Tourism juggernaut shows signs of slowing down

Hotel rates lowered, ad pitch reworked for ‘recession-proof’ city

Monday, April 7, 2008 | 2 a.m.

A clarification for this story has been published.

For all the highly technical and nuanced ways to identify economic slowdowns, in Las Vegas there’s one simple way to take measure: room rates.

So it doesn’t take a Harvard MBA to figure out that, at a time of year when business conventioneers and tourists head to Vegas for near-perfect weather, the city’s economic engine isn’t firing on all eight cylinders.

The proof: Rooms are going for $75 at Harrah’s, $69 at Bally’s and just $199 at Wynn Las Vegas and the Venetian.

Even one of the Strip’s most exclusive hotels, the Four Seasons, is offering a $50 credit on hotel services as well as rooms for less than $400 a night.

Then there’s the blitz of promotions, from two-for-one meal and show offers to free cocktails and concierge services. Even the just-opened Palazzo is offering a $20 food credit and a $25 gambling credit.

There are no hard figures to show Las Vegas is in a tourism slump. Though airline and car traffic is down, figures from the Las Vegas Convention and Visitors Authority largely show flattening growth in key indicators such as room rates and visitor traffic, and most casino bosses have yet to publicly acknowledge any slowdown in business. (Figures from the visitors authority, one of the only official sources of data, are more than a month old by the time they are released.)

In spite of its impressive track record, Las Vegas has been harder hit than other destinations by the combined effect of the subprime mortgage crisis, rising gas prices and the broader economic slowdown, said Ray Snisky, president of Funjet Vacations, a brand of Mark Travel Corp., one of the nation’s largest operators of travel charters and packaged tours. The company, which is stepping up special offers in vacations it packages for major airlines and big hotel companies such as MGM Mirage, has seen some Las Vegas rates drop by more than 20 percent from a year ago.

“It’s been surprising to us because Las Vegas has always been considered recession-proof,” Snisky said.

It’s a cold blow to Las Vegas, where room rates have hit record highs in recent years and rooms have remained occupied 90 percent or more of the time.

“The challenge for Vegas is how you keep the momentum going at such peak performance,” said Gary Sain, president and chief executive of the Orlando/Orange County Convention and Visitors Bureau in Florida. “You’ve got so many rooms to fill, especially with more than 130,000 rooms and another 40,000 or so rooms coming.”

Well before fears of a recession became national news, the Las Vegas visitors authority’s marketing arm, wary of a coming slowdown, began planning in the fall for a new batch of ads complementing Las Vegas’ long-running “What Happens Here, Stays Here” brand campaign.

They include radio and online ads in Southern California, source of a third of Las Vegas’ tourists. These bits, a first for a town known for glitzy ads on national television and seemingly more suited to car dealerships and furniture stores, mention events of the coming weekend, including performances by comedians such as David Spade and Bill Maher. The tagline: “You might know Vegas but you don’t know Vegas right now.”

The “Vegas Right Now” ad campaign “is like a B-12 shot for the Las Vegas brand,” said Rob O’Keefe, group account director at R&R Partners, which creates the Vegas ads. They are more specific to attractions and events and are aimed at counteracting a slowdown that’s as much psychological as economic. Backup research conducted by R&R, he said, showed that consumers with money to burn have nevertheless tightened their budgets based on negative headlines.

One of the yet-to-debut television spots begins with a man saying, “Americans spend 4,088 hours every year doing nothing ... What if you could trade your nothing for something?” and concludes with name-dropping, including the shopping area at Wynn Las Vegas and Planet Hollywood’s Miracle Mile Shops. The idea, creators said, is to get people to drop whatever they are doing and step onto a plane — or get into a car — for Vegas.

The ads supplement a new feature on the visitors authority’s Web site, which now resembles those of major travel operators by allowing consumers to search for hotels and link to the hotels’ Web sites for special deals.

Major travel Web sites are witnessing a change, too.

At Travelocity.com, average hotel room rates in Las Vegas are slightly higher than a year ago, though hotels are offering many more promotions than they did a year ago to drive bookings, including dining, spa and slot play credits.

To offset rising fuel prices, some travelers are targeting less expensive hotels or booking further in advance for better rates, Senior Editor Genevieve Shaw Brown said. Las Vegas travelers should expect rates to fall over the summer, she said.

Nationwide surveys indicate that travel is down across the United States, with customers taking fewer trips and spending less. But room rates in several markets outside Las Vegas — led by New York, San Francisco and Boston — are soaring.

According to Smith Travel Research, average daily rates in the nation’s top 25 hotel markets rose 6 percent through February of this year from the same month in 2007. Occupancy rates fell 2 percent over that period, however. Smith Travel doesn’t track Las Vegas hotel-casinos.

After three years of double digit increases in room rates, Las Vegas room rates were down 3 percent in January from a year ago, with occupancy down a percentage point, according to the visitors authority, which says it’s premature to draw conclusions from a month’s worth of data.

Orlando, where the growth in room rates is expected to slow this year and next, began its first-ever national television campaign last year. Like Las Vegas, Orlando has had some last-minute convention cancellations.

“We have to have a consistent presence in the marketplace,” Sain said. “We’re laying a foundation for the long term. It’s not about 2008. It’s about the layer of business we will add in 2015 and 2030.”

Las Vegas is facing competition from a proliferation of reasonably-priced, all-inclusive resorts that have cropped up in places such as Mexico and the Caribbean, Sain said.

Las Vegas has now dropped to second place behind Orlando on Travelocity’s list of top destinations. Likewise, Las Vegas — long No. 1 among Funjet customers — has recently slipped to No. 2, behind Mexico, according to Funjet.

