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Room Demand for Early May Weak

LAS VEGAS -- A light convention calendar, sparse headliner shows, travel disruptions and the war in Iraq are all clipping demand on the Strip heading into May, analysts said Tuesday.

The average rate for rooms booked three weeks in advance for the week of May 5 fell to $124, down 10.9 percent compared with the year before, the latest survey data released Tuesday by Deutsche Bank shows.

Compared with pre-Sept. 11 numbers, the average room rate was down 25.7 percent.

"May has gotten off to a sluggish start on the rate front following (an average) drop of 6.7 percent in April," Deutsche Bank analyst Marc Falcone said.

Weak room results for May's first week were largely due to a light convention and special events schedule compared with last year, analysts said.

Room rate performance was mixed among major Strip operators with MGM Mirage rates down 10.8 percent on the average, Mandalay Resort Group rates down 1.1 percent and Park Place Entertainment Corp. rates up 12.4 percent.

Rate results also differed between market segments in the Deutsche Bank survey, with upscale property room rates up 2.1 percent, midlevel rates down 17.9 percent and value property rates down 14.4 percent

Occupancy rates stayed at relatively solid levels for April, although the first week of May is challenging given a light convention and event calendar, and cancellation levels are normal, said Joe Greff, gaming analyst at Fulcrum Global Partners, an independent Wall Street investment research firm.

However, booking windows remain very short and continued fighting in Iraq or the further spread of severe acute respiratory syndrome could prompt increased room cancellations in the future, he said.

This week, the first possible case of SARS in Nevada was reported.

Las Vegas is expected to host 31,200 conventioneers at large-scale events during the week of May 5 compared with 80,800 in the same week last year, Greff said.

A portion of the downturn in convention attendance involves events that have been delayed indefinitely and may be rescheduled for later in the year.

The most significant large-scale events that occurred in the first week of May last year but not this year are the Networld + Interop show (60,000 attendees) and the Intershow/Money Show (11,500 attendees).

The weak results were also affected by travel disruptions caused by the war in Iraq and the SARS outbreak, Greff said.

Analysts and casino spokesmen said business meeting bookings have dropped off dramatically as event planners have delayed decisions because of hostilities in the Middle East and travel disruptions.

At Deutsche Bank, Falcone said a sparse headliner calendar also is contributing to the soft weekend room rates.

"While the war appears to be drawing to a close, we think the booking window remains very short and operators may be hesitant to increase pricing ahead of better visibility on trends," he said.

Weekend rates dropped to $168 for the week of May 5, down 6 percent from the previous year in the newest survey by Fulcrum.

"Weekend rates have been soft for the past six surveys, which is not surprising to us given the overall geopolitical and economic environments," Greff said.

In April, weekend rates on the average dropped 16.2 percent each week in Fulcrum surveys compared with the year-earlier weeks.

Midweek rates on the average for the week of May 5 dropped to $102, down 8 percent from a year earlier in the Fulcrum survey.

Results from the survey of midweek room rates for May 5 represented a reversal from two weeks of increases, Greff said.

Analysts said the impact of group business and convention schedules help explain the dropping demand.

In April, midweek rates declined an average of 6.6 percent compared with the year earlier rates, in the Fulcrum survey.

Deutsche Bank data showed a more dramatic 16.6 percent drop off for midweek rates compared with a year earlier.

Deutsche Bank and Fulcrum surveys include slightly different mixes of Strip properties and may be conducted at slightly different times, explain differences between them.

By contrast with advance bookings, same day reservations are at the highest levels seen in years, Greff said.

For that reason, Fulcrum resurveyed room rates for previous weeks and found on the average they increased as dates of stay came closer.

"Barring any unforeseen events, booking windows should begin to widen as news reports on the war become less frequent and travel fears due to war weariness dissipate," Greff said.

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