Higher room rates are not dissuading Las Vegas visitors

By Liz Benston

Tuesday, Dec. 14, 2004 | 10:32 a.m.

When Mandalay Resort Group released its latest quarterly profit report this month, it was room rates -- not gambling revenue -- that did most to boost earnings by about 65 percent.

That's probably no great surprise, as Mandalay owns the largest block of mid- to lower-price rooms on the Strip, often subject to price swings. The company also generates the greatest share of revenue from nongaming sources such as rooms than any other major Strip operator.

What amazed Wall Street most was the company's ability to push the envelope on room rates more successfully, it seems, than the competition. In other words, Mandalay is raising room rates significantly and still filling its rooms.

The Mandalay Bay Convention Center has a lot to do with that because the company is filling rooms at its Mandalay Bay, Luxor and Excalibur hotels with convention-goers and charging more to boot, analysts said.

Mandalay Resort expects to sell about 40 percent of its Mandalay Bay rooms to convention customers by next year. Still, the company's success bodes well for room inflation elsewhere on the Strip and especially for MGM Mirage, which which owns the largest number of resorts on the Strip and will soon become the Strip's largest operator when it swallows Mandalay Resort Group next year, they said.

"Furthermore, our surveys show that significant rate gains will likely occur through December for Las Vegas Strip assets in general," Merrill Lynch analyst David Anders wrote to investors this month.

That's good for investors because rooms cost less to maintain and have less risk than casinos. But what does that mean for consumers? If you talk to analysts and casinos, you might feel lucky that rooms don't already cost more than they do. After all, rates have only recently caught up with growth rates in place before the city was rocked by the Sept. 11 attacks.

After crowing about average nightly rates of $212 at Mandalay Bay and $232 at the new hotel tower, Mandalay Resort Group Chief Executive Glenn Schaeffer said on a conference call this month that Las Vegas still offers some of the best hotel deals in the nation.

"I can name 10 other cities where you still pay more," he said.

Anthony Curtis, publisher of the Las Vegas Advisor consumer newsletter, agrees, citing recent visits to New York, London, Paris and San Francisco as examples of inflated rates for not much hotel.

A few visitors are getting fed up with rates that have crept up steadily over the past couple of years, Curtis said. Just about everything else besides hotel rates, from buffets to entertainment, also is going up, he said.

"Some people have canceled their subscriptions, saying, 'I'm not coming to Las Vegas anymore,' " he said.

Still, there are many more people joining the party than leaving. Las Vegas is on track to welcome more than 37 million people this year -- breaking 2000's record of 35.8 million people, according to the Las Vegas Convention and Visitors Authority. In October, the average daily room rate for Las Vegas-area hotels and motels was $100.87. The convention authority doesn't break out Strip rates separately. Occupancy is also on the rise, with rooms 98.2 percent full on the weekends.

Consumers are also getting smarter about seeking deals, Curtis said. The Las Vegas Advisor helps the cause each December by seeking the best deals of the year.

This year, Curtis dug up some surprising deals using the newsletter's two-prong approach of calling the hotels and using the company's Internet rate search engine, called Travelaxe.

"We say, 'I can come anytime in December. What's the absolute best deal you've got,' " he said.

The lowest rate turned up at Palace Station, which offered a $15 rate last month and is now offering an Internet rate of $10.99 per night for its older rooms.

The low rate drives a lot of traffic from customers who come to town to escape during the holidays or who are visiting family who live in town, Station Casinos spokeswoman Gina Lateef said. Senior groups, bus tours and amateur sports teams are also among the budget-conscious travelers who frequent the property, she said.

"It's a short taxi ride and even a short walk, if you're adventurous, to the Strip," Lateef said. The company also provides a shuttle service from Palace Station to the Tropicana and Fashion Show mall and back again.

Another hotel that came out on the top of Curtis' survey was the Rio, which recently offered a $45 rate -- well below rates that have totaled in the hundreds of dollars during more popular times.

Rio owner Harrah's Entertainment Inc. doesn't draw as many of its typical tour groups in December as other months so it offers a lower rate during selected midweek days of the month, spokeswoman Madeleine Weekley said.

Both Palace Station and the Rio average in the mid-to-high 90 percent range in December, reps say.

About 55 hotels in town fell under $89 a night, an arbitrary cutoff for deals this month. Rates will become schizophrenic later this month as tourists spill into town for the New Year's holiday and some rates soar into the $1,000 range.

The Lady Luck, Arizona Charlie's East, Boardwalk and Stratosphere dangled rates below $20. The largest number of properties in the survey -- 19 hotels in all -- had rates under $30, including the Gold Coast, Plaza, Four Queens, Westward Ho, Terrible's, Fitzgeralds, Sahara and Silverton. Sixteen properties charged less than $40, including the San Remo, New Frontier, Circus Circus, Sam's Town, Riviera, Imperial Palace, Stardust and Tropicana. The high end featured 15 hotels including Monte Carlo at $54, Palms at $59, Hard Rock at $69, MGM Grand at $71, Aladdin at $49 and Mirage at $79. Mandalay Bay topped out at $89, leaving the rest of the luxury spectrum -- Caesars Palace, Venetian, Paris and Bellagio -- out of range.

Properties like Harrah's and the Venetian, among others, are increasingly using high-tech software to micromanage their room rates and have transformed the price-demand process into a fine art.

Consumers are working the system by being more flexible, vigilant and aggressive about scoring discounts, said Curtis, whose newsletter now reaches an all-time high of about 19,000 subscribers.

Even so, the deals available today aren't quite as low as they were in years past, he said.

"Prices are going up all the way around. But deals are available if people look for them."