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Chris Jones

Las Vegas Tourism: Fuel at a Threshold?

19 May 2006

LAS VEGAS, Nevada -- Fuel prices are nearing a 'tipping point' that could deter Americans from taking summer vacations, the head of one of the nation's largest travel trade groups said Thursday.

"I am concerned about a number of economic indicators with gasoline prices and the pocket-book impact they're having," said Suzanne Cook, senior vice president of research for the Travel Industry Association of America.

"We've had gasoline prices jump up for the summer travel season before and (we've) weathered it. But there are additional factors to be considered this year," Cook said, citing the power of price increases in fuel to undermine consumer confidence and economic growth.

Cook's comments were delivered at a news conference in Washington, D.C.

Three dollars per gallon, Cook said, is the threshold at which 10 percent of Americans polled by TIA said they'd seriously consider canceling a planned leisure trip. That total climbed to 36 percent when gasoline prices are between $3 and $3.24 per gallon.

Overall, TIA projects Americans will take 325.6 million individual leisure trips of more than 50 miles between June and August.

That's up less than 1 percent from last year's 322.9 million tally.

Separately, the Energy Information Administration, a statistical agency of the U.S. Department of Energy, said last week that summer driving costs will be greater than a year ago.

Still, a 34-cent-per-gallon increase would add only $8.50 to the bill paid by drivers taking a 500-mile trip in a vehicle that averages 20 miles per gallon.

The greatest cost increases, EIA warned, could hit air travelers because jet fuel prices are also on the rise.

So far, the Las Vegas Convention and Visitors Authority has not seen any dips. Visitor volume through March was up 1.8 percent from the first quarter of 2005, while incoming auto traffic was up 3 percent.

But with AAA reporting Los Angeles-area gasoline prices of $3.40 per gallon Thursday, authority President Rossi Ralenkotter said fuel costs have local leaders' rapt attention.

"It's always a concern as gas prices increase," Ralenkotter said. "Where that price elasticity is (at which point people choose not to vacation), we're still in the analysis stage."

Approximately one-third of Las Vegas visitors are from Southern California.

The authority and local hotels closely monitor surveys that pertain to fuel costs and travel, Ralenkotter said.

Because the authority's budget is tied to local visitation, he said, adjustments are made monthly to ensure that expenditures don't grow faster than income dictates.

That restraint is critical since the authority's board on Thursday approved a new budget that anticipates record-high revenue of $265.5 million in fiscal 2007, up 8.7 percent from the current year.

That growth is based upon projected 5.9 percent gains in room taxes and a 17.7 percent surge in convention center business, said Brenda Siddall, the authority's senior finance director

Next year's expenditures will also be larger than ever at a projected $207.7 million.

Approximately 4,700 more rooms are scheduled to open citywide in the first half of 2007. Occupancy rates are projected to rise slightly, but the bulk of the revenue growth would come through hotel taxes collected on increased room rates.

For fiscal 2006, for example, the authority's budget was based on room rates rising by 3.5 percent. They are now estimated to end the fiscal year, which ends June 30, with a 12 percent increase.

Next year's budget calls for a 4.8 percent increase, a plan Siddall termed conservative.

The authority collects a 9 percent room tax from most guest rooms leased in Clark County. Portions of that tax are used to fund its efforts to promote the city's convention and leisure travel industries.

The authority's marketing budget will jump by 5.8 percent to $34.6 million, while advertising expenditures will climb 1 percent to $84.7 million.

Special-event-related expenditures will rise by 46 percent to $15.3 million due to a $4.5 million commitment to host the National Basketball Association's All-Star events in February.

The authority will spend $46 million next year toward the planned $737 million renovation of its Las Vegas Convention Center.

A more optimistic travel outlook came earlier this week from TripAdvisor, a Needham, Mass.-based information service that hosts more than 20 million unique visitors on its Web site each month.

It recently polled more than 2,300 people for its international summer travel survey. It found that 70 percent of respondents said rising fuel costs will not interfere with their travel plans. In addition, 29 percent said they'll spend more money on summer vacations than they did in 2005.

Americans are more concerned with gasoline prices than travelers from other countries, with 27 percent reporting they will take fewer trips because of fuel costs, compared to 12 percent of foreign respondents.

TripAdvisor's survey showed Florida is this year's summer destination of choice, followed by California and Las Vegas. Its leading international destinations include Italy, Canada and France.

"Travelers seem eager to pull out their credit cards this summer, even at the gas pumps," the company's statement said.

Still, TripAdvisor's numbers could favor more-positive projections. Because its Web site caters to travelers, those with no plans to leave home this summer were less likely to participate in its survey.