Analyst: Las Vegas businesses should make Plan B for possible trade wars

By Ric Anderson

Tuesday, Jan. 24, 2017 | noon

Las Vegas business operators and investors have reason to be optimistic about the local economy as President Donald Trump begins carrying out his economic plan, an analyst said this morning at the Las Vegas Metro Chamber of Commerce’s annual Preview expo.

But they also would be wise to watch Trump carefully on trade matters and should start making a contingency plan to deal with a loss of international tourists if the president’s actions spark disputes with foreign nations.

That was the advice from Mike PeQueen, who along with analyst John Restrepo opened Preview with a report on the local economy and a look ahead to the rest of 2017.

PeQueen said Trump’s plans to reduce governmental regulations and cut tax rates would benefit Las Vegas operators and investors and could help the Southern Nevada economy continue its post-recession upswing. Combined with his vow to invest in infrastructure, PeQueen said, the moves would inject billions into the economy and spark growth in such areas as investment, construction and energy development.

But other dynamics could hold back the local economy, including an anticipated increase in interest rates and the growing strength of the U.S. dollar, which reduces the buying power of foreign currency and, therefore, could dissuade international tourists from visiting Las Vegas.

And Trump’s aggressive rhetoric on trade, particularly toward China and Mexico, is a concern because Las Vegas draws a significant number of its foreign tourists from those nations.

“Las Vegas could be vulnerable if trade tensions heat up,” PeQueen said.

So what should local businesses do to prepare for the rest of the year? Here were PeQueen’s suggestions:

• Lock in interest rates. With an increase in interest rates seeming almost imminent, PeQueen urged business operators to negotiate with lenders now, if possible, to freeze their current rates.

• Lock in rents. Restrepo presented statistics showing that commercial real estate vacancy was dropping in the valley, which has led to a corresponding increase in rents. The trend is expected to continue, meaning that renegotiating a lease now or negotiating a new one could save money later.

• Focus on doing business with growing sectors — finance, infrastructure and energy, among them.

• Make a Plan B for a drop-off in tourism. Besides the trade issues involving Mexico and China, political instability in Europe could lead to erosion in the value of European currency and result in less travel to the U.S. from EU nations.