New hotel development in Las Vegas follows a familiar cycle. A raft of new casino-hotel projects are announced, followed by civic euphoria, followed then by a trickle of skeptics who believe the city won't be able to absorb the new supply. So far, history has proven the naysayers to be wrong. Every new wave of hotel development has brought even more visitors and more profits to the city's vital economic engine. It's the only pure example of supply-side economics that works reliably.
And so as the city faces a possible 25-percent increase in room inventory in the next five years, some pessimists are hard at work proclaiming that doomsday is near. The 40,000 new rooms in the Vegas pipeline will depress average rates and revenues for existing Strip properties, says a new report from investment banker Goldman Sachs.
I, too, think Las Vegas may be heading for difficulties in the next decade or so but for different reasons. I agree with local boosters who believe additional hotel roomsÃ¢€”as well as the casinos, dining, retail and other attractions that followÃ¢€”increase the size of the pie and eventually draw even more tourists to Sin City. The problem I foresee is in the infrastructure. Water, for one, is a very limited resource in the Southwest, and I'm not sure Las Vegas will get the added quantities it needs for prolonged growth. There are other concernsÃ¢€”power, housing, traffic, workersÃ¢€”that may be part of the process that finally puts a halt to the long, glorious growth run for America's most unique and vibrant resort city. Then again, I could be wrong.