EXECUTIVE SUMMARY 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 brief is specific to the relative dependence of major U.S. economies on the tourism sector. Twenty-three metropolitan areas (MSAs) were analyzed to determine each region s relative dependence on tourism based on several metrics. The comparison group included the largest U.S. cities in terms of population, as well as smaller well-known tourist destinations. Southern Nevada is among the most tourism-dependent economies in the U.S., and may be the nation s most tourismdependent economy. The Las Vegas MSA ranked among the top three regions in every major comparison category, including employment distribution, compensation, Gross Domestic Product (GDP), ratio of visitors-to-population, and visitor spending as a percentage of GDP. Excluding the relatively small MSA of Atlantic City (population of 275,200 versus Las Vegas 2.1 million), southern Nevada is arguably the most tourismdependent of all major economies in the U.S. Las Vegas ranked 2 nd nationally in terms of leisure and hospitality employment as a share of total employment with 31.7 percent. Ranking 1 st was Atlantic City with 31.8 percent; rounding out the top three was Orlando with 21.4 percent. Las Vegas high share of leisure and hospitality employees resulted in the second-highest leisure and hospitality location quotient 1 of 2.94. Atlantic City was only fractionally higher, reporting an LQ of 2.95. Las Vegas ranked 2 nd nationally in terms of leisure and hospitality compensation as a share of total compensation at 23.1 percent. Ranking 1 st was Atlantic City with 23.6 percent; again, Orlando placed third in the nation, at 12.5 percent. Leisure and hospitality employees in Las Vegas earn an average annual wage of $38,808, the highest among comparison cities. In Las Vegas, the leisure and hospitality sector accounted for 20.9 percent of GDP, ranking the region 2 nd among comparison cities. Atlantic City was 1 st with 23.2 percent, and Orlando was 3 rd with 11.1 percent. Las Vegas ranked 6 th nationally in terms of absolute visitor volume, reporting 41.1 million visitors in 2014, and 3 rd nationally in terms of the ratio of visitors-to-population. Only Atlantic City and Orlando ranked above Las Vegas when considering the number of visitor trips per full-time resident. Las Vegas ranked 3 rd nationally in terms of absolute visitor spending with an estimated $29.8 billion in 2014. The region also ranked 3 rd in terms of visitor spending as a share of total GDP with 31.5 percent. Only New York City and Orlando reported higher levels of absolute visitor spending, while Atlantic City and Orlando reported higher visitor spending as a share of GDP of 52.5 percent and 32.6 percent, respectively. 1 A location quotient (LQ) measures the relative employment shares of a region s economy and compares them with those of the nation to identify the concentration of each employment sector. An LQ of 1.00 means the region and the nation are equally specialized in a particular industry. If a region s LQ is greater than 1.00, its economy is more concentrated in a single industry than the nation. Page 1
EMPLOYMENT The most common measure of relative dependence on a single sector of the economy is that sector s share of total employment. Nationwide, 10.8 percent of the workforce was employed by the leisure and hospitality sector in September 2015. In Las Vegas, that share was nearly triple the national average at 31.7 percent. The only MSA to rank higher than Las Vegas during the month (by 0.1 percentage point) was Atlantic City, where 31.8 percent of the workforce was employed by the leisure and hospitality sector. Notably, Las Vegas reported 290,900 leisure and hospitality employees, which is nearly seven times the 43,000 employed by the sector in Atlantic City. Orlando was a distant 3 rd, with 21.4 percent of its workforce employed in the leisure and hospitality industry. New Orleans and Honolulu rounded out the top five with 15.0 percent and 14.8 percent, respectively. Exhibit 1 Leisure and Hospitality Employment as a Share of Total Employment (September 2015) 2 35% 30% 31.7% 25% 20% 15% 10% Nationwide: 10.8% 5% 0% 2 Source: Bureau of Labor Statistics. Page 2
