Vegas casinos face plunging room rates

David Strow

Friday, Sept. 14, 2001 | 10:47 a.m.

As the first weekend since Tuesday's terrorist attacks approaches, Las Vegas hotel-casinos are bracing for what could be a dramatic plunge in business.

One local analyst, in fact, said Las Vegas room rates this weekend are at their lowest level in five years.

"The evidence, in our view, is substantial that visitor volume in southern Nevada will not return to pre-World Trade Center (levels) any time in the near to intermediate term," said Dave Ehlers, chairman of Las Vegas Investment Advisors. "I think occupancy this weekend is going to be a complete disaster, and I would say next weekend less disastrous. There will be major gaps in occupancy for awhile."

On a typical weekend, occupancy averages about 94.5 percent citywide, and at any given moment, 230,000 to 250,000 visitors are in the Las Vegas Valley. Forty-six percent of these visitors arrive via air, the Las Vegas Convention and Visitors Authority said.

With air travel still disrupted, this occupancy is expected to plunge this weekend. But how much is as yet unknown, as that depends on how much air traffic resumes today and Saturday. But MGM MIRAGE and Park Place Entertainment Corp., two of the city's three largest hotel-casino operators, said this morning that cancellations have been heavy for this weekend.

"It obviously is not going to be a normal weekend by any stretch of the imagination," said Alan Feldman, spokesman for MGM MIRAGE. "My assumption is that the airport is mostly shut down. Other than those that may drive in, it's going to be slim, and those that may drive may choose to stay home.

"There clearly will be a near-term hit to the city, what that will be remains to be seen. How quickly there is any kind of rebound is very much in the air right now."

The situation is similar at Park Place, said spokeswoman Debbie Munch.

"We continue to take calls from individuals whose travel plans are changing because of the airline situation at this time," Munch said. "Our occupancy will be impacted until air traffic is restored to 100 percent capacity. The level of impact will be determined to some extent by the rate of that recovery."

And the Aladdin, an independently owned property on the Strip, is shutting down four of its restaurants Sunday because of expected low demand. Some will remain closed through Thursday.

"We're getting many cancellations, and it's affecting us," said Fred Lewis, Aladdin spokesman. "If you look around, other hotels are doing the same thing."

How severe is the impact? Ehlers pointed to room rate surveys his firm has been conducting among 10 major Strip hotels this week.

Three weeks ago, Ehlers said, these 10 hotels quoted an average nightly rate of $213 for this weekend. On Wednesday, one day after the terrorist attacks, the rate had fallen to $151.

The rates have continued to erode. As of this morning, the average rate had fallen to $110, Ehlers said. That's a decline of 48 percent over three weeks ago.

"Most of these hotels are at less than a hundred bucks for a Saturday night," Ehlers said. "We can't match that at any time since we've been taking these surveys (over the last five years). That's the lowest Saturday night we've ever seen."

This continues through next weekend, Ehlers said. From a three-week advance quote of $273, the average rate for the weekend of Sept. 22 has fallen to $185, a decline of 32 percent.

However, the average for the weekend of Sept. 29 stands at $245, off just 4 percent, Ehlers said. This is likely because of the championship boxing match scheduled for Mandalay Bay that weekend, Ehlers said.

"They seem to be saying, 'While we admit we'll be affected next week, the following week, we'll be kind of back to normal,"' Ehlers said. "They will sharply re-examine that position as we go through the days next week."

Other analysts are also sounding notes of concern.

"It is becoming increasingly clear that travel and tourism will be one of the hardest hit sectors of our economy and one of the areas where consumer confidence will take the longest to return," Bear Stearns gaming analyst Jason Ader wrote in a research note this morning. Some analysts, he noted, are projecting an initial drop of 20 percent in demand for air travel.

Las Vegas, Ader warned, stands to be the hardest-hit market in the gaming industry, as it is the most dependent on air travel.

"In our view ... we believe the recent events could pressure operating results in Las Vegas for at least the next two quarters, or until consumers regain some degree of confidence in flying," Ader said. "Visitation from the New York area, as well as Washington, D.C., and other East Coast markets could be particularly soft in the coming months, as people from those areas attempt to pick up the pieces from Tuesday's tragedy."

Roughly 9 percent of Las Vegas visitors come from the East Coast, Ader said.