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Best of Liz Benston

Gaming Guru

Liz Benston

Tourism juggernaut shows signs of slowing down

9 April 2008

LAS VEGAS, Nevada -- For all the highly technical and nuanced ways to identify economic slowdowns, in Las Vegas there's one simple way to take measure: room rates.

So it doesn't take a Harvard MBA to figure out that, at a time of year when business conventioneers and tourists head to Vegas for near-perfect weather, the city's economic engine isn't firing on all eight cylinders.

The proof: Rooms are going for $75 at Harrah's, $69 at Bally's and just $199 at Wynn Las Vegas and the Venetian.

Even one of the Strip's most exclusive hotels, the Four Seasons, is offering a $50 credit on hotel services as well as rooms for less than $400 a night.

Then there's the blitz of promotions, from two-for-one meal and show offers to free cocktails and concierge services. Even the just-opened Palazzo is offering a $20 food credit and a $25 gambling credit.

There are no hard figures to show Las Vegas is in a tourism slump. Though airline and car traffic is down, figures from the Las Vegas Convention and Visitors Authority largely show flattening growth in key indicators such as room rates and visitor traffic, and most casino bosses have yet to publicly acknowledge any slowdown in business. (Figures from the visitors authority, one of the only official sources of data, are more than a month old by the time they are released.)

In spite of its impressive track record, Las Vegas has been harder hit than other destinations by the combined effect of the subprime mortgage crisis, rising gas prices and the broader economic slowdown, said Ray Snisky, president of Funjet Vacations, a brand of Mark Travel Corp., one of the nation's largest operators of travel charters and packaged tours. The company, which is stepping up special offers in vacations it packages for major airlines and big hotel companies such as MGM Mirage, has seen some Las Vegas rates drop by more than 20 percent from a year ago.

"It's been surprising to us because Las Vegas has always been considered recession-proof," Snisky said.

It's a cold blow to Las Vegas, where room rates have hit record highs in recent years and rooms have remained occupied 90 percent or more of the time.

"The challenge for Vegas is how you keep the momentum going at such peak performance," said Gary Sain, president and chief executive of the Orlando/Orange County Convention and Visitors Bureau in Florida. "You've got so many rooms to fill, especially with more than 130,000 rooms and another 40,000 or so rooms coming."

Well before fears of a recession became national news, the Las Vegas visitors authority's marketing arm, wary of a coming slowdown, began planning in the fall for a new batch of ads complementing Las Vegas' long-running "What Happens Here, Stays Here" brand campaign.

They include radio and online ads in Southern California, source of a third of Las Vegas' tourists. These bits, a first for a town known for glitzy ads on national television and seemingly more suited to car dealerships and furniture stores, mention events of the coming weekend, including performances by comedians such as David Spade and Bill Maher. The tagline: "You might know Vegas but you don't know Vegas right now."

The "Vegas Right Now" ad campaign "is like a B-12 shot for the Las Vegas brand," said Rob O'Keefe, group account director at R&R Partners, which creates the Vegas ads. They are more specific to attractions and events and are aimed at counteracting a slowdown that's as much psychological as economic. Backup research conducted by R&R, he said, showed that consumers with money to burn have nevertheless tightened their budgets based on negative headlines.

One of the yet-to-debut television spots begins with a man saying, "Americans spend 4,088 hours every year doing nothing ... What if you could trade your nothing for something?" and concludes with name-dropping, including the shopping area at Wynn Las Vegas and Planet Hollywood's Miracle Mile Shops. The idea, creators said, is to get people to drop whatever they are doing and step onto a plane — or get into a car — for Vegas.

The ads supplement a new feature on the visitors authority's Web site, which now resembles those of major travel operators by allowing consumers to search for hotels and link to the hotels' Web sites for special deals.

Major travel Web sites are witnessing a change, too.

At, average hotel room rates in Las Vegas are slightly higher than a year ago, though hotels are offering many more promotions than they did a year ago to drive bookings, including dining, spa and slot play credits.

To offset rising fuel prices, some travelers are targeting less expensive hotels or booking further in advance for better rates, Senior Editor Genevieve Shaw Brown said. Las Vegas travelers should expect rates to fall over the summer, she said.

Nationwide surveys indicate that travel is down across the United States, with customers taking fewer trips and spending less. But room rates in several markets outside Las Vegas — led by New York, San Francisco and Boston — are soaring.

According to Smith Travel Research, average daily rates in the nation's top 25 hotel markets rose 6 percent through February of this year from the same month in 2007. Occupancy rates fell 2 percent over that period, however. Smith Travel doesn't track Las Vegas hotel-casinos.

After three years of double digit increases in room rates, Las Vegas room rates were down 3 percent in January from a year ago, with occupancy down a percentage point, according to the visitors authority, which says it's premature to draw conclusions from a month's worth of data.

Orlando, where the growth in room rates is expected to slow this year and next, began its first-ever national television campaign last year. Like Las Vegas, Orlando has had some last-minute convention cancellations.

"We have to have a consistent presence in the marketplace," Sain said. "We're laying a foundation for the long term. It's not about 2008. It's about the layer of business we will add in 2015 and 2030."

Las Vegas is facing competition from a proliferation of reasonably-priced, all-inclusive resorts that have cropped up in places such as Mexico and the Caribbean, Sain said.

Las Vegas has now dropped to second place behind Orlando on Travelocity's list of top destinations. Likewise, Las Vegas — long No. 1 among Funjet customers — has recently slipped to No. 2, behind Mexico, according to Funjet.

The visitors authority is aiming to boost convention business with a contest for meeting planners who submit proposals to hotels and specials for upcoming convention dates.

"More than any other place, Las Vegas has always been the place where people can get away from what's bothering them," O'Keefe said. "In this phase of rapid evolution, we're reminding people that this is a good place to get away from it all."