Las Vegas readies itself to cash in on convention industry boom

Friday, June 1, 2001 | 10:57 a.m.

The expansion of the Las Vegas convention and trade show business could be more significant than a new wave of megaresorts to stimulate visitor demand, new research indicates.

A study of the Las Vegas convention market by Bear Stearns gaming analysts Jason Ader, Marc Falcone and Eric Hausler says a stronger meetings industry will reduce the city's reliance on gaming revenue and the primary beneficiaries of a greater emphasis on conventions are MGM MIRAGE, the Venetian, Mandalay Resort Group and Park Place Entertainment Corp.

"We believe the continued expansion of the convention trade show business in Las Vegas could further reduce the focus on gaming revenues, mitigate earnings volatility for some companies and increase demand for higher-end amenities," the report says.

"Ultimately, we belive a higher focus on the convention business could contribute to an environment with less room pricing sensitivity and more rational allocation of capital, as operators focus on bolt-on capital projects such as additional restaurants, retail, meeting space and hotel rooms, with a lesser focus on new megaresort development to stimulate the next wave of demand," the report says.

The report notes that Las Vegas currently plays host to six of the nation's top 10 shows, but only 34 of the top 200, indicating there's room for market share growth. And, two major convention center construction projects will be completed next year, giving Las Vegas more room for larger or simultaneous shows.

The Las Vegas Convention Center will add 1.3 million square feet of additional convention space when its $150 million South Hall expansion project is completed in January. Mandalay Resort Group also announced earlier this year plans to open a three-story 1.8 million-square-foot conference center at the Mandalay Bay hotel-casino. Construction on the $225 million center begins this month with completion expected next summer.

The report says convention business is a plus for Las Vegas because most shows occur on weekdays when hotel rooms usually are empty. Also, conventions draw more high-margin customers who spend more and stay longer.

The report says 77 percent of conventioneers stay in Las Vegas for three days or more, compared with an average 67 percent for the total market. In an average stay, a conventioneer spends $470 on food and beverages, local transportation, shopping, shows and sightseeing -- about 21.5 percent more than the average tourist.

But on the down side, conventioneers spend more time tending to business and less in the casinos. The average convention customer has a $424 gambling budget compared with $539 for the average tourist, the report says.

The study also says the expanding convention business will increase demand for high-end amenities, spur repeat visits as conventioneers plan return trips with their families, stimulate demand for more air service and reduce reliance on any one geographic region for visitors.

The report identifies MGM MIRAGE as a company best positioned to take advantage of the growth of the industry because its six properties have a total of 855,000 square feet of meeting space, including 500,000 square feet at the MGM Grand hotel-casino and its three-story conference center.

Other benefactors are the Venetian, which caters to the conventioneer and not only has its own conference center, but also is attached to the 1 million-square-foot Sands Expo Center; Mandalay Resort Group, which will have more than 2 million square feet of space at five properties when its new conference center is done; and Park Place Entertainment, which is positioning its Las Vegas Hilton property as a convention hotel because of its location adjacent to the Las Vegas Convention Center.