Anecdotes Help You To Understand the Economy

I was spending time with a loyal blog reader yesterday and he brought up what he felt was an economic anecdote conundrum.  On one hand he was listening to a program that said that the Pittsburgh Pirates were struggling to fill their ballpark right now and that average attendance was around 10,000 people.  The reason for the fanbase decline is that the economy is tough.  Yet he had just returned from Las Vegas which was bursting at the seams with activity and the Wynn Hotel where he was staying was at a 95% occupancy rate.  He wanted to know which piece of info was the relevant piece for understanding the economy.  I thought it would make a nice blog post.  Here’s what I feel…

Both pieces of anecdotal information are indicative of the state of the economy.  The piece that is more indicative to me is the Pittsburgh Pirates’ decline in attendance.  Before talking about that I wanted to discuss the Las Vegas situation first.  This is a great example of why getting the proper context is essential to invest well.  What is the economic context of Las Vegas, and specifically the Wynn Hotel?

Las Vegas is a tourist town.  Most people who go to Vegas don’t go to visit relatives, they go to get their party phreak on, whether that is Cirque de Soleil or Wayne Newton.  In a country with 305 million people, the folks travelling to Vegas are the one’s who either have the enough money that they don’t have to worry about the cost to travel there, or who saved money to travel there, or have used credit cards to travel there.  The point is that when you encounter people in Vegas in good or bad economic times they are people who could afford to get there.  By extension then, they are people either unaffected by, or ignoring the economy.

The Wynn Hotel, in particular, is a very expensive home-away-from-home and the wealthy just are not that economically sensitive to bad times.  Vegas is also increasingly attracting tourists from abroad.  To really understand how Vegas has been affected by the downturn one would need to look at the occupancy rate of the hotels that the lower and middle classes stay.

Additionally, among glamorous tourist destinations, Las Vegas is a well known inexpensive place to travel.  Even in a downturn people still vacation.  I am guessing that Vegas is taking away tourists from New York, Orlando, Los Angeles and definitely Europe.  So, in my opinon, Vegas is the anomaly.

A ticket to a Pittsburgh Pirates game represents a minor luxury purchase for a citizen of the Burgh.  One that, in poor economic times, looks more like a non-necessity.  A Pirates game is a local good.  People do not plan vacations around a trip to a Pirates game.  Instead the context is that they probably are thinking about local entertainment options and the Pirates game competes with going to a movie theater, staying home to watch TV, surfing the Internet, reading a book, hanging out with friends, and so forth.  Because sporting events tickets are expensive, it’s likely that the Pirates are losing out to Netflix, for example.

A Pirates game is not all that unique given that there are 84 home games per year to choose from.  Fans who used to go to a Pirates game have probably been to quite a few of them over the years.  Whereas, seeing a new movie is not equated with going to the theater yet another time.  Instead, it’s seen as seeing the new movie, a unique experience.

In my opinion, Pittsburgh is more likely indicative of how the worst recession since the Great Depression has affected daily living.

What would be very interesting would be to see how many folks from Pittsburgh, who no longer go to Pirates games, were in Vegas along with my pal.  Their stories would be the truly indicative ones.

Have a great weekend!

Jason