LOCATION QUOTIENT A location quotient (LQ) measures the relative employment shares of a region s economy and compares them with those of the nation to identify the relative concentration in each sector. An LQ of 1.00 means the region and the nation are equally specialized in a particular industry. Meanwhile, a location quotient larger than 1.00 means the region is more concentrated in an industry than the nation, while an LQ of less than 1.00 means the economy is less concentrated in that industry. In September 2015, Las Vegas reported a leisure and hospitality location quotient of 2.94, meaning the leisure and hospitality sector was nearly three times more concentrated in southern Nevada than reported for the nation as a whole. Las Vegas ranked 2 nd among comparison groups in this metric. Atlantic City took the top spot with an LQ of 2.95, while Orlando rounded out the top three with an LQ of 1.98. City Exhibit 2 Leisure and Hospitality Location Quotient (September 2015) 3 Leisure and Hospitality Location Quotient Rank Atlantic City, New Jersey 2.95 1 Las Vegas, Nevada 2.94 2 Orlando, Florida 1.98 3 New Orleans, Louisiana 1.39 4 Honolulu (O'ahu), Hawaii 1.38 5 San Diego, California 1.25 6 Miami, Florida 1.13 7 Tampa-St. Petersburg, Florida 1.13 8 Los Angeles, California 1.09 9 San Francisco, California 1.07 10 Nashville, Tennessee 1.03 11 Denver, Colorado 1.01 12 Phoenix/Central Arizona 1.00 13 Dallas/Fort Worth, Texas 0.97 14 Atlanta, Georgia 0.97 15 Houston, Texas 0.95 16 Boston/Cambridge, Mass. 0.91 17 Chicago, Illinois 0.90 18 Washington, DC 0.90 19 Seattle, Washington 0.89 20 Detroit, Michigan 0.89 21 New York City, New York 0.88 22 Philadelphia, Pennsylvania 0.85 23 Nationwide 1.00 3 Source: United States Bureau of Labor Statistics and Applied Analysis. Page 3
WAGE AND SALARY PAYMENTS An economy s reliance on a single industry may also be measured by employee compensation. Compensation data are not reported at the MSA level as frequently as employment data, the most recent sector-level data available are for 2013. Nationwide, 4.3 percent of wage and salary payments are attributed to the leisure and hospitality sector. In the Las Vegas MSA, this percentage is 23.1 percent, roughly five times the national average and ranking the area 2 nd among the comparison areas behind only Atlantic City, which reported a leisure and hospitality share of 23.6 percent. In terms of absolute dollar value of leisure and hospitality compensation, Las Vegas ranked 4 th among the comparison areas, generating $11.3 billion in wage and salary payments to the industry s direct employees. Only the much larger New York City, Los Angeles and Chicago MSAs ranked ahead of Las Vegas in terms of wage and salary payments. 25% 20% 15% 10% 5% 0% Nationwide: 4.3% Exhibit 3 Leisure and Hospitality Compensation as a Share of Total Wage and Salary Payments (2013) 4 23.1% 4 Source: United States Bureau of Economic Analysis, Local Area Personal Income and Employment, Compensation of Employees by Industry. Note, 2013 data was not available for Atlanta, Chicago, Denver and Washington, DC. Data for these MSAs are as of 2012. Page 4
