Article: Adam Beck discusses Las Vegas and its competitiveness as a tourism destination in the future.
Las Vegas, Nevada ‘the gambling capital of the world’ has an interesting and lucrative history stretching back over 100 years. The city has grown dramatically in population over the past 50 years, in fact over 1000% from 54,405 residents in 1960 to 583,756 in 2010 (LVCVA 2011). Over this time large multi-national companies such as MGM Mirage, Wynn, Hilton and Marriott have shaped the skies of the Las Vegas with unique and eye-catching ‘mega’ hotels – some with over 5000 rooms.
Las Vegas currently has 148,935 hotel rooms across the city and despite talk of over capacity, various projects have been completed in recent years and others are planned for the future. MGM City Center, the most expensive privately funded project in USA history opened in late 2010 adding some 7800 rooms to Las Vegas. Other future projects include a replica of the famous Plaza Hotel in New York and an entire hotel themed on Elvis.
Las Vegas has enjoyed significant tourism growth in the past 50 years from 5 million visitors in 1970 to 37 million visitors in 2010 – an extraordinary statistic for any tourism destination. However, in recent years it can be argued that Las Vegas has began to suffer. The city is experiencing little growth in the number of visitors and the amount they spend (Las Vegas Convention and Visitors Authority Statistics 2011).
This article presents an investigation of the external environment, the internal operating environment and a SWOT analysis of Las Vegas. These findings can be used to identify potential issues which may affect the competitiveness of Las Vegas as a tourism destination in the future.
External Environment: PESTEL Analysis
Johnson et al (2008) state that a PESTEL Analysis ‘categorises environment influences into six main types : Political, Economical, Social, Technological, Environmental and Legal’ Therefore, this tends to provide a detailed view of the external environment which could potentially have an effect on the competitiveness of Las Vegas as a destination :
Political – Negative impact
- Threat of terrorism attacks
- Threat of war in areas of the world
- Loss of trust in financial institutions
Economical – Negative impact
- Global recession and recovery?
- Rising oil prices – increasing airline fairs
- Unemployment rates and lack of disposable income
- Luxury commodities such a tourism falling
Social – Positive impact
- Younger population looking for experiences
- Population (all ages) able to travel
Technological – Positive impact
- Access to the internet growing
- Increasing in technology improve experiences
- Mobile internet and GPS – seeing before you go
- Travel websites such a trip advisor to share experiences
Environmental – Negative impact
- Increased awareness of natural environment
- Access to natural resources
- Climate change – affecting airfares and opinions
Legal – Positive impact
- Increases in minimum wage allowing more disposable income
- Changes in government policies
Internal Environment: Five Forces Analysis
Johnson et al (2008) describes that a Five Forces Analysis ‘helps indentify the attractiveness/success of an industry in terms of competitive forces : buyer power, supplier power, threat of new entrants, substitutes and inter-firm rivalry’. This framework also tends to be useful when analysing the competitiveness of a destination.
Inter-firm rivalry (High)
Competition between firms in Las Vegas tends to be very high creating great choice for consumers. Las Vegas has over 113 hotels with 38 large (over 100 rooms) on the strip itself. The destination also holds a wealth of restaurants, retail outlets, attractions, wedding chapels, conferences centres and casinos. High levels of competition often create greater choice for consumers, improved quality and perhaps more importantly lower prices. Hotels on the strip continually have discounts on rooms and often a nights stay in a strip hotel can be as low as $20. The high number of firms ought to suggest that unemployment is relatively low in Las Vegas.
Threat of potential entrants (Low – Medium)
Threat of potential entrants to Las Vegas tends to be medium to high. The Las Vegas strip is very limited for space which pushes prices to over $34 million per acre (Hotel Interactive, 2007). Often hotels are bought and imploded to allow space for new developments on the strip. Due to these high entry costs firms wishing to enter the Las Vegas market would need high levels of capital. Therefore, this creates large barriers to entry which would deter many firms.
Bargaining power of buyers (High)
Bargaining power of buyers to Las Vegas as a destination is quite high. The introduction of internet and increases in technology now makes it easier for more people to travel. However, Las Vegas benefits from domestic tourism and has a repeat guest’s average of 81%. Although, as other destinations such as Macau in Chine become more popular, Las Vegas will need to continue to adapt in attracting visitors.
