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Benjamin Spillman

September brings fewer visitors to Las Vegas

13 November 2008

LAS VEGAS, Nevada -- The number of people who visited Las Vegas in September fell 10.1 percent to 2.9 million, a jarring drop for a community that's already in the throes of a deepening recession.

The decline occurred despite a 21 percent drop in the average daily room rate to $112 and falling oil prices, conditions that typically make Las Vegas vacations more appealing.

It suggests fallout from the real estate market crash and subsequent credit crisis is finally coming to rest on the shoulders of a community that was addicted as any to the easy cash of bygone boom times.

Visitation, convention attendance, airline and auto traffic and spending all declined for the month.

"It was just unsustainable," said Brian Gordon, a principal at the Las Vegas economics research firm Applied Analysis. "People were spending more than they were making."

Gordon said the sudden derailment of the consumer gravy train caught much of Las Vegas off guard, and is already resulting in discussions about how to create a less volatile local economy.

"To structure business operations around that type of environment, it creates a difficult situation as we come off of those highs," Gordon said.

The September numbers were included in a monthly visitation report from the Las Vegas Convention and Visitors Authority that is considered one of the best indicators of economic activity in Southern Nevada.

In addition to a decline in visitation and room rates, the occupancy rate in the region's 137,690 hotel rooms fell 7 percentage points to 84.3 percent.

The number of arriving and departing passengers at McCarran International Airport fell 13.2 percent to 3.4 million.

Average daily auto traffic on Interstate 15 at the California border was down 8.8 percent to 35,194 vehicles.

Visitation to Laughlin and Mesquite fell 13.3 percent and 38.5 percent, respectively.

"Unfortunately it is across the board," said Terry Jicinsky, senior vice president of marketing for the Las Vegas Convention and Visitors Authority. "People are making their decisions based on how they feel about the economy."

Jicinsky said it is the largest double-digit percentage decrease in visitation since September 2001, when terrorist attacks in New York and Washington, D.C., brought travel to a halt.

MGM Mirage spokesman Alan Feldman said the numbers weren't a total surprise because industry leaders knew at the time September was a brutal month.

But the results, and subsequent turbulence that's shaken major companies like Las Vegas Sands and General Growth Properties to their cores, are still disturbing.

"We had already seen weakening in the marketplace, but September was a pivotal month for the economy and this community," Feldman said. "I think we are seeing historic changes in the market."

MGM Mirage, with 10 resorts and 40,000 hotel rooms on the Strip, outperformed the overall Las Vegas resort industry in September, Feldman said.

Bellagio, the company's premier resort, actually increased net revenue 3 percent in the third quarter.

But even MGM Mirage's numbers weakened as the quarter dragged into September.

Table game volume was down 13 percent in MGM Mirage's Strip resorts. And the company lowered its average daily room rates 8.2 percent to $135 to keep guests coming.

The depth and breadth of the recession are likely to have an impact on Las Vegas beyond the short-term fallout, Feldman said.

Cutbacks have already prompted Boyd Gaming Corp. and Las Vegas Sands Corp. to halt major projects on the Strip and MGM delayed development of a proposed MGM Grand in Atlantic City as well as a proposed joint-venture project on the Strip at Sahara Avenue.

Although long-term projects such as MGM's CityCenter remains on track, Feldman says it may be many years before lenders open their vaults for another major resort project.

"I've heard some say there may not be another building built in Las Vegas for another 10 years," he said.

Skittish lenders could throw cold water on the "build it and they will come" approach to boosting the Las Vegas economy.

Feldman says if that's the case, Nevadans may want to consider expanding the state's tax revenue sources beyond the gambling industry.

"We are going to learn as a state what a bad idea it is to be so overly reliant as a state on gaming revenues," he said. "When that pipeline isn't being filled and, in fact, revenues are falling off we are going to feel it in a really, really serious way."