Why Las Vegas is (Probably) Not the Next Detroit

Photo credit: chepenicoli
A recent post at MarketWatch suggests that Las Vegas could be on its way to becoming the next Detroit, a metropolitan mire populated mostly by those who can't afford to leave. Indeed, the two cities share some striking parallels: both are industry towns, Detroit for auto manufacturing, and Vegas for gaming tourism; both cities experienced intense booms, Detroit at the start of the 20th century, and Vegas at the end of it; and both have been hit hard as their boom economies experienced extraordinary challenges, with Detroit facing the decline of domestic manufacturing and Vegas facing the decline of the domestic pocketbook.

But Las Vegas has a key advantage that Detroit does not share: it is dependent on an industry that is rooted in place. You can drive a car (or a factory) right out of Detroit, but Vegas succeeds because of its concentration of spectacle and excess. Vegas has long competed successfully with casinos in other cities. Atlantic City and Reno are one thing, but in the past couple of decades casinos have become popular plug-the-hole-in-the-budget schemes for cities around the US. (Even Detroit has put a lot of its downtown-revival eggs into the casino basket).

This competition has driven Vegas to become a center of innovation for the tourism and hospitality industries: it succeeds not because it is a center of glittering decadence, but because it is the center--the hub that other glitz-burgs model themselves after. The product here is a place-based experience, and that's a lot harder to outsource.

But MarketWatch also notes that Sin City has been well-trumped as the world's largest gaming center by Macau. While this fact is nothing to sneeze at, gambling tourism is not a zero-sum game considering the limits imposed by distance--that old, inconvenient truth that keeps Thomas Friedman up at night. Macau's new-found financial supremacy can be attributed more to the rise of Asian economies than a loss of interest in the Strip. Vegas remains the premier gambling center in North America, and it hardly seems likely that the good people of Omaha and Altoona will start hopping flights to the South China coast en masse any time soon.

A one-horse town will always be economically vulnerable, and the city should continue its efforts to diversify. Las Vegas' reliance on such an unstable industry played an undeniable role in magnifying the impact of the foreclosure crisis there (when your income shrinks, vacations are often the first thing to get cut from the budget). Still, don't bet against a comeback. "What happens in Vegas, stays in Vegas" turns out to be a surprisingly apt summation of how the city's economy functions. It may be tacky and garish, but that's part of the fun; Las Vegas is a city that cannot be separated from its Brand. The place is the product.

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