Bargaining power of suppliers (Low)
Las Vegas is a well established destination therefore this would assume that it has a well-integrated supply chain for its needs as a competitive destination. One example of this is the Hoover Dam which supplies enough energy for over 500,000 homes each year. This is not only efficient and sustainable but is considerably cheaper than other forms of power supply. However, it is important to understand that energy sources such as the Hoover Dam will not be sufficient if Las Vegas continues to grow in the future.
Threat of substitutes (High)
Threat of substitutes occur both internally in Las Vegas and external between different destinations. It has already been mentioned that competition in Las Vegas tends to be very high and the destination offers many forms of entertainment. Therefore, on experience such as the theatre can be substituted for shopping or dining out. This forces firms in Las Vegas to be very competitive in terms of price and quality which makes the destination more competitive.
Las Vegas is also in competition with many other destinations throughout the world. However, Las Vegas does hold a benefit of being one of the only places in the world where gambling is legal. Although, area such as the Middle East and China are beginning to compete more seriously with Las Vegas as desirable destinations for entertainment.
Internal Environment: SWOT Analysis
Planning, development and management of Las Vegas will continue to be important in the future. The Financial Times (2008) have already reported plans for officials to encourage more visitors to Las Vegas with increased marketing. It is possible to use a SWOT Analysis to identify potential areas which could be exploited in order to increase and maintain a competitive position.
- Image of Destination
- Good infrastructure
- Well established organisations
- 81% annual repeat visitors
- High USD contribution.
- High domestic tourism from close by states in America (50%).
- Loyalty to the destination (81% repeat visitors)
- Ability to provide a wealth of experiences
- Little elements of seasonality on tourism
- High competitive forces which encourage lower prices and greater quality
- Location of Las Vegas and natural resources to support the city’s growth
- ‘Gambling’ image restricted to limited market segments
- Difficulty in travelling from locations such as Europe (as Las Vegas is in far west of USA)
- Only 19% annual new visitors
- Over 21 alcohol laws deter 18-20 year old travellers
- Low threat of potential entrants could make the market stagnant or even decline.
- Appealing to wider markets by adding attractions and changing image
- Maintaining repeat visitors and increasing new visitors
- Holidays which appeal to family audiences
- Taking advantage of new forms of technology to improve hotel design etc.
- Development of other destinations around the world such as Dubai, Abu Dhabi and the East
- Development of alternative ‘gambling’ capitals such as Macau, China.
- Credit Crunch and rising oil prices may reduce visitors from abroad.
- Possible reduction in visitor volume
- Global terrorism and war
- Access to natural resources (water)
Assessing the Competitiveness of Las Vegas as a Destination
This article has provided an analysis of the competitive position and success of Las Vegas as a destination. Initial analysis into key trends demonstrates that Las Vegas has been a successful and growing destination for many years. The destination continues to attract vast numbers of visitors, however, figures of visitor volume and a number of reports show that Las Vegas may have started to suffer in terms of competitiveness.
A number of factors which are uncontrollable have been considered in a PESTEL analysis. Results show that economical, political and environmental factors will all potentially affect Las Vegas in the future. However, social and technological factors seem to benefit the destination in its competitiveness. A Five Forces Analysis shows that the operating environment of Las Vegas is highly competitive. These competitive forces create high levels of competition between firms in Las Vegas which are ultimately passed onto the consumer through low prices, increased choice and greater quality. All factors which make Las Vegas more attractive as a destination and therefore more competitive.
Finally, a SWOT analysis highlights a number factors which should be considered for the future. Las Vegas holds a great number of strengths, however, there are a number of weaknesses and threats which currently affect its competitiveness and will continue to so in the future. A number of opportunities, some of which are already being exploited will allow Las Vegas to increase its long-term competitiveness.
Although Las Vegas appears to have been successful and has held a strong competitive position for many years, it will be increasingly important in the future to monitor this position. However, a number of issues which are outside of the destinations control such as the recovery of the recession, rising oil prices and access to natural resources may control the direction of Las Vegas in the future.
Please note: This article is published for information only and any recommendations given are the opinion of the author and therefore, should only be used if the reader feels they are applicable. A full reference list is available on request via email.