AVERAGE WAGES Relative compensation levels are also important to the discussion of relative dependence on the leisure and hospitality industry. Higher compensation levels generally reflect greater demand for specific groups of employees. Notably, leisure and hospitality workers on the whole are well paid in Las Vegas relative to their counterparts in MSAs across the nation. A unique concentration of gaming and entertainment employees contribute to Las Vegas higher than average wages. In addition, food service workers in areas with high concentrations of highend restaurants may also affect the average compensation of the leisure and hospitality sector in that location, as these workers tend to receive higher wages. Leisure and hospitality employees in Las Vegas earned an average wage of $38,808 in 2013 (latest available data), the highest among comparison cities. Their counterparts in Atlantic City earned $35,774 on average during the same period, which was 7.8-percent lower than the average reported in Las Vegas. Orlando ranked 3 rd, reporting an average wage of $30,221, followed by Honolulu ($30,146) and Los Angeles ($29,372). Nationwide, the average wage for leisure and hospitality employees was $22,801 during the period, which is 41.2-percent lower than Las Vegas. City Exhibit 4 Leisure and Hospitality Average Wages (2013) 5 Leisure and Hospitality Average Compensation Rank Las Vegas, Nevada $38,808 1 Atlantic City, New Jersey $35,774 2 Orlando, Florida $30,221 3 Honolulu (O'ahu), Hawaii $30,146 4 Los Angeles, California $29,372 5 New York City, New York $29,239 6 San Francisco, California $28,551 7 Miami, Florida $27,345 8 Boston/Cambridge, Mass. $25,904 9 New Orleans, Louisiana $25,609 10 Washington, DC $25,553 11 Seattle, Washington $25,385 12 San Diego, California $25,194 13 Chicago, Illinois $25,025 14 Phoenix/Central Arizona $24,216 15 Denver, Colorado $24,101 16 Tampa-St. Petersburg, Florida $23,540 17 Philadelphia, Pennsylvania $23,235 18 Nashville, Tennessee $22,737 19 Dallas/Fort Worth, Texas $22,535 20 Houston, Texas $21,724 21 Detroit, Michigan $21,595 22 Atlanta, Georgia $21,485 23 Nationwide $22,801 5 Source: United States Bureau of Economic Analysis, Local Area Personal Income and Employment, Compensation of Employees by Industry. Note, 2013 data was not available for Atlanta, Chicago, Denver and Washington, DC. Data for these MSAs are as of 2012. Page 5
INDUSTRY SHARE OF GROSS DOMESTIC PRODUCT Gross domestic product (GDP) is the market value of goods and services produced by labor and property. GDP by MSA is derived as the sum of the GDP originating in all the industries in a particular metropolitan area. GDP is broken down by industrial sectors, one of which is leisure and hospitality. Nationwide, leisure and hospitality accounted for 3.8 percent of GDP in 2014; in Las Vegas, the figure was a much higher 20.9 percent. The significantly smaller MSA of Atlantic City ranked 1 st among comparison cities, with the leisure and hospitality industry accounting for 23.2 percent of total GDP. Similar to trends in leisure and hospitality employment and compensation as a share of the total, Orlando, Honolulu and New Orleans rounded out the top five, with shares of 11.1 percent, 6.5 percent and 5.6 percent, respectively. Exhibit 5 Leisure and Hospitality GDP as a Share of Total GDP (2014) 6 25% 20% 20.9% 15% 10% 5% Nationwide: 3.8% 0% 6 Source: United States Bureau of Economic Analysis, Gross Domestic Product (GDP) by Metropolitan Area. Note, 2013 and 2014 data was not available for New York City. Data for this MSA are as of 2012. Page 6
VISITOR VOLUME-TO-POPULATION The following two sections compare visitor volume to population as well as visitor spending as a percentage of GDP. Both of these metrics are unique in that they focus on the driver of the leisure and hospitality sector the visitor rather than on the industry. Note, visitation and visitor spending are estimated in various destinations based on differing methodologies and/or visitor surveys, which are not always consistent or complete. These limitations notwithstanding, visitation and visitor spending estimates are worthwhile data points to consider as part of an overall analysis of an area s relative dependence on tourism. In absolute terms, Las Vegas welcomed 41.1 million visitors in 2014, making it the 6 th most visited area in the nation, behind Orlando, New York City, Chicago, Atlanta and Los Angeles. However, with a population base of only 2.1 million, Las Vegas reported 19.9 visitors