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New rooms on the Strip, background, have added to tourism industry woes related to cuts in flights and increased airfares.
Friday, Aug. 20, 2010 | 2 a.m.
Flights cut, fares up
Airlines have been cutting capacity to Las Vegas, which allows them to raise fares. The combination of lower costs and more revenue means higher profits for airlines, but fewer people flying to Las Vegas. The good news for Southern Nevada: The trend of cutting flights has slowed considerably.Sun archives
- Repeal of Washington airport ‘perimeter rule’ could lead to new Las Vegas flights (7-16-2010)
- US Airways slashes McCarran flights (10-28-2009)
- Big hit in convention traffic cuts visitor volume again in August (10-16-2009)
- Air traffic will rebound soon but slowly, analysis finds (10-12-2009)
- Holding pattern: Expert sees slow recovery for McCarran (10-9-2009)
- US Airways to cut more Las Vegas flights (4-30-2008)
Beyond the Sun
An airline industry strategy to raise profits — by offering fewer flights — may make sense for them, but may be coming at the expense of the Las Vegas tourism industry.
For the airlines, offering fewer flights ensures that they can cut expenses and increase fares.
And indeed, airline capacity cuts — in Las Vegas and nationwide — have resulted in higher fares and profitable airlines.
The downside for Las Vegas is obvious: The higher fares may scare off travel to Southern Nevada, or cause tourists to spend less money once they get here.
Dan Hippler, the vice president of marketing for VEGAS.com, a sister company of the Las Vegas Sun, said for June, July and August, fares on flights to Las Vegas have been 7 percent higher than they were in the same months in 2009. USA Today, quoting Orbitz.com executives, recently reported that airfares were up 10 percent for domestic travel and 17 percent for international travel in July compared with the previous year.
Most major airlines are reporting increased profits with the higher ticket prices, coupled with add-on charges. Southwest Airlines, the busiest air carrier at McCarran International Airport, reported a revenue increase of more than 20 percent in the second quarter, compared with the same quarter a year earlier; Delta Air Lines, the No. 2 carrier at McCarran, saw revenue climb 17 percent for the quarter.
US Airways, whose CEO, Doug Parker, is one of the leading industry proponents of capacity reduction, reported earnings more than quadrupled for the quarter.
The decreasing airline capacity coupled with the increasing number of hotel rooms in Southern Nevada has prompted a New York-based gaming analyst to warn that recovery from the recession “is going to be slow and prolonged.”
Andrew Zarnett, a research analyst with Deutsche Bank, said excess rooms, higher unemployment and expected increases in taxes, as well as rising airfares don’t bode well for Las Vegas.
“Given that approximately 50 percent of Las Vegas revenues come from visitors who arrive by air, we believe that the higher cost of flying will be yet another impediment to the Las Vegas recovery,” Zarnett wrote in a note to investors. “We believe that higher airfares will have a twofold impact: Higher airfares will make it more expensive for consumers to travel to Las Vegas, resulting in lower passenger volumes, and consumers choosing to travel to Las Vegas will spend less at the casino floor, given the higher cost of flying will reduce their discretionary budgets.”
It’s no secret that capacity is down at McCarran.
In July, the number of arriving airline seats was down 3.5 percent from 12 months earlier.
A more dramatic measure comes from a three-year view: There are 17.5 percent fewer flights and 15.5 percent fewer seats arriving now compared with July 2007, when the economy was booming.
Clark County Aviation Director Randall Walker says the slowing of the capacity reduction is reason for some optimism. He’s also encouraged by the record load factors — the percentage of paying customers on flights — airlines have been reporting.
“Airfares are up across the country and flights to Las Vegas are no exception,” Walker said. “For the short term, that’s not good for stimulating demand, but on the other hand, it’s important to have airlines that are financially healthy.”
Walker said he doesn’t expect capacity at McCarran to grow dramatically for at least two years, and that it will take a long time, if ever, for capacity to reach 2007 levels, especially because some airlines have merged, further shrinking capacity.
(Northwest Airlines’ merger with Delta, announced in 2008 and completed this year, had little effect on the Las Vegas market, and Walker expects the proposed merger between Continental and United will produce a similar minor blip on the airport’s radar.)
Cathy Tull, Las Vegas Convention and Visitors Authority senior vice president of marketing, isn’t sold on Zarnett’s assessment of Las Vegas’ future. She reasons that just because airfares have climbed nationally doesn’t mean they’ll be up by the same levels on flights to Las Vegas. The reason: This market is dominated by low-cost carriers.
Southwest Airlines, whose “Bags fly free” ad campaign bolsters its message that it doesn’t charge as many ancillary fees as its rivals, has a 44.5 percent share of the seats coming into Southern Nevada. Las Vegas-based Allegiant Air, another big discounter — but one that capitalizes on ancillary revenue — owns another 5.5 percent share.
McCarran is populated by other low-fare carriers such as WestJet, JetBlue, Spirit and AirTran. Legacy carriers, conscious of their low-cost rivals, often cut fares in Las Vegas to compete.
McCarran ranks 11th of 50 airports in an airfare comparison, Tull said.
