Thursday, Jan. 25, 2001 | 11:30 a.m.
Depending on who you listened to at Preview 2001 Wednesday, Las Vegas' economy either is on the verge of hard times, is lukewarm or is poised for more meteoric growth.
Eleven speakers took turns offering their forecasts from each of their industry perspectives at the event presented by the Las Vegas Chamber of Commerce and the Nevada Development Authority.
About 1,500 people attended the half-day event sponsored by 28 companies, including top contributors Cox Communications of Las Vegas, Harrah's Entertainment Inc., In Business Las Vegas, Mission Industries, Nevada Bell, Sprint and XO Communications.
Mark Suman, co-founder and vice president of strategic planning for Las Vegas-based National Airlines, presented the darkest cloud on the city's economic horizon.
After telling the Preview audience that National, which is operating under Chapter 11 bankruptcy protection, recently had the best week of advanced bookings in the airline's history, Suman explained why high fuel costs being assessed the airline industry could result in fewer tourists visiting the city.
He said in the second week of January, National sold about 65,000 tickets for future travel, the best ever. He said the company has taken a "business-as-usual" approach to operations and after the initial shock of the bankruptcy announcement seven weeks ago, sales momentum is starting to build.
He said the company is in talks with "aerospace companies" about investing in the airline to solve some of its financial problems. In an interview following the speech, Suman would not disclose the companies with which National is having talks.
But National's bankruptcy problems aside, Suman said Las Vegas could feel the brunt of fuel-cost problems being experienced by the entire aviation industry.
He explained that jet fuel cost between 50 cents and 70 cents a gallon in the 1990s and since National began flying in 1999, it has cost about 90 cents a gallon. When National announced its bankruptcy filing, it cited fuel costs of $1.17 a gallon at their peak.
Suman said major airlines' costs are up 10 percent to 15 percent over last year and the industry, as a whole, is showing a loss for the fourth quarter of 2000, the first loss in six years.
Most airlines' quick fix for recovery is to allocate their fleets where they're going to make the most money, Suman said. That means planes may be moved to routes where they can serve more business customers. Business fliers are more profitable to airlines than leisure travelers because they tend to book more expensive last-minute flights.
Las Vegas, Suman said, is competing with other cities when it comes to aircraft allocation and the economics put the city at a disadvantage. He said only Honolulu may be more dependent on airlines to feed its tourism base than Las Vegas.
Most airlines have tried to keep their fares at existing levels, which means planes have to have more paying customers aboard them to make them profitable. Suman said the break-even load factor for major airlines operating in Las Vegas is now approaching 90 percent -- an unheard of level in the industry.
A "load factor" is the percentage of paying customers aboard a plane. Most airlines are profitable in the high 60s and Las Vegas' busiest carrier, Southwest Airlines, recently announced loads of about 70 percent in its most recent quarterly earnings.
Suman said the public can get involved in the issue by encouraging lawmakers to support public policy that's friendly to the industry. He said it's important that tax dollars collected by airlines when they sell tickets go to aviation projects instead of the federal government's general fund.
Aviation projects, like air-traffic-control systems, need refurbishing, he said, to keep planes flying.
While Suman's speech detailed a potential problem for Las Vegas, other speakers were more upbeat about what's in store for the city.
Slower growth
Keith Schwer, director of UNLV's Center for Business and Economic Research, reiterated some of his projections for the city that he announced last month.
After saying that some forecasters' projections about the national economy are "so dour as to be downright misleading," Schwer explained that Las Vegas will be in the midst of a down cycle in the city's "circle of growth" -- which means the local economy's growth won't be quite as robust as it has been.
The circle of growth, he explained, starts with the building of new resorts, which results in larger visitor volumes, which results in increased gaming revenue, which results in more employment, which results in more population, which results in more home construction and more personal income.
Since there aren't any new megaresorts planned in 2001, Schwer expects growth won't be as great in most of those categories this year and in 2002 as they were in the 1990s.
Schwer's growth projection in those categories: new hotel rooms up 1.3 percent in 2001 and 1.7 percent in 2002 after '90s growth of 5.7 percent per year; visitor volume up 1.5 percent and 1.4 percent, compared with 5.6 percent; gaming revenue up 3 percent and 2.8 percent, compared with 5.5 percent; job growth up 4.9 percent and 4.3 percent, compared with 7.3 percent; population up 5.3 percent and 4.6 percent, compared with 6.4 percent; home construction up 0.3 percent and 3.9 percent, compared with 4.8 percent; and personal income up 7.6 percent and 7.1 percent, compared with 7.6 percent.
