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Survey: Strip Holiday Room Rates Down

LAS VEGAS -- It's Christmastime and Santa Claus is coming to town, but his gift for the gaming industry may be a bucket of coal.

The average room rate on the Strip has dropped 22 percent for the Christmas weekend, Dec. 28 and 29, compared with last year, according to recent survey data collected by Wall Street broker Bear, Stearns & Co.

"There's no holiday cheer for the Strip," said Bear, Stearns analyst Jason Ader.

The news is even worse when this year's numbers are compared with those for the pre-Sept. 11 Christmas weekend. The average weekend room rate has tumbled 60 percent when compared with the same period in 2000.

Analysts are using pre-terrorist attack indicators as benchmarks to make more realistic comparisons based on performance in "normal" times.

"Given the timing of the holiday, coupled with continued economic and Middle East uncertainty, Las Vegas operators are having difficultly persuading Americans to spend the holidays on the Strip, resulting in room rates declines," said Ader.

This year, both Christmas and New Year's Day is on a Wednesday, the same day normally sampled for weekday room rates, and there is no three- or four-day weekend.

"The timing of the holidays and fears of war are dragging rates down," Ader said.

The average room rate for Christmas week is down 5 percent compared with last year and down 20 percent compared with pre-Sept. 11, according to the survey data.

For New Years, the average room rate on the Strip is down 24 percent compared with last year and down15 percent compared with pre-Sept. 11.

Among the big three Strip operators, only Park Place is seeing room rate increases over New Years, with prices being paid up 15 percent compared with last year.

"Our demand for New Years has been strong this year which we attribute to post-9-11 recovery" and specific developments at individual properties including new room products at Bally's and the Las Vegas Hilton and wrapping up construction at Caesars Palace, said Park Place spokesman Michael Coldwell.

At Deutsche Bank Securities, analyst Marc Falcone said: "I think over the next few weeks, we're going to get a better idea of consumer demand."

"The problem the industry is facing is that consumers are waiting longer to book rates," he said, which in turn is reducing the rates they are paying on the average.

Still, Falcone said he expects "rates to strengthen off of the preliminary rates we have seen."

He said the weakness in rates is caused mainly by changes in consumer booking patterns which is affecting all both business and leisure travel.

Operators remain optimistic.

MGM Mirage, for example, expects to outpace other strip properties, said spokeswoman Shelley Mansholt.

"We believe our (revenue per available room) tends will continue to improve and we are reasonably pleased with the level of activities during the Christmas through New Years Holiday time frame. Our properties generally do better than the city and we expect our rates to be better than they were last year," said Mansholt said.

Analysts agree it is difficult to gauge final demand for the Holidays by comparison with historic booking patterns, but that actually performance will be important for understanding consumer interest at the beginning of 2003.

"It's going to be important how the New Years weekend shapes up," said Brian Gordon, spokesman for Applied Analysis, a Las Vegas-based financial consulting company. "Typically, we see a slow period in the first half of November and then an upswing through New Years."

Of particular important will be the interest of major international players in the upscale Strip properties over the Holiday period, he said.

"That will give us the best indication of upscale visitor volume for the upcoming year, and a better feel for the pulse of what is actually happening in the market place," Gordon said.

"Right now, (however,) we're seeing a lot of tentativeness in international travel because of the threat of military conflict," he said.

"International travelers are particularly leery of pre-booking holiday vacations to Las Vegas and we're expecting to see some of that trend to continue into 2003," Gordon said.

The average weekday rate across the Strip for the week ending Dec. 28 is $105, the average weekend rate is $167 and the average rate New Years rate is $250.

Still, Deutsche Bank's Falcone is optimistic about the Holiday period.

"I think Christmas will probably be better that last year, but not spectacular in terms of overall business," he said.

"But I think New Years will be stronger than last year," Falcone said, suggesting that 2003 "is shaping up to be pretty strong overall."

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