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Rod Smith

Advance Hotel Room Rates Soared During Third Quarter

9 September 2003

LAS VEGAS -- With demand for domestic leisure travel surging over the summer, average third-quarter rates for Las Vegas soared 26 percent midweek and 11 percent on weekends for rooms booked three weeks or more in advance.

It was by far the strongest quarterly room rate performance this year, data from Fulcrum Global Partners, an independent Wall Street investment research firm, show.

The average midweek rate for rooms booked on the Strip for the last week in September is $133 and the average weekend rate is $224.

By company, rates increased on average 43 percent at MGM Mirage, 25 percent at Mandalay Resort Group and 22 percent at Park Place Entertainment Corp.

In a similar survey by Deutsche Bank, mid-priced Las Vegas properties fared strongest with rates up 37 percent, compared with value properties where rates were up 3 percent and upscale resorts where rates fell 13 percent.

The average midweek rate for the last week in September was up 11 percent compared with the year before.

"This was the twelfth consecutive week that the average midweek rate on the Strip outperformed last year," Fulcrum gaming analyst Joe Greff said.

"Midweek room rate growth was solid this period despite a considerably slower convention schedule," he said.

Roughly 14,500 convention attendees are expected midweek this year compared with 59,000 last year.

Deutsche Bank analyst Marc Falcone added that there are also no major entertainment events scheduled over the last weekend in September.

The average weekend rate, however, posted a 1 percent drop in the last week of September compared with the year before.

"Part of the weekend's down result was (also) due to a slower convention schedule than last year," Greff said.

Only 2,200 convention attendees are expected this year compared with 6,200 last year.

"We had expected weekend rate growth to be somewhat better this period, particularly considering an easy comparison with last year (when rates were down 13 percent), but are not too concerned with this result as a negative trend has not become evident," Greff said.

In the third quarter, rates for rooms booked in advance improved year-over-year for 11 of 13 weeks.

"In addition, most operators continue to improve room rates closer to the date of stay, usually resulting in average daily rates ahead of last year's levels," Greff said.

Most operators attribute improved room rate performance over the summer to stronger demand for leisure travel and increased numbers of vacation travelers, Greff said.