Restaurant and retail storefronts line the Las Vegas Strip. (Pexels Photo)
Sam Marvin has spent the past year caught between losing profits and losing customers.
He says his food costs have climbed 32% and his margins have fallen to roughly 4% at his restaurant, Echo & Rig, a midpriced steakhouse and butcher shop located off the Strip in Las Vegas.
“As soon as I raise the prices, then the guest count moves down,” said Marvin, one of many midpriced restaurant operators in and around the Strip caught between diners trading down and wealthier consumers still spending freely.
In a city like Las Vegas, that divide is on display. High-income visitors spend freely at luxury resorts and restaurants on the Strip, while independent and midscale restaurants in the middle are being squeezed out by lower-priced chains and fast-food franchises.
It reflects a stark picture of what is happening across the country: a growing divide between high income earners spending freely at the top, and decreased spending power for those at the bottom. Restaurants caught in the middle are left with little room to survive.
Since the pandemic, the economics of dining out have shifted dramatically for both restaurants and consumers. Restaurant prices have climbed since the pandemic, shrinking who can afford to eat out, and how often. Meanwhile, restaurants that made it through the pandemic faced growing food and labor costs that shrunk their bottom line and forced many to raise prices.
This shift is what some describe as a “K-shaped economy,” where a growing divide between the spending power of those at the bottom and those at the top income brackets is taking place. Peter Atwater, professor of economics at William and Mary, says that the gap has been widening, and consumers at the bottom have now reached a breaking point. “What’s happened is the divide has reached a point where those at the bottom are now, out of desperation, having to make sacrifices,” Atwater said.
These sacrifices are reflected in the restaurant industry, where customer traffic over the past year has remained flat, and the number of independent restaurants has declined by 2.5%, according to Technomic data. Consumers have instead shifted toward fast-food and fast-casual chains which offer perceived value through lower prices, value offerings, and rewards programs.
“Consumers are still spending, but they’re concentrating that spend at the extremes,” says Tom Bailey, Senior Consumer Foods Analyst, Rabobank. “People will still spend $150 on a dinner, or $10 on a quick meal, but they will avoid an average $40 to $50 experience that doesn’t feel special.”
Las Vegas has become one of the clearest examples of the split.
This past year, Nevada gaming revenue hit a record $15.8 billion in 2025, while Las Vegas visitation fell 7.5% to 38.5 million visitors, according to a recent press release by the Las Vegas Convention and Visitors Authority.
“It’s because the higher end continues to come to Las Vegas and spend and gamble,” said Anthony Curtis, publisher of Las Vegas Advisor.
Restaurants owners like Marvin have had to change how they operate.
Echo & Rig is located outside the casino corridor in a quiet, upscale shopping district. Marvin said he wanted to hit a market others were not targeting, serving business professionals and families who live outside the Strip.
Over the years, Marvin has kept his menu mostly the same, sourcing local ingredients and prime cattle. He says his ethos for creating a customer-driven experience has given him staying power in the community.
Marvin doesn’t want to push menu price increases to his customers, but he says his shrinking margins leave him little choice. “Your labor is 30%. Your incidentals are 20%, and you would put 20% to the bottom line. That’s the original formula,” he said. “It’s not even close to that now.”
Restaurant owners across the country are seeing similar shifts in consumer behavior. “Traffic, visits are down. Dollars are up, but that’s because consumers are spending more per visit,” said David Henkes, senior advisor at Technomic.
Since 2020, restaurant prices have climbed, with average menu prices increasing by over a third according to data from the Bureau of Labor Statistics.
Henkes said the industry is facing what he describes as an “affordability crisis” in restaurants, where businesses are faced with prices that are outpacing wage inflation, creating a cycle where growth is driven by higher prices alone. “It’s not fewer meals out,” Bailey said. “It’s fewer average meals out.”
On the Strip, the shift played out in real time. As lower-income consumers pulled back on travel, the restaurants that served them did too. The number of casino buffets, once a staple of affordable, high-volume dining, has fallen from more than 70 before the pandemic to fewer than a dozen today, according to the Las Vegas Review-Journal.
That contrast is hard to miss. “Thousand dollar tomahawk steaks are coming out of gold briefcases,” said Peter Saba, manager of government affairs at the Nevada Restaurant Association. He describes this shift as a deliberate marketing strategy that has come from years of catering more toward higher-end consumers.
It reflects a broader shift in consumer spending where affluent diners continue spending freely on luxury experiences and lower and middle income households cut back. A 2026 industry report published by McKinsey showed that low income consumers across all generations planned the biggest cuts to spending on restaurants, while high income consumers showed little to no pullback.
Over the past year, spending on groceries rose about 2.8%, while spending on dining out was essentially flat, increasing just 0.3%, according to BLS data.
Consumers are gravitating toward lower-priced value items and deals, which are more common at fast-casual restaurants and fast-food chains. Those companies can spread costs across multiple locations. Independent operators, like Marvin, bear these costs directly.
Marvin said he is getting the pricing right on both the high and low ends of the menu, but struggling to sell anything in between. After more than 15 years in business, he said he’s unsure how long he can sustain those food costs. He plans to open a burger shop to meet consumers at the lower end.
“You’ve got this double whammy where restaurants have to raise prices to cover higher costs, but the more they raise prices, the more consumers pull back and traffic drops,” said Henkes.
The loss of traffic has already been reflected in Marvin’s profits.
“In the last couple years, we were probably at, you know, at the free cash flow at 13%, 14%,” Marvin said. “And now we’re at 4%.”
Saba says restaurant operators represented by the Nevada Restaurant Association, too, have faced softer traffic and mounting price pressures, particularly in tourist-heavy areas.
“People enjoy going out to eat still, but they are being more deliberate about how they do it,” said Saba.
As celebrity-driven restaurant concepts and fast-casual chains continue expanding across Las Vegas, operators like Marvin are left wondering what future remains for independent restaurants caught in the middle.
“How’s that middle restaurant going to survive?” said Marvin. “People can’t afford it.”