LV faces decline in New Year’s crowd

Gary Thompson

Thursday, Dec. 23, 1999 | 10:59 a.m.

Las Vegas tourist counts for New Year's Eve could be the lowest in years, as a confluence of events has blasted into oblivion rosy projections of record turnouts for millennium weekend celebrations.

The Las Vegas Convention & Visitors Authority this week slashed its estimate of visitor volume for the New Year's weekend to 240,000 persons, a far cry from the 750,000 people some analysts have predicted.

The new projection compares with last year's 250,000 New Year's visitors, who traveled here before the openings of resorts such as Mandalay Bay, the Venetian, Paris Las Vegas, the Resort at Summerlin and the Hyatt Regency Lake Las Vegas added 10,700 rooms to the market.

And the latest LVCVA prediction was also made before government warnings of terrorists threats to Americans caused some potential travelers to consider canceling plans for New Year's travel.

Those threats, coupled with sky-high early room prices, Y2K fears and the simple desire of many Americans to spend the historic weekend at home with family and friends, constitute a "quadruple whammy" that has hotel-casino executives desperately trying to boost demand.

"Obviously this isn't good news," Credit Suisse First Boston leisure and gaming analyst David Anders said today.

"What's of further concern is how aggressively people who've already booked rooms attempt to renegotiate their rates," he said. As the Sun reported Tuesday, some Strip hotels have slashed room rates for the New Year's weekend as much as 80 percent and are giving rebates to customers who booked early at higher prices.

Anders doesn't expect any short-term impact on casino stock prices from the LVCVA forecast.

"I've attributed some of the recent selloff of the stocks of big-cap casino companies to the expectation that millennium business would be slower than expected, so I believe the bad news is already priced into the stocks," he said.

"The upside is that there will be no millennium spending hangover, which many leisure analysts had feared. It may be that people who are saving money now will have cash available to spend later, and that may smooth out leisure spending throughout the course of the year."

Right now, though, the LVCVA is predicting a New Year's Eve occupancy rate for the area's 120,444 hotel and motel rooms of 85 percent -- 14 percentage points below initial projections and nine points lower than last year's number.

Kevin Bagger, senior research analyst for the LVCVA, said the 85 percent occupancy rate is projected using a formula that factors in an estimated 240,000 visitors, 2.1 persons per room and an average stay of 3.3 nights.

To be sure, room inventory has jumped 9.8 percent since last year, which means more visitors are required to maintain a steady occupancy rate. But the LVCVA projection is even three points below that of the 88 percent occupancy average for the past 12 months.

Some people who haven't planned New Year's Eve travel yet may change their minds and book rooms here next Monday, Tuesday and Wednesday to capitalize on the relative bargains afforded by plunging room rates.

But such hopes weren't helped by widely publicized comments this week from the former FBI chief in New York City, where tourism officials hope to attract 1.5 million visitors to the Times Square millennium bash.

"I personally wouldn't go to any event in Times Square," said Jim Kallstrom, who headed the investigation into the crash of TWA Flight 800.

"If there is a (terrorist) strike, it will be in a large gathering," he said. "The prudent thing is to celebrate by yourself or with your family."

That's apparently what many Americans decided to do already, terrorist threats or Y2K fears notwithstanding.

The American Automobile Association is predicting a 1 percent drop in Christmas and New Year's travel this year compared with the 1998-99 holidays, the first decline in more than a decade.

Of those who do travel, 82 percent will go by automobile, a AAA telephone survey of 1,500 Americans found.

"What we've gotten from people is that they don't want to be out in that mess," Yoli Buss, director of traffic safety at the AAA Auto Club South, told the Orlando Sentinel.

"Most are telling us there's going to be so much celebrating going on, they'd rather just stay home," he told the newspaper.

Still, more than than 300,000 Nevadans will be traveling at least 100 miles from home in late December, said AAA Nevada spokesman Paul Moreno.

Lodging and tourism experts at PriceWaterhouseCoopers said this week the industry nationwide will perform "far below ... the expectations of a few months ago for occupancy and attendance at New Year's events."

The group, which said it has predicted every tourism industry turning point in the past 10 years, cited initial above-market pricing and Y2K fears as two of the factors that have led to the diminished expectations nationwide.

That was certainly the case in Las Vegas, where hotel-casino operators -- euphoric over soaring summer visitor volume and hoping to cash in on expected high year-end demand -- initially jacked up room prices to four or five times the normal weekend rate. But as reservations failed to materialize, operators have cut prices as much as 80 percent.

That still hasn't helped much, said LVCVA officials. While a few big Strip resorts will hit occupancy rates in the 90s -- much of it made up of "comped" customers -- others are still wallowing in the high 30 to low 40 percentiles just seven days before what's normally the busiest weekend of the year begins.

Fears of computer chaos as 1999 clicks over to the double zeros of 2000 have taken their toll. While fully half of all Americans expect no problems, the Y2K scare has many wondering whether they'll be able to fill their cars up at fuel pumps, board aircraft on time or get cash from ATM machines as easily on Jan. 1 as they can today.

And in a tourist destination that relies so heavily on planes, cars and cash machines, that's a worrisome prospect. After all, while government officials say the chances of major catastrophes are miniscule, nobody knows for sure.

Finally, some fallout may occur due to delays stemming from the heightened security at U.S. airports the Federal Aviation Administration instituted after the State Department issued its second warning of terrorist threats in 11 days late Tuesday.

Meanwhile, the LVCVA is continuing to track room trends and may issue a revised forecast for New Year's Eve visitation next week.

Further out, advance bookings for mid-January indicate visitor volume and room rates could rebound, continuing the 15-month trend of increases that have sparked renewed investor interest in gaming stocks.

Bear Stearns's & Co. analyst Jason Ader said that for the week ending Jan. 15, 2000, weekend room rates are up 8.2 percent from the year-ago period, while weekday rates are 8.4 percent higher.

Ader said the higher rates are "particularly impressive" in view of the light convention and entertainment schedule for that week, and indicate the market is drawing more free and independent travel (FIT) business.

"There has been an amount of uncertainty surrounding travel plans around the beginning of the year due to unsettled Y2K concerns," he noted. "However, as we get farther away from the first of the year, travel concerns should diminish and people will become less wary of making travel plans."

Ader said air fare discounts of up to 68 percent below average prices are spurring FIT business, which should give travelers more incentive to visit Las Vegas and have more money to spend when they get here.