The visitors authority is aiming to boost convention business with a contest for meeting planners who submit proposals to hotels and specials for upcoming convention dates.

“More than any other place, Las Vegas has always been the place where people can get away from what’s bothering them,” O’Keefe said. “In this phase of rapid evolution, we’re reminding people that this is a good place to get away from it all.”

Clarification: An April 7 article about the sluggish economy reported that Las Vegas has dropped to second place behind Orlando on Travelocity’s list of top destinations. The ranking was based on an early analysis of summer bookings, and the company notes that the ranking may well change as summer approaches. The article also quoted a Travelocity editor who said room rates are expected to fall in the summer. In fact, that is a normal summer occurrence.

Discussion: 10 comments so far…

By ronGodzilla

4/7/08 at 8:16 a.m.

Suggest removal

I was out on the town on Saturday night around 11 and was quite surprised at how sparce the casinos were. Was downtown around 1 and it was practically a ghost town. What's going on here.
By HelenWeils

4/7/08 at 3:17 p.m.

Suggest removal

From a tourist point of view, Las Vegas has become a VERY expensive city to visit. $15 drinks? Skyhigh prices on everything. Normal people can't afford this. My sisters and their daughters came last August. They were furious at the high prices. The mini bars in the casinos charge you if you look at an item for more than 60 seconds. Get a grip!
By shiny

4/7/08 at 4:19 p.m.

Suggest removal

To follow-up to HelenWeils' comment: just like the real estate market, the costs at strip casinos have bubbled out of control. Now they are all dressed up with nowhere to go as SoCal (the prime source of tourists) heads into a deep recession. Look at the room rates at the Palazzo: that place must be taking a beating because their financing is so fresh. I love the town and have visited many times but enough is enough on the gouging of visitors' pocketbooks.
By vonster

4/7/08 at 5:25 p.m.

Suggest removal

I was born and raised in Las Vegas. I am 41 now and I remember when I was in my mid 20's , I could get a drink for $3 or $4 on the strip with good customer service. I would tip a couple dollars to the bartender and put the remaining change from my 20 dollar bill into the video poker machine. However, most of the time the drinks were free when you gamble. Over the past ten years or so, the drink prices have tripled with horrible customer service. They give you a lecture on what they can comp and what they can't. I actually would not mind paying $22 dollars for a double Manderin vodka with ice if they would at least smile as I put my twenty dollars into their machine. The entire Las Vegas valley is full of bars with tavern licenses that gladly comp your drinks as you fill their machines with your money. If you are a tourist coming to Vegas.....Get off the strip and go into the places locals attend. Believe me the bartenders and service is five star and we all laugh and talk how every bartender on the strip must be miserable.
By mikeg

4/7/08 at 10 p.m.

Suggest removal

It seems that the casinos have become almost too efficient at taking the money of guests. A lot of greed coming down from the top. 6:5 Blackjack, high room rates, fees for everything, everyone has their hand out.

If they're not careful people will lose the hunger to come, and instead visit somewhere with better value and beautiful scenery. I can think of a lot of other places in the lower 48 that have Vegas trumped on that score.
By nicolass

4/8/08 at 7:53 a.m.

Suggest removal

Everyone is right about the high prices,but the visitors authority should try to focus on different things than the las vegas strip. They should try to take tourist out of the strip and put them in the surrounding metro area. Maybe some places like Red Rock, Mt. Charleston, and Lake Mead would attract more visitors and it would feel like there is more to do than just gambling!
By RPJ

4/8/08 at 9:10 a.m.

Suggest removal

Las Vegas tried catering to everyone in the 1990s; it was a failure. Catering to a more discriminating visitor via pricing is just fine. If it means a few less casinos, a few less visitors, and a few less carpetbaggers pouring into our valley every year and using all of our resources and giving little in return, I see no problem with it. Thin the herd!
By shiny

4/8/08 at 10:25 a.m.

Suggest removal

RPJ: the excalibur is catering to a more discriminating customer?? what about circus circus, the sahara, etc., etc. Vegas needs low-rollers for these dumps. But right now, they are stiffing the poor chumps such that they don't come anymore.
By bigbadjon

4/14/08 at 2:55 p.m.

Suggest removal

I'm a "low roller" when it comes to actual gambling, although I do enjoy it, and that is the main reason i frequent (not as much as of late) Vegas, but I don't think I fall into the typical example of the "low roller" crowd.

I'm pretty much middle class, and enjoy the nicer properties as far as accommodations and amenities, but due to the fact that I don't drop $2g+ per trip sort of relegates me to having to go to a less premium casino to do my gambling.

I think the people that are going to Orlando and Mexico as stated in this article are consumers that Las Vegas is DIRECTLY losing.

If the city keeps forcing out the low rollers, it'll fall by the wayside because there are only so many of the upper class to try to woo, who might also come to realize that paying $500+ per room in the middle of the desert might not be the best idea.
By darkhelmet

4/16/08 at 7:22 a.m.

Suggest removal

Las Vegas was great at one time, since doing away with all the old slot machines and replacing them with video games, I have lost all interest. If I wanted to play video games, I would buy an Xbox. The cost of food and drinks is way out of hand. Last year i found myself more interested in walking around town, instead of spending money in front of a Video game.

« Previous Ten Next Ten »

Live chat: Tuesday, noon PST; Chat with Krista Creelman; Problem Gambling Center executive director Krista Creelman will answer questions about gambling addiction from Las Vegas Sun readers from noon to 1 p.m. Tuesday, Nov. ... Submit question