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Rod Smith

Las Vegas Tourism: 291,000 Not Fearing Fuel

26 May 2006

LAS VEGAS, Nevada -- To travel or not to travel, that's the question facing millions of Americans as they contemplate Memorial Day holidays to Las Vegas and elsewhere this weekend.

Gasoline prices, which averaged about $3.14 per gallon for regular unleaded on Thursday, are a large reason for their concerns.

AAA predicts that the number of Americans driving and flying over the holiday weekend will increase only slightly this year as consumers respond to higher gasoline prices and air fares.

Las Vegas Convention and Visitors Authority spokesman Vince Alberta said 291,000 visitors are expected to visit the city this Memorial Day holiday, about the same as last year.

Room occupancy is expected to hit 95.9 percent, up just 0.3 percentage points from 95.6 a year ago, and the nongaming economic impact is expected to hit $190.4 million, up 4.8 percent from $181.7 million in 2005.

Alberta said there are not enough data to suggest what effect surging gasoline prices may have on Las Vegas this summer, although the authority is monitoring the situation.

However, individual hotel-casino operators are already feeling some impact, although they are feeling it differently. Operators believe there are factors others than gasoline prices affecting consumers' decision making.

The Ritz-Carlton at Lake Las Vegas, for example, had expected a drop-off based on national predictions, but instead spokeswoman Bonnie Crail said this weekend is the most heavily-booked Memorial Day in its history.

Further, the property's reservations office said so far there are no indications gasoline prices are a factor for most visitors, either for Memorial Day or later this summer.

"This year's Memorial Day strength here may relate to increased awareness of Lake Las Vegas as a destination," Crail said.

By contrast, New Frontier spokeswoman Melanie Mabry said her property expects a drop-off in business this weekend and over the summer.

"This is a time when I can almost always depend on the whims of my drive-in customers to jump in the car and run away to Vegas for a couple days," she said.

"However, I am expecting that I won't see as many of those folks as often as I usually do," Mabry said.

However, she said gasoline prices are among several factors involved.

"It's hard for me to realistically predict where we might credit any kind of fall-off in business right now, since I have some unique factors to consider, such as the speculation of a date for our closing," she said, referring to the company's plans to implode the building to make way for a new megaresort. "However, I am expecting the gas prices and the anxiety about the economy that those prices have fueled, to have an effect continuing through the summer months."

Other properties fall somewhere in the middle, with strong booking trends continuing