In Nevada, there is no income tax. And if you've ever been to Las Vegas then you know why — they don't need one.
More than 30 million tourists a year stumble down the Las Vegas Strip, and many of those tourists come to gamble, leaving behind a ridiculous amount of money. For decades, business boomed.
But the financial collapse hit Las Vegas hard. Despite what people had been saying for years, the gaming industry is not recession-proof. According to the Center for Gaming Research at the University of Nevada, Las Vegas, casino revenues on the Vegas strip dropped for 22 straight months during the last recession, and the city became the unofficial foreclosure capital of the U.S.
The city is now taking steps to claw its way back. In doing so, it may emerge as more than a one-economy town.
The New Nightlife
To be clear, gambling is not going anywhere. It is still what drives Las Vegas. But 2008 was a wake-up call.
Rick Lax, a writer who lives and breathes Las Vegas, tells NPR's Arun Rath that the city discovered that it was, in fact, not immune from the economic downturn.
"It turns out, when people don't have money, in fact they do not have money to come out to Las Vegas and gamble," he says. "And it really sunk in once President Obama ... used as an example of fiscal irresponsibility coming to Vegas on a bender, and that's when we knew we were in bad shape."
Las Vegas has remade itself before, becoming a bit more family-friendly in the '90s. But a more recent trend is the trading in of billboards for penny slots and buffets in exchange for ones advertising the latest nightclubs — and there are a lot of them.
"The club scene has boomed in the past five years," Lax says. "We have just been opening up mega-club after mega-club. And now if you look at the list of the highest money-making clubs in the United States, if you look at that Top 10 list, seven of them are right here in Las Vegas."
One of the newest clubs is called Light, which opened at the Mandalay Bay Hotel and Casino in May. Its $25 million cost can be seen in the massive walls of LED screens that illuminate the room, lasers, strobes and fog cannons. And if that wasn't enough of a spectacle, Light is a partnership with Cirque du Soleil, a company that has taken Las Vegas by storm since its first show there in 1993.
In Light, the Cirque du Soleil acrobats and performers swing from the rafters above club-goers.
"So all this is happening while the club's going on," says Andy Masi, CEO of Las Vegas hospitality company The Light Group. "You're part of the experience."
Masi says party-goers pay anything from $30 to get in the door to $10,000 to get a prime table and hear the world-famous DJs these clubs attract, like Kaskade and Tiesto.
"It's part of the culture right now," Masi says. "This is a movement, and these DJs who are creating this music ... they're composers, they are creating music. And it's really something that has inspired a massive generation."
The clubs in Las Vegas are getting bigger and bigger, and making huge amounts of money that isn't gambling. Masi says that it is all part of the market shift in the city.
"Gen X and Gen Y are really more into entertainment and dining and seeing shows and staying in great hotels than they are into gaming," he says. "[But] gaming is still a big part of Las Vegas ... I don't think you can have one without the other."
Counting On Collision
A couple of miles away, one entrepreneur is trying to bring the spirit of a party to a corporation. Tony Hsieh, CEO of online retailer Zappos, wants to transform Las Vegas.
Zappos has its headquarters in downtown Vegas (away from the Strip), but Hsieh's goals are broader. In 2009, he sold the company to Amazon for $1.2 billion, and with some of that money he started the Downtown Project.
In one way, it's a venture capital firm, trying to attract new industries. But in other ways, it's much more ambitious. Hsieh wants to rethink city planning and imagines how a well-designed city can breed innovation.
The secret, he says, is forcing more collaboration. It's something he likes to call "collisions." One example, Hsieh says, is at Zappos' new headquarters housed in what used to be Las Vegas City Hall. The company shut down a skybridge in order to force employees out into the street and into the community when coming to work.
"Research has shown that most innovation actually comes from something outside your industry or outside your area of expertise being combined with your own," he says. "So on the city level, it's really important for people from all different backgrounds and industries to collide and talk to each other. That's where a lot of the great ideas come from."
Hsieh has already started forcing a few collisions by funding companies like CrowdHall — a site that hosts Q&A sessions where visitors vote on the best questions — and Fluencr, a site that rethinks the celebrity endorsement and gets companies to offer everyday people endorsements instead.
Hsieh's Downtown Project, which is separate from Zappos, divides its $350 million budget between investing in small business, tech companies, education, arts, music and real estate.
"In the past year, we've relocated about 60 companies from other states or even countries actually to downtown Vegas," he says.
Hsieh says there are a few different goals of the project. One is to have everything people need to live, work and play within walking distance; another is to make downtown Vegas the most community-focused large city in the world — in probably the place most people would least expect it.
A third goal is to make Las Vegas the co-working and co-learning capital of the world. Co-working is where small companies, especially tech startups, share the same physical space. The idea started with some startups in San Francisco.
"What they found was they would start overhearing each other's conversations, and that would result in these serendipitous interactions and they'd start collaborating," he says. "And it actually drove a lot of innovation and productivity."
Dollar Signs In The Sky
For other new sources of revenue, Las Vegas is looking to the skies. Next month, the Federal Aviation Administration will decide on a new test site for unmanned aerial vehicles, better known as drones. Nevada is vying for that honor.
"We also have the largest concentration of unmanned aerial vehicle pilots in the world," says Tom Wilczek, who fronts the effort for the governor's office.
Wilczek says the Department of Defense did drone research here in the early 1990s, and military pilots fly drones from both Nellis Air Force Base in Las Vegas, and Creech, about an hour away. But the FAA isn't looking to do more military research; it's interested in the commercial possibilities for drones.
"The very first applications we're going to see are agricultural and then law enforcement — more of a public safety context," Wilczek says. "Somewhere in the future, you may have packages coming from a UPS or FedEx transited on aircraft that are remotely piloted."
That new industry could mean billions. Wilczek says commercial drones could earn about $90 billion in global revenue by 2025, a fraction of which he hopes will come Nevada's way.
"It's going to be enormous for our economy. The governor's made this one of his top economic development platforms," he says.
Casinos Will Always Rule
While Las Vegas appears to be branching out from its tried-and-true model, writer Rick Lax wants you to know that in Las Vegas, the casino is still king.
"We've got this giant, Chinese-themed Resorts World Casino that's going be opening up soon," he says, "so I think come three or four years, that's going to be the place to be and people will be saying at that point, 'Wow, Vegas really turned itself around.' "
Most of the high-earning dance clubs are all owned by casinos, as well as plenty of other non-gambling attractions like shows, amusement parks, mini-aquariums and zoos.
As Vegas comes roaring back, Lax says the casinos will still be on top.
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