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Benjamin Spillman
 

Travel group predicts fewer trips

31 October 2008

LAS VEGAS, Nevada -- The recession that's battering the Las Vegas hospitality economy is likely to continue through 2009 and could worsen, according to a national travel forecast.

The Travel Industry Association, a trade group for the nation's $740 billion hospitality industry, predicts leisure travel will fall 1.3 percent nationally in 2009 and business travel will decline 2.7 percent.

The impact on Las Vegas, however, could be deeper than the forecast declines suggest.

That's because travelers surveyed by the group say they intend to cut spending on food, beverages, entertainment and souvenirs, and shorten lengths of stay, moves that would further reduce the amount of money visitors leave behind in Las Vegas.

"Even if intentions (to travel) remain robust, people are accommodating (economic uncertainty) by making changes in plans," said researcher Peter Yesawich, who helped conduct the survey.

Yesawich said travelers who might wish to take a five-night vacation are more likely to cut back to four nights in an effort to save money.

"In that example, you are going to see a 20 percent decline in occupied room nights," Yesawich said.

The projections foresaw steeper cuts among business than leisure travel.

Since 2000, Yesawich said business travelers have cut back on leisure extensions to their trips by 50 percent. He expects the recession will exacerbate that trend.

"Business travel has become very serious," he said. "And in many respects, very frugal."

The projections were based on a survey of households of people who make overnight trips more than 50 miles from home at least once a year. It was national and did not include Las Vegas-specific data.

But elements of national trends discussed Thursday in a conference call on the report are showing up on the bottom lines of Las Vegas companies.

MGM Mirage, the largest private employer in Nevada with about 64,000 workers, discounted rooms in its Strip properties 9 percent in the third quarter and still posted a 2 percent occupancy decline.

The pullback reverberated through other departments in the resort company.

Casino revenue companywide fell 8 percent, mostly due to a 13 percent decline in table game revenue on the Strip, the company reported.

Food and beverage revenue fell 3 percent and entertainment revenue was down 4 percent.

Ironically, the diversification of resorts in recent years beyond gambling to upscale shopping and dining has made Las Vegas more vulnerable to economic trends that hamper discretionary spending.

"It is a fair assumption that as our appeal has become more broad-based, we could be a bit more exposed," said Scott Voller, vice president of marketing for Mandalay Bay.

But diversification has also come with more sophisticated marketing strategies, which gives operators more levers to pull when it comes to identifying and attracting more customers.

In addition to lowering room rates, operators can review what core customers spent money on in good times and adjust restaurant menus and other offerings in ways they think will inspire a return visit.

"There are a lot of smart operators who have the flexibility to get through this," Voller said.