Foreign Exchange Rate Effect on International Gaming Demand: An examination from an Upscale Las Vegas Casino

UNLV Gaming Research & Review Journal, Feb 2017

Las Vegas has developed into one of the world’s top tourist destinations, and the international market has become a vital stream of the city’s revenue. The objective of this study was to understand the foreign exchange rate as a determinant for international gaming demand in the Las Vegas gaming industry. This study applied the econometric modeling method of panel data analysis to secondary data originated from a Las Vegas Strip casino property. This study attempted to validate the foreign exchange effect through empirical investigation. Results of this study showed that foreign exchange rate has an impact on international gaming demand.

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Foreign Exchange Rate Effect on International Gaming Demand: An examination from an Upscale Las Vegas Casino

UNLV Gaming Research & Review Journal t Foreign Exchange Rate Efect on International Gaming Demand: An Examination from an Upscale Las Vegas Casino 0 Ashok K. Singh Professor University of Nevada, Las Vegas William F. Harrah College of Hotel Administration , USA 1 Kasra Ghaharian Las Vegas has developed into one of the world's top tourist destinations, and the international market has become a vital stream of the city's revenue. The objective of this study was to understand the foreign exchange rate as a determinant for international gaming demand in the Las Vegas gaming industry. This study applied the econometric modeling method of panel data analysis to secondary data originated from a Las Vegas Strip casino property. This study attempted to validate the foreign exchange effect through empirical investigation. Results of this study showed that foreign exchange rate has an impact on international gaming demand. Currency rate; Econometric modeling; Exchange rate; International gaming demand; Las Vegas; Panel Data Introduction International visitors make up a significant proportion of total visitor volume in Las Vegas. Between 2011 and 2015, international visitors comprised approximately 20% of the Las Vegas visitor profile (Las Vegas Convention and Visitors Authority (LVCVA), 2016). These visitors are of very high value to the Las Vegas economy, as they generate over 25% of the city’s total gaming revenue and over 30% of non-gaming revenue. Moreover, international visitors spend twice as more than domestic visitors on average on total expense (Huddleston, 2011; LVCVA, 2016; Velotta, 2012) . International visitors are known to plan their trips in advance, stay longer, and spend more than domestic visitors. For this reason, the LVCVA has been paying attention towards boosting the international market, and have been developing various global strategies by increasing marketing budgets and international offices throughout the world expecting to reach 30% in the next 10 years (Haugen, 2015; LVCVA, 2016). Casino marketers have been constantly looking for international visitors to keep the hotels and casinos occupied as well with the city’s inventory adding up to more than 150,000 rooms (LVCVA, 2016). Even during the economic downturn, visitor volume of the international market increased, while in fact, the total number of visitations actually decreased (LVCVA, 2016). Currency depreciation usually impacts the prices of foreign travel, whereas appreciating currencies usually encourage foreign travel (Raab & Scher, 2003) . While there are many factors that influence international tourists to travel, the weak dollar after the financial crisis in 2008 has been one of the strong selling points for international tourism. It actually drove international travelers to the Las Vegas and encouraged their expenditures (Sayre, 2008) . For example, the exchange rate of the U.S. dollar per Euro was approximately 1.6 to 1 at the highest in 2008, allowing European visitors to believe Las Vegas a good value to visit (Sayre, 2008; International Monetary Fund (IMF), 2016 ). Additionally, international visitor volume to Las Vegas steadily increased to 20% until 2013 when the U.S. dollar was relatively weaker and decreased to 16% in 2015 when the US dollar became relatively stronger (LVCVA, 2016). The purpose of this study is to investigate the currency exchange rate effect as a potential determinant of the international gaming demand in the Las Vegas gaming industry. Given the incredibly competitive climate of the gaming industry in Las Vegas, casino marketers have been recognizing the importance of the international market as an additional revenue source. This study was specifically designed to explore the gaming demand of the international market to Las Vegas based on the economic circumstances. The findings of this study are expected to provide valuable insights for marketers to understand the international market behavior from an economic standpoint. It is anticipated that marketers will take the study findings to the next level and develop marketing tactics to maintain higher profit levels by saving costs and utilizing budgets more strategically. There are numerous studies that attempted to inspect the role of the foreign exchange rate on tourism demand (Chadee & Mieczkowski, 1987; Crouch, 1994b; Loeb 1982; Qu & Or, 2006; Tse, 2001; Vanegas & Croes, 2000; Witt & Martin, 1987) . However, empirical evidence on this topic within the gaming industry has been extremely scarce. While Raab and Scher (2003) investigated the short and long term impact of the Asian crisis on Las Vegas gaming revenues using fluctuations in exchange rates, only Asian high-rollers from Japan, Korea, Taiwan, and Hong Kong were observed, on a particular table game, Baccarat. Based on Raab and Scher’s (2003) study and previous studies of the foreign exchange rate effect (Chadee & Mieczkowski, 1987; Loeb, 1982; Qu & Or, 2006) , this study at (...truncated)


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Myongjee Yoo, Ashok K. Singh, Kasra Ghaharian. Foreign Exchange Rate Effect on International Gaming Demand: An examination from an Upscale Las Vegas Casino, UNLV Gaming Research & Review Journal, 2017, Volume 21, Issue 1,