for each permanent resident, ranking the area 3 rd among the comparison group. Atlantic City, which has a population of only 275,200 people, reported the highest ratio of visitors to population with 92.3, while Orlando was 2 nd with 27.0. Exhibit 6 Annual Visitors and Population (2014) 7 City Visitors Rank Visitors to Pop. Rank Atlantic City, New Jersey 25,400,000 9 92.3 1 Orlando, Florida 62,735,000 1 27.0 2 Las Vegas, Nevada 41,126,512 6 19.9 3 San Diego, California 33,800,000 8 10.4 4 Atlanta, Georgia 48,000,000 4 8.5 5 New Orleans, Louisiana 9,520,000 22 7.6 6 Nashville, Tennessee 13,100,000 21 7.3 7 Philadelphia, Pennsylvania 39,700,000 7 6.6 8 Denver, Colorado 15,400,000 17 5.6 9 Honolulu (O'ahu), Hawaii 5,417,126 23 5.5 10 Chicago, Illinois 50,170,000 3 5.3 11 Seattle, Washington 19,200,000 12 5.2 12 Tampa-St. Petersburg, FL 13,963,000 20 4.8 13 Phoenix/Central Arizona 19,000,000 13 4.2 14 San Francisco, California 18,000,000 14 3.9 15 Detroit, Michigan 16,000,000 16 3.7 16 Boston/Cambridge, MA 16,250,000 15 3.4 17 Dallas/Fort Worth, Texas 23,600,000 10 3.4 18 Washington, DC 20,200,000 11 3.3 19 Los Angeles, California 44,200,000 5 3.3 20 New York City, New York 56,400,000 2 2.8 21 Miami, Florida 14,600,000 19 2.5 22 Houston, Texas 14,800,000 18 2.3 23 7 Source: LVCVA; Visit Orlando; NYC & Company; Choose Chicago; Atlanta CVB; New Jersey Division of Travel & Tourism; Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism; Houston CVB; San Diego Tourism Authority; Visit Philadelphia; LA Tourism & Convention Board; Dallas CVB; Greater Boston CVB; Destination DC; San Francisco Center for Economic Development; Visit Tampa Bay; Detroit Metro CVB; Arizona Office of Tourism; Greater Miami CVB; VISIT DENVER; Tennessee Department of Tourist Development; Nashville CVC; Visit Seattle; New Orleans CVB; and Hawaii Tourism Authority. Note, 2014 visitor volume data was not available for Tampa-St. Petersburg, so 2013 was used. Population is sourced to the U.S. Census Bureau, 2014 estimates. Page 7
VISITOR SPENDING AS A SHARE OF GDP Visitors to Las Vegas spent an estimated $29.8 billion during 2014, ranking the area 3 rd nationally in terms of the absolute dollar value of visitor spending, behind only New York City and Orlando. Visitor spending represented 31.5 percent of southern Nevada s GDP in 2014, ranking Las Vegas 3 rd in this metric as well. Atlantic City, where over half of GDP is accounted for by visitor spending, took the top spot. Orlando was 2 nd, reporting a share of 32.6 percent. Exhibit 7 Visitor Spending and Total GDP (2014) 8 City Visitor Spending (Billions) Impact per Visitor Total GDP (Billions) Visitor Spending as Share of GDP Rank Atlantic City, New Jersey $7.1 $279 $13.5 52.5% 1 Orlando, Florida $37.8 $603 $115.9 32.6% 2 Las Vegas, Nevada $29.8 $724 $94.5 31.5% 3 Honolulu (O'ahu), Hawaii $7.3 $1,356 $59.3 12.4% 4 New Orleans, Louisiana $6.8 $715 $80.3 8.5% 5 Miami, Florida $23.8 $1,630 $299.2 8.0% 6 Phoenix/Central Arizona $13.3 $700 $215.2 6.2% 7 Nashville, Tennessee $5.4 $415 $106.7 5.1% 8 San Diego, California $9.2 $272 $206.8 4.4% 9 Atlanta, Georgia $13.0 $271 $324.9 4.0% 10 Tampa-St. Petersburg, Florida $4.3 $311 $128.2 3.4% 11 Houston, Texas $16.0 $1,081 $525.4 3.0% 12 Boston/Cambridge, Mass. $11.5 $707 $382.5 3.0% 13 Philadelphia, Pennsylvania $10.4 $262 $391.1 2.7% 14 New York City, New York $41.0 $727 $1,558.5 2.6% 15 San Francisco, California $10.7 $593 $412.0 2.6% 16 Denver, Colorado $4.6 $299 $187.1 2.5% 17 Los Angeles, California $19.6 $443 $866.7 2.3% 18 Chicago, Illinois $13.7 $273 $610.6 2.2% 19 Seattle, Washington $6.4 $333 $300.8 2.1% 20 Washington, DC $6.8 $337 $471.6 1.4% 21 Detroit, Michigan $2.7 $169 $236.5 1.1% 22 Dallas/Fort Worth, Texas $4.0 $169 $504.4 0.8% 23 8 Source: LVCVA; Visit Orlando; NYC & Company; Choose Chicago; Atlanta CVB; New Jersey Division of Travel & Tourism; Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism; Houston CVB; San Diego Tourism