were obtained from the Nevada Department of Employment, Training and Rehabilitation and the U.S. Department of Commerce, Bureau of Economic Analysis. International air passenger information was obtained from McCarran International Airport. With respect to the economic impacts estimated herein, to identify the interrelationships in a regional economy, the IMPLAN (Impact Analysis for Planning) software and databases were used. IMPLAN is one of three generally accepted applications that are used to model how industries within an economy are interrelated. Simply stated, the model attempts to demonstrate mathematically how the outputs of one industry, be those wage payments or widgets, become the inputs of other industries. IMPLAN employs a regional social accounting system that is used to generate a set of balanced accounts and multipliers. The social accounting system is an extension of input-output analysis. Input-output analysis has been expanded beyond market-based transaction accounting to include non-market financial flows by using a social accounting matrix framework. The model is designed to describe the transfer of money between industries and institutions (e.g., households) and contains both market-based and non-market financial flows, such as inter-institutional transfers. IMPLAN uses regional purchase coefficients generated by complex econometric equations that predict local purchases based on a region's characteristics. In this case, the region is Clark County, Nevada. Output from the model includes descriptive measures of the economy including total industry output, employment and value-added contributions for over 500 industries. ANALYSIS LIMITATIONS This analysis used the best available data to estimate the economic impact of international visitors on southern Nevada. It relies heavily on data reported by third-party data providers; and, although we have no reason to doubt the accuracy of these data, they have not been subjected to any auditing or review procedures by AA. In some cases data were either incomplete or inconsistent. Efforts were taken to minimize the impacts of these challenges, and we believe the analysis provides a fair and reasonable response to the fundamental question presented. Finally, it is important to note that this is a preliminary undertaking that will be supplemented by on-going and future analyses. This report is not intended to be comprehensive and may not be appropriate for all purposes.