Monday, March 8, 2010 | 2 a.m.
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During MGM Mirage’s fourth-quarter earnings conference call last month, the company’s executives attempted to address questions that have dogged them since the recession began.
With tourism down, would CityCenter steal business from the company’s other Strip hotels rather than attract additional customers to Las Vegas? Would Aria have to use extremely low rates to keep rooms occupied?
Three months after CityCenter’s debut, however, the answers remain unclear, in part because of the complexities of room rate data.
MGM Mirage executives say rates at Aria are neck and neck with Bellagio, the company’s premier luxury property at the time of CityCenter’s development.
Although CityCenter is MGM Mirage’s new crown jewel and a unique attraction, some Las Vegas visitors still favor the Bellagio next door.
Although worldwide media coverage has spread the CityCenter name far and wide, its flagship hotel, Aria, doesn’t have the same familiar ring as Bellagio, which opened in 1998.
That could be the reason why an episode of the CBS show “Two and a Half Men” two weeks ago about a trip to Las Vegas had the lead character stay at the Bellagio, not Aria.
And although Aria is newer and touted as the most luxurious hotel on the Strip, its room rates have turned out to be surprisingly low.
Aria’s average daily rate in January was $202.91 and Bellagio’s was $201.27, the company reported after its earnings release. March and April forecasts are similar, with Aria’s rates in line with or slightly above Bellagio’s, executives said. In March, Aria is trending toward rates in the $170s midweek and $230s on weekends.
But MGM Mirage sometimes sells blocks of rooms to third parties that can further discount rates. Other customers may be paying full retail price for the room by calling the company directly.
Recent deals advertised by Southwest Airlines Vacations and American Airlines Vacations have packaged airfare with discounted stays at Aria that yield daily rates approaching $100 when “free” days are factored into the total.
Package deals and online hotel discounts are among the many ways hotels have unloaded rooms and boosted occupancy without sacrificing brand cachet that could suffer if customers were to perceive deluxe hotels with $100 rooms as “cheap.” MGM Mirage representatives caution that online rates aren’t a good gauge because they only represent a fraction of rooms sold. The company isn’t slashing rates above the competition to boost visitor traffic at CityCenter, executives said.
“We’re not buying the business. We’re earning it,” MGM Mirage CEO Jim Murren said during the call.
In fact, MGM Mirage boosted room rates at its Las Vegas megaresorts in the fourth quarter from the third quarter. Occupancy rates fell, however.
Bellagio’s average fourth-quarter rate was $206. Its third-quarter rate was $195. The occupancy rate was 92 percent in the fourth quarter. It had been 96 percent in the prior quarter.
Bellagio has been boosted by CityCenter’s debut, Murren said. More than 10,000 people are coming and going from the Bellagio stop on the tram that shuttles customers to that property, CityCenter and Monte Carlo, he said.
“The Bellagio does not buy business ... it doesn’t have to,” Murren said.
Mandalay Bay, meanwhile, which has been harder hit by the recession because it relies more on convention business, reported an average daily rate of $153 in the fourth quarter compared with $147 in the third quarter. Occupancy fell to 86 percent from 94 percent.
But the bottom line is hotels need leverage to raise room rates, and much of that can come from booking convention groups.
MGM Mirage reports that it is seeing more conventions being booked for this year and next, so as long as those events are held as planned, they will help fill hotels and allow the company to charge higher prices to last-minute visitors for the remaining rooms.
The company is booking convention groups — which generally get group discounts on rooms — at higher rates than tourists would pay for the same rooms. Conventions in the second half of the year are paying 2004 and 2005 prices for rooms, not far off from 2007’s peak prices, Murren said. Convention groups are expected to spend lots of money elsewhere during their stays — on expensive meals, shows and other amenities.
The upshot is MGM Mirage expects it will be able to charge more for its rooms in the coming year. But whether that means Aria will wind up being a lot more expensive than Bellagio remains to be seen.