The Effects of 911 on Casino Revenues: A Comparison of Mississippi and Las Vegas

By Moss, Steven E.; Ryan, Chuck et al. | Academy of Marketing Studies Journal, July 2004 | Go to article overview
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The Effects of 911 on Casino Revenues: A Comparison of Mississippi and Las Vegas


Moss, Steven E., Ryan, Chuck, Parker, Darrell, Academy of Marketing Studies Journal


ABSTRACT

This research compares the effect of 9/11 on casino gaming revenues in Las Vegas and Mississippi. ARIMA models with intervention and transfer functions are used to estimate a time series model for each market. The models show a significant negative downturn in gaming revenues for Las Vegas post 9/11. A similar downturn in gaming revenues in Mississippi is not observed. Air travel is introduced as an explanatory variable for the negative intervention in Las Vegas. This research shows that air travel has significant explanatory power both pre and post 9/11 for Las Vegas gaming revenues. Implications for casino operators are then discussed.

INTRODUCTION

Since September 2001 there has been speculation about the effects of terrorism and changes in the airline industry on various segments of the US economy. In this paper we will show that a statistically significant drop in Las Vegas, Nevada casino gaming has occurred. The methodology used will clearly demonstrate that the decline is not attributable to seasonal shifts or pre-existing trends in gaming revenues. Additionally we will show that there has not been a corresponding drop in Mississippi casino gaming revenues since September 2001.

Having established that Las Vegas gaming revenues have decreased significantly since 9/11, we introduce air travel as a possible explanatory variable. A relatively large percentage of Las Vegas gamblers arrive via commercial aircraft, while most Mississippi gamblers come from adjoining states and do not fly to the casinos.

The airline industry and resorts that rely on airlines maybe some of the hardest hit by the economic effects of 9/11. In the two weeks following 9/11 some 240 conventions cancelled events in Las Vegas (Verhovek & Kaufman, 2001). By October of 2001 forecast national convention revenues had been adjusted downward from 96 billion to 76 billion. The drop in convention revenue is partially attributed to excessive media coverage of the airplane disasters of 9/11 (Barabosa, 2001). Early evidence shows that the decline in air travel may not be short lived. Nationally air travel was down 14.6% in December 2001 versus the prior year. A February, 2002 USA Today survey showed that 43% of respondents reported that they were afraid to fly, almost the same percent as the 44% reported in November of 2001 (Morrison, 2002). Prior to 9/11 only 10% of Americans reported that they were afraid to fly. In a 2003 survey the percentage of Americans afraid to fly was 40% (Fitzpatrick, 2003).

If customers are unwilling to use commercial air service, this reluctance may explain, in part, a downward shift in Las Vegas gaming revenues. If Las Vegas gaming revenues are significantly affected by the general publics willingness to fly while other casino markets do not depend on air travel for their visitors then Las Vegas casinos face a significant threat to their ability to continue to grow and maintain their dominate market share. The same threat that Las Vegas faces may also be an opportunity for casino operators who can operate casinos in regional markets such as Mississippi.

MISSISSIPPI CASINO INDUSTRY

Mississippi ranks as the third largest casino market in the United States, with more than 50 million people visiting the state's casinos each year (Mississippi Gaming Commission, 2003; Meyer-Arendt, 1995). Additionally, operations in the state have been consistently regulated, facilitating analysis over time (Russell, 1997).

Legislation in Mississippi authorizing gaming on navigable waterways was passed in 1990, and the first casino opened in mid-1992. While some have classified Mississippi casinos as a form of riverboat gambling (Roehl, 1994), large facilities with adjoining hotels, restaurants, and entertainment facilities generate most revenues today.

During the period of 1992 to 2002, annual casino gaming revenues increased from $121 million to over $2.

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