Because airline capacity has fallen so dramatically, Tull said, the convention authority has spent more time and money marketing “drive” markets, mainly Southern California and Arizona.
Since 2005, the percentage of Las Vegas tourists who arrive by car has inched up while the number arriving by plane has gone down. In 2005, 47 percent of tourists arrived in Las Vegas by plane and 53 percent by car or bus. By 2009, 42 percent came by plane and 58 percent by car or bus.
“As the recession continued, people realized that they could cut their costs by putting four people in a car and driving instead of flying,” Tull said. “We put a lot more resources into Southern California and Arizona. And, that’s one of the reasons we spend so much time talking about transportation developments in California.”
In October, the authority is expected to shift some of its advertising resources to Phoenix to capitalize on the opening of the Mike O’Callaghan-Pat Tillman Memorial Bridge over the Colorado River at Hoover Dam.
“We’re going to tell them that the trip just got shorter with the opening of the bridge,” Tull said. “We’re planning a print and radio campaign to explain that Las Vegas is a little closer to Arizona with the bridge.”
CORRECTION: The percentage change in the number of flights and seats coming into the Las Vegas were incorrectly reported in the initial version of this story. There were 17.5 percent fewer flights and 15.5 percent fewer seats coming into the market in July 2010 than in July 2007. A change in how the number of flights and seats were posted by McCarran International Airport from 2007 to 2010 resulted in the error. | (August 20, 2010)
Once again I say to blazes with the enslavement we are under with the airlines, Get Maglev NOW!!!
I had been planning on going to Las Vegas in late Sept. or during October, but the R/T airfares from the Washington, DC airports to LV are have gotten a bit high in cost...like $100 more R/T ($320.00). Not that the extra $100 would break me, but it's just the principle. Even the discount airlines Southwest & AirTran from BWI/IAD/DCA have high fares (no sales from this region to LV). They're no cheaper than the other airlines operating from the East Coast. One of them advertises "Bags Fly Free" but it's advertised airfares from here are definitely not discounted (I mean, $320.00 R/T is either the same or higher than the other airlines). Oh well, I was already out to LV for a week during Spring 2010 just $230.00 R/T Air. I guess $320.00 R/T Flight is not that big of a deal to make, considering the great room deals at the Vegas Hotels, but I could be just as happy taking my money by driving up to Atlantic City, NJ to spend. Guess I got spoiled paying a mere $147 to $220 R/T to Vegas.
This article hit the nail on the head. It is a problem that I am afraid LV doesn't have an answer for. Cheap rooms and comps are just part of the Vegas experience, because people have to get there first. Wow.
Overseas flights are only tolerable if you fly directly to the West Coast and then jump on a hopper flight into Las Vegas. The long 5'30 flights from the East Coast into Las Vegas are murder. Too tight seating, almost always completely full flights and minimal food and beverage service. I would expect better than that on a 5+ hour flight. Obviously, US carriers are used to treat passengers like inevitable garbage, not knowing that it's exactly the passengers that bring the money to the airline. Very sad situation.
From Switzerland
Another nail in the coffin is the increased taxes for flights out of the UK into USA, some seats command over $1000 in taxes alone.
It would be something if the airlines would work out better flight and hotel deals for passengers, staying a few days, booking into a hotel and combining this with the airfare. I am sure, this, togehter with interesting funbook specials would attract the tourists. Charter flights also very welcome.
From Switzerland
I've cut back my trips to Vegas as well, strictly on principal. Roundtrip from NJ on Continental has gone up $140 in the last 5 months. Add to that increased luggage fees, resort fees, the exorbitant prices for food and drink, and the high cab fares, and I can get drunk and stupid in Hawaii for less.
The statistic that floored me was the 2007 flight volume comparison, with 2010 being down 58% from then.
However, increased demand for seats will lead to more flights.
It is true also that often a small extra charge (like airline bag fee or hotel "resort" fee) can persuade a tourist not to bother coming, even though the small extra cost is really not significant.
Allegiant Air is going to start flights - 2X a week Sunday & Thursday - non-stop to Vegas from our local airport. There is a introductory fare of $44.99 if you purchase before Sept. 8. However, in all the hoopla in the newspaper this morning, they had that little informative "box" next to the article on extra fees. Flat out there is the $10.99 surcharge for security, $14.99 fee for each segment of the flight (2x based on a round trip ticket), and of course the infamous baggage fees. All these fees are based on "per segment" and "per person". So for this introductory fare, with all those add-ons, the fare is no way going to be $44.99! When this introductory period ends, it states that the regular fare will be $90 one way, but with all the fees, no way is it going to be $90.
Basically, the casinos made out when the airlines slashed fares to compete and they lost money on each flight. Now that the airlines have wised up and cut flights to run more efficiently, and raised fares to cover costs, the casinos can't freeload anymore on the backs of another industry.
Now the weak operators in the casino industry have to work at making money. It isn't being dumped by the truckload (or airplane load) at their feet anymore. As someone else said, maybe the casinos should work with the airlines to promote packages to Las Vegas
Too crowded, too uncomfortable, too inconvenient, lousy service, bad attitudes, no or crappy food and too many charges for too many things; airlines are charging like hospitals and serving as if they have a captive market.