Authority; Visit Philadelphia; LA Tourism & Convention Board; Dallas CVB; Greater Boston CVB; Destination DC; San Francisco Center for Economic Development; Visit Tampa Bay; Detroit Metro CVB; Arizona Office of Tourism; Greater Miami CVB; VISIT DENVER; Tennessee Department of Tourist Development; Nashville CVC; Visit Seattle; New Orleans CVB; and Hawaii Tourism Authority. Note, 2014 visitor spending data was not available for Tampa- St. Petersburg and Boston, so 2013 was used. GDP is sourced to the United States Bureau of Economic Analysis, Gross Domestic Product (GDP) by Metropolitan Area. Page 8
HACHMAN INDEX It is clear from the metrics presented in previous sections of this report that Las Vegas is one of the most tourism-dependent economies in the U.S. This is further evidenced by the Hachman Index (the Index ), which is commonly used to measure the diversification of an economy. The Index assumes the national economy reflects broad economic diversity and measures how closely the employment distribution of a subject economy resembles that of the nation. A score of 100 reflects a diversified economy comparable to the nation, while a score of zero reflects a narrow economy. Las Vegas reported a relatively low Hachman Index of 66.6 in September 2015, making it one of the least diversified economies among comparison cities, largely attributable to its high dependence on tourism. The only MSA to report a lower Index was Atlantic City with a score of 65.0. The third-lowest MSA, Washington, DC, reported a Hachman Index of 84.6 in September 2015, which was 18 points higher than Las Vegas. Not surprisingly, Washington, DC reported relatively high shares of government and professional/business services employment. Exhibit 8 Hachman Index (September 2015) 9 100 90 80 70 60 50 40 30 20 10 0 66.6 9 Source: Bureau of Labor Statistics and Applied Analysis. Page 9
METHODOLOGY Twenty-three metropolitan statistical areas (MSAs) were analyzed to determine each region s relative dependence on tourism. The twentythree MSA s analyzed comprise the fifteen largest metropolitan areas in the nation (except Riverside, California, which is not considered a major tourist destination for purposes of this analysis) plus the well-known visitor destinations of Nashville, Tennessee; Tampa, Florida; Denver, Colorado; Orlando, Florida; Las Vegas, Nevada; New Orleans, Louisiana; Atlantic City, New Jersey; San Diego, California; and Honolulu, Hawaii. quotients and average wage data were calculated based on data from the Bureau of Labor Statistics and Bureau of Economic Analysis. ANALYSIS LIMITATIONS This analysis used the best available data to assess the relative dependence of major destination economies in the U.S. on tourism. It relies 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. This analysis comprises the largest tourism economies in the nation, respecting the fact that there are some small areas that are relatively dependent on tourism that are not included. For example, small seaside villages and other similar towns in the U.S., whose economies may rely almost exclusively on visitors, are not included in this analysis. General information on visitor volume and visitor spending was obtained from each destination s convention and visitors bureau or similar organization for 2014 (or latest available). For Las Vegas, a discounted, survey-based measure of total visitor spending was utilized; refer to the previous brief in this series, The Economic Impact of Southern Nevada s Tourism Industry and Convention Sector 2014 Update. Leisure and hospitality and total GDP for 2014 (latest available) and employee compensation (2013, latest available) was obtained from the Bureau of Economic Analysis. Employment data (September 2015) was obtained from the Bureau of Labor Statistics. Population data for 2014 was obtained from the U.S. Census Bureau. The Hachman Index, location 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. Page 10