News for the Hospitality Executive
|By Rod Smith, Las Vegas Review-Journal
Knight Ridder/Tribune Business News
Mar. 3, 2004 - Despite slack convention and events business in late March, first-quarter room rates on the Strip are climbing at double-digit rates to record peaks, analysts said Tuesday.
"This demonstrates the strength of the economy in both leisure and business travel. It's very promising for 2004 and into 2005 for the Las Vegas Valley and the overall tourism industry," said Brian Gordon, spokesman for Applied Analysis, a Las Vegas-based financial consulting firm.
The increased demand is based on the economic recovery, which is driving leisure travel, shifting shares of convention business from other cities and allowing easy comparisons with a year earlier, when the prospects of war in the Middle East threw a pall over leisure travel, analysts agreed, said Joe Greff, gaming analyst at Fulcrum Global Partners, an independent Wall Street investment research firm.
For the first quarter of 2004, rooms booked three weeks in advance on the Strip increased to $195, up 25 percent from the first quarter a year earlier, data released by Fulcrum showed.
Among major operators, average rates at Mandalay Resort Group increased 30 percent to $199, at Caesars Entertainment 28 percent to $193, at Harrah's Entertainment 22 percent to $175 and at MGM Mirage 19 percent to $201.
At individual hotel-casinos, Caesars Palace ($355) led with rate increases at 67 percent, followed by New York-New York (up 37 percent at $184), Tropicana (up 33 percent at $101), Excalibur (up 32 percent at $120) and Harrah's Las Vegas (up 31 percent at $156).
Robert Stewart, spokesman for Caesars Entertainment, which operates Caesars Palace, said the increases at the company's Strip landmark are a continuation of trends started in 2003 when it had room-rate increases in eight of 12 months.
"We would attribute this strength to the new attractions we've been opening at Caesars Palace, including the Celine Dion show last year and now the Elton John show. The success of the shows at the Colosseum has created strong demand for rooms at Caesars Palace," he said.
Deutsche Bank analyst Marc Falcone said rates for most Strip properties continued strong through the end of March, attributing the end of quarter increases to the return of Elton John to Caesars Palace after a brief hiatus, combined with March Madness, as the National Collegiate Athletic Association's basketball tournament is known.
However, analysts said for most major operators, the reasons for the surging business are more complex.
"Overall, you have a mix of factors driving rates. A very strong booking convention business is one which also means there are not many rooms left over for free and independent travelers," said Eric Hausler, gaming analyst for Susquehanna Financial Group.
"Plus, every measure of economic activity is moving in the right direction on top of very easy comparisons (with last year) because of the Iraq war," he said.
Hausler said room rate comparisons with last year will be more difficult in the second half of 2004, but Susquehanna Financial is still projecting a blended increase of 8 percent to 10 percent for all of 2004.
"You'll have a very strong rate year in Las Vegas, overall," he said.
And Greff said those increases, while slacking off, will still be strong relative to historic trends in Las Vegas.
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(c) 2004, Las Vegas Review-Journal. Distributed by Knight Ridder/Tribune Business News. MBG, CZR, HET, MGG,