Las Vegas, Nevada, had its issuer default rating upgraded to AA from AA-minus by Fitch Ratings, which cited favorable visitor trends, healthier-than-anticipated revenues and federal aid.

A stable ratings outlook has been assigned.

The upgrade affects the series 2004 limited tax general obligation bonds issued by the Las Vegas Special Improvement District. The special improvement LTGO bonds are general obligations of the city to which it has pledged its full faith and credit for payment of the bonds, subject to statutory and constitutional limits on the amount of ad valorem taxes it may levy.

The upgrade of the city’s IDR and LTGO rating “reflects the city’s improved resiliency spurred by an accelerated post-pandemic recovery evidenced through increased reserve levels enabled by favorable visitor trends, healthier than anticipated revenues, and federal aid,” Fitch analysts said in a Monday report.

“Revenue growth is expected to be solid over the long term, supported by population growth and ongoing demand in the travel and leisure sector,” Fitch Director Graham Schnaars, Senior Analyst Anne Adiele and Senior Director Karen Ribble said in the report.

The state’s largest city, with 647,000 residents welcomed 3.7 million visitors in March, a 9.6% increase year-over-year, and nearly even with 2019 numbers, according to the Las Vegas Convention and Visitors Authority’s monthly report. Gaming revenues reached $1.5 billion in Clark County, down 2.5% on a year-over-year basis, but 30.2% higher than pre-pandemic 2019.

The number of visitors to the region has steadily improved since a partial reopening in June 2020. Compared to the typical pre-pandemic 3.5 million monthly visitors, June 2020 saw just 1.1 million visitors when casinos reopened; 2.2 million visitors in March 2021 when vaccines become more widely available; and 3.3 million visitors in July 2021 when large-scale events resumed.

Fitch also cited the city’s strong operating performance and the sufficiency of its reserves relative to its expected revenue volatility through economic cycles for the improved rating.

“The city’s primary revenue source is controlled by the state, limiting its revenue-raising authority to just a satisfactory level,” Fitch analysts said. “Overall spending flexibility is adequate and principally constrained by the structure of the city/county law enforcement over which the city has less control than is typical.

Tourism dominates the regional economy, with major employers tied to the entertainment, gaming, or convention industries, which Fitch said was amplified by the number of temporary layoffs when gaming was shuttered during the pandemic.

According to the Bureau of Labor Statistics the hospitality and leisure industry employed nearly 300,000 residents prior to the pandemic.

That figure plummeted to a low of 127,000 during the most stringent shelter-in place orders in April and May 2020, Fitch said.

As of March 2023, Fitch said, the hospitality and leisure industry reports employing 292,000 residents, a nearly 130% increase from the pandemic low, and approximately 97% of pre-pandemic employment.

“The scale of the job losses, while temporary, illustrates the region’s exposure to the hospitality sector,” Fitch said. “The concentration in the economy weighs on the rating.”