Then, there were the exuberant speakers, including Rossi Ralenkotter, vice president of marketing for the Las Vegas Convention and Visitors Authority, and Richard Lee, director of public relations for First American Title Co. Lee led a panel of development experts: W. Stewart Gibbons, executive director of Summerlin developer Howard Hughes Corp., Frank Pankratz, senior vice president and general manager of homebuilding giant Del Webb Corp., and John Kilduff, president of Green Valley developer American Nevada Corp.
Ralenkotter got the crowd's most enthusiastic response with his presentation of the LVCVA's television ad spots marketing the city. The campaign, developed by R&R Partners and unveiled in September and December, is based on Las Vegas as a symbol of personal freedom.
The September campaign kicked off a "freedom party" political ad spoof featuring pitchman Brock Wilder as the head of a movement wanting to party, and the newest campaign features three ads, one of which will debut in 12 markets during the Super Bowl broadcast.
The Super Bowl ad, "MudFlap Girls," features chrome mudflap icons jumping off a truck and hitching a ride to Las Vegas on another truck. The new ads also will feature the LVCVA's new logo, which plays off five casino chips spelling "VEGAS."
Real estate
Gibbons, Pankratz and Kilduff outlined their respective companies' projects, some of which will near completion in 2001.
Gibbons talked about the Hughes Corp. and its parent, the Rouse Co., and their development of Summerlin. New projects within the massive master-planned community include The Gardens, The Vistas, The Ridges and Summerlin Centre.
Gibbons also talked about the expansion of the Hughes Center office complex in midtown Las Vegas and the Fashion Show mall on the Strip. He got a smattering of applause when he announced the arrival of the state's first Nordstrom department store at the mall when the project is completed in 2002.
Pankratz climbed on the Preview stage to the Beach Boys' "Catch a Wave," while beach balls cascaded down the arena aisles -- his way of introducing that Del Webb plans to "catch the wave" of Baby Boomers at the company's properties, which includes Anthem in Henderson.
Pankratz said the largest rate of births in the nation's history occurred in 1957, when 4.3 million Americans were born. Now, people born between 1946 and 1964 -- the Baby Boom era -- are moving toward retirement age. Del Webb wants to market to them.
He said in Las Vegas, 20 percent of the population is between the ages of 35 and 44 and 19 percent are between 45 and 54. The median age for the city is 46.
Del Webb calls that the demographic the "Zoomers," and wants to offer products that fit their lifestyle.
"They can't be treated like yesterday's mature market," Pankratz said.
Kilduff discussed American Nevada's development plans at the I-215 Beltway and Green Valley Parkway in the Green Valley area of Henderson.
Included at the site are Class A office space, occupied by tenants like the Greenspun Media Group, and back-office space, occupied by tenants Ford Motor Credit Co.
He also discussed American Nevada's joint-venture hotel-casino project with Station Casinos Inc., and a 30-acre urban village currently being designed.
The urban village will be a contemporary "Main Street" project that may have commercial development on the ground floor, office space on the second story and apartment living on the third.
The village will be clustered with a community amphitheater, a swimming complex, a library and a police substation.
One of the most flamboyant of the speakers, Lee presented his annual Las Vegas video, which has grown into a Preview tradition.
It was Lee's crystal-ball predictions for what lies ahead in the next five years that had most people talking when they left the arena. Lee said some of his predictions were based on his own suppositions, based on conversations he has had with his numerous real estate contacts.
His gave his analysis of what could lie ahead for the Desert Inn hotel-casino property, even though he has had no conversations with its owner, Steve Wynn.
"What he builds," Lee said, "could set the stage for Las Vegas for the next 10 years."
He said he expects the property to be home to four or five new resort hotels, some of which would be operated by other resort companies. However, he expects Wynn to keep the prime corner at the Strip and Sands Avenue to develop the most luxurious hotel ever built. That was Wynn's goal years ago when he set out to build the Bellagio.
Lee said he expects Wynn's new property to be one of the tallest buildings on the Strip and it would have a "different" look to stand out.
Lee mentioned another obvious feature: "I also expect it will have a lake in front of it ... duh.
"It's fun to see him design his vision and see it come to fruition," Lee said.
Other Lee predictions for what will happen by 2006:
The Greenspun family, which publishes the Las Vegas Sun, has financial interests in American Nevada, Cox, In Business and XO.
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