Tourism execs call industry fragile

Friday, March 21, 2003 | 11:08 a.m.

Three state tourism leaders cautioned a panel of lawmakers Thursday that raising room taxes could help price visitors out of the market and further damage Nevada's already-fragile tourism industry.

Manny Cortez, president and chief executive officer of the Las Vegas Convention and Visitors Authority, said the state of the tourism industry in Nevada could be described with one word: anxiety.

But the industry can drive some of that anxiety away by convincing potential customers that they will be safe and secure when they visit the state. Cortez said the state can be even more convincing if it offers that safety at a bargain price.

Part of the solution to keeping that bargain price is to avoid the temptation of piling taxes onto the cost of a room, Cortez said.

Gov. Kenny Guinn's proposed tax package doesn't contemplate a new room tax, but some alternative tax plans under consideration could raise the tax.

Cortez said he wouldn't want to see any increase in room taxes to avoid creating one more reason to keep tourists away from Nevada.

Cortez, Lt. Gov. Lorraine Hunt and Reno-Sparks Convention and Visitors Authority Chief Executive Jeff Beckelman gave a state-of-the-industry report on tourism to the Assembly Committee on Taxation, which met in the Cashman Center theater in Las Vegas.

While there are numerous obstacles ahead, including increased competition and the threat of terrorism, Nevada's tourism economy should continue to be formidable, the three experts concurred.

Hunt, who leads the state's Commission on Tourism as lieutenant governor, said part of her strategy is to exploit a fertile, untapped market -- China.

Hunt said there are millions of Chinese gamblers waiting to be convinced to make a trip to Nevada.

Cortez said how that market will be approached will be a key to success. He said most Chinese tourists have made a habit of traveling to short destinations.

"We need to convince them to take a long-haul trip," Cortez said. "So far, we haven't figured out just how to do that."

Cortez said casino projects in the Chinese city of Macau by Steve Wynn and Sheldon Adelson also could help market American resorts.

The international traveler has been a key focus of Nevada's tourism executives because they visit for longer periods of time and spend more money per visit.

However, the international traveler also has been the one that has stayed away the most since the Sept. 11 terrorist attacks. In 2000, the international visitor represented 13 percent of the overall total. That fell to 12 percent in 2001 and 8 percent in 2002. In both 2001 and 2002, about 36 million people visited Las Vegas, according to the LVCVA.

Cortez said international travel now isn't expected to rebound until 2004.

But that was before two days ago. With a war in Iraq under way, a bad scenario has worsened, Cortez said. With another plunge in demand resulting from the war, Air Transport Association and Travel Industry Association analysts have projected an additional $4 billion loss, 70,000 jobs to be cut and more airlines either filing for bankruptcy or ending service.

Add to that increased security costs being tacked on by airlines, higher taxes in most locations, growing insurance premiums and fuel prices that are unstable and climbing. Cortez said it all means that airlines serving the Las Vegas market have encountered "the perfect storm."

Today's traveler, he said, is taking shorter trips and staying close to home. Travelers are using the Internet to find value-oriented travel deals. That helps the traveler, but it also pushes room rates down for resort operators.

Northern Nevada has an additional big problem, Beckelman said -- formidable competition. California-based Indian casinos compete for the gambler's dollar in Reno, which has been hit harder by Indian casinos than has Las Vegas.

Cortez also said a category Las Vegas has dominated in the past could feature new competition. Convention and meeting space is being filled with shows in Las Vegas, but convention centers in Orlando, Fla., Chicago and New Orleans are being expanded, meaning tougher competition for Las Vegas.

Other states and industries also are heating up the competition for Las Vegas. California, Florida and Illinois are putting together their own regional advertising promotions to keep tourists at home and the cruise industry has begun aggressive discounting to capture customers who are reluctant to fly.

Cortez also noted that while filling existing rooms will be a challenge, there are 8,300 new hotel rooms planned for Las Vegas by the end of 2005. That, he said, will require nearly 4 million additional visitors each year to achieve 2000 occupancy levels.