Chuck em. Fortunate enough not to be forced to fly, we probably never will again. Now we see the USA in our GMC, old but newer than most airplanes, and do as we please, when we please. I don't care if the airlines go out of business for their sake, I do ultimately as it hurts the folks and our economy. Old enough to remember the good days of flying with reasonable prices, good service and comfortable environment, the current mess makes us angry.
The process of air travel is excruciating, from the time you leave your house until you get to your destination, they can keep it.
FYI:
Despite claims by the TSA that electronic body scan images "cannot be stored or recorded," some federal police agencies are in fact saving tens of thousands of images.
The body scanners, increasingly found in airports, courthouses and other places where security is high, use an assortment of technologies. These include millimeter wave scanners in which the subject is harmlessly pelted with extremely high frequency radio waves which reflect a picture back to the device -- and backscatter X-ray -- which measures low-powered reflective X-rays to produce clearer body shots, shots that can reveal alarmingly precise anatomical detail.
The TSA maintains that body scanning is "constitutional", while the machines are built to "allow exporting of image data in real time" and provide networked "high-speed transfer of image data."
On another note:
Government officials have removed or fired at least 23 TSA agents since 2007 for stealing items at airport security checkpoints or from checked baggage, while thousands of airline passengers have filed claims reporting theft of personal items.
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talking of body scanners i asked the girl at the airport if it was safe her answer" i stand near it all day" well she clearly has no brains, remember the forces washed in DDT only to find it was dangerous..
I think these scanners could be dangerous to health
Isn't it great how the 'fees' start before you've even boarded the plane now with the luggage fees? Then the hotels bilk you with the daily resort fees. Nice way to punish tourists. Great for repeat business.
World wide demand for oil has gone up dramatically with China and India replacing bicycles and motorscooters with cars getting far less gas milage.Cheap easy getting oil extraction is long gone,witness Gulf wells going 5,000 ft. to the bottom of the ocean then 5,000 ft. more below the ocean floor.The huge oil fields that exist are in major decline,and soon many of the exporting countries will be saving what's left for themselfs.Pray that a war with Iran dosen't happen,10 dollars a gallon for your gas will be the norm.As for airlines,they will once again be a rich man's way of gettin around.Time to rethink what the reality could be around here.Paradigm shifts happen wether we like it or not.Might we even try to think of what we would do if these probably soon to be enevetible event's happen?
10 dollars a gallon is nothing try living in europe it is around 10 dollars a gallon
air travel costs and fuel costs is all tax
Unfortunately there are two mistakes in terms of the numbers presented in this story. It originally reported that there are 59 percent fewer flights and 58 percent fewer seats arriving now compared with July 2007.
Those figures are incorrect. In fact, weekly flights from McCarran fell from 3,994 in July 2007 to 3,295 this July, a decrease of 17.5 percent. Seat counts fell from 552,463 per week to 467,044, a decline of 15.4 percent.
The historic numbers are posted at www.mccarran.com.
I've contacted Rick Velotta about this and he's in the process of amending the incorrect figures.
Chris Jones,
Public Information Administrator
McCarran International Airport
Just checked Continental,Newark/Las,mid week october came to $319 RT including taxes and fees.
Not great,but not horrible either. Trick is to book in advance and be flexible with dates.
Newark to LAS at $319 RT.
Let assume 2800 miles each way or 5600 miles RT. That is about 5.7 cents per mile. That is an enormous value. Service stinks, but air travel is an amazing bargain.
At least when someone farts in my car, I can roll down the windows. Sure the lower costs and hassles with driving make it superior to airline travel, as well as the quirky stops along the way, points of interest, and tourist traps that seem like a trip to the 99 compared to the SkyMall catalog. But not having to smell strangers is the biggest benefit to me.
The Hotels have no choice but to cut their rates to make up for the higher airfares.
Here's a suggestion: Show a rouundtrip airline ticket upon hotel check-in, and get your "bundled" resort amenities FREE!
The airfares from the east coast have gone 200 dollars but there is not much that you can do about it. All of the airlines have done it. Las Vegas is worth it though.
A recent survey found that Los Angeles (all airports) to Las Vegas was the busiest air city pair under 300 miles in the entire country.
Until Vegas is better integrated with Southern California with a modern train it will always be subject to extreme fluctuations.
"Walker said he doesn't expect capacity at McCarran to grow dramatically for at least two years, and that it will take a long time, if ever, for capacity to reach 2007 levels..."
Way to go, Randy! How much is the new Terminal 3? $2 Billion and yet, about how many gates are unused and closed to the public in the existing facility? About 15 gates? So let's spend a couple of billion dollars on 17 new gates for which there is little demand and already plenty of excess capacity!
When does the County budget cuts take effect on Randy Walker's job, especially as the airline executives were telling him not to build the new Terminal. Time for this clown to get out of LAS, as he blows money on stupid projects, including the $12 million parking fee system to keep people from "gaming the system" (his words) because someone found some unused time on a parking meter while looking for a parking spot!