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 Las Vegas Embodied the Motto "If You Build it, They Will Come",
Recession Forged New Motto "If You Slash Prices, They Will Come"

By Jennifer Robison, Las Vegas Review-JournalMcClatchy-Tribune Regional News

Jan. 31, 2010--Las Vegas needs a new motto.

Once the living, breathing embodiment of "if you build it, they will come," the city's visitation numbers tumbled as consumers stayed home to wait out the recession.

Hotels responded to the declines, though, and in the process, they've forged a new market slogan: "If you slash prices, they will come."

The bargain-basement approach seems to be working. Tourism experts say they see hotel-room bookings rebounding as Super Bowl weekend nears, though room rates remain significantly depressed compared with prerecession levels.

Rooms booked for Super Bowl weekend through travel Web site Vegas.com averaged $98.44 a night as of Thursday, said Dan Hippler, vice president of marketing. That's down from around $102 on the same weekend a year ago and $131 in 2008.

But with rates dropping so noticeably, consumers at last appear to like the prices they're seeing, and they're finally shelling out the discretionary income for a trip to Las Vegas, Hippler said. Bookings through Vegas.com are up 11 percent year-over-year for Super Bowl weekend, while the booking window -- the length of advance reservation time ahead of trip dates -- jumped 5 percent compared with a year ago.

"That (advance bookings) is one of the best indicators in terms of seeing improvement (in visitation)," Hippler said. "During recessions, you see people really waiting for those last-second deals. More advance bookings show that consumers are a little more confident in prebooking rooms, rather than waiting for the price to just drop through the floor."

Michael Zaletel, chief executive officer of travel Web site i4vegas.com, said he also sees stabilized room rates and improved bookings through his company.

"Demand is up overall, and that's driven by price," Zaletel said. "It's fundamental economics: Even when people are struggling financially, they can't resist a deal."

But bigger booking volumes don't mean hotels can dramatically raise rates in the near term, observers said, nor will improved reservation counts translate into higher rates later in the quarter or the year.

Weekends in February and March typically rank as the priciest times of the year to visit Las Vegas, but room rates at some hotels are half what they were a year ago, Zaletel said.

And that average daily Vegas.com room rate for Super Bowl weekend is down roughly 5 percent year over year, Hippler said, though the site compiled those numbers more than a week before the big game, so comparisons might change with a surge in late bookings or an increase in steep discounts to fill hotel rooms.

Rates at some hotels might rise, while other properties could require cuts to increase business. Hotels also muddy average daily rates when they give big percentages of their rooms as comps to regular customers and high rollers, and those giveaways are popular right now, Zaletel said. The freebies can absorb large shares of rooms, creating an artificially smaller supply of rooms commanding higher rates on the open market.

What's more, the city is rife with bargains that simply don't appear in official averages, so discounts in the broader market are already higher than room rates suggest. Take the complimentary bottle of wine and $40 in casino play that accompany a $179-a-night deal at Planet Hollywood Resort. The Flamingo is offering $5 off its buffet and 2-for-1 admissions on some attractions, and guests staying at Imperial Palace will receive 15 percent off at the spa.

Michael Leven, president and chief operating officer of the Las Vegas Sands Corp., told Reuters on Thursday that he expects his company, which operates The Venetian and Palazzo, to remain "much more price-oriented" than it was two years ago. Casino operators have little leverage in terms of pricing power, he said, and he doesn't expect room rates to return to prerecession levels before early 2011.

Industry insiders agree it's too early for hotels to even think about testing consumers with fewer deals, despite improved bookings.

"There's a lot of momentum, because the reputation is that Las Vegas is affordable again," Zaletel said. "You don't want to destroy that momentum. If hotels raise rates quickly, they will wipe out that momentum. People will turn away, and it will be hard to get them back again."

Bill Thompson, a gaming professor at the University of Nevada, Las Vegas, agreed.

Marketwide hotel occupancy has dwindled from the mid-90 percent range before the recession to the mid-80s now, Thompson said. Hotels should build occupancy levels back to 92 percent before they weigh rate hikes.

"It's a slow recovery. We're not about to gouge the consumer," he said. "I'm happy rates are still low, and that we're not playing that terrible game we played in the (early) millennium, where we charged $300 and $400 a night for an ordinary room."

But Hippler said he already sees small signs that room rates might inch up, at least in the first quarter. The year-over-year drop in average daily room rates for Super Bowl weekend dwindled from 7 percent on Jan. 22 to around 5 percent by Thursday, a hint that demand has allowed some properties to push up rates a little as the weekend nears.

Plus, the first quarter will bring a series of major events that could bolster visitation figures and stabilize room rates even more. Chinese New Year falls on the same weekend as Valentine's Day and Presidents Day, and NASCAR Weekend runs Feb. 26-28, so February is shaping up as a strong month for tourism. Throw in three weeks of March Madness surrounding the National Collegiate Athletic Association's college basketball tournament and big conventions such as February's Men's Apparel Guild in California show, and the first quarter could see average daily room rates in Las Vegas hit or slightly exceed $100 for the first time since January 2009, Hippler said.

Beyond the first quarter, Zaletel said he doesn't expect 2010 to represent a "turnaround year" for room rates. Average charges should drop below 2009 levels once the whole year's data are tallied, he predicted.

And that's not necessarily a bad thing, as he said lower rates should generate "compounding attention."

"The reputation that Vegas is a bargain again will drive more consumers and businesses to consider Vegas," Zaletel said.

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To see more of the Las Vegas Review-Journal, or to subscribe to the newspaper, go to http://www.lvrj.com.

Copyright (c) 2010, Las Vegas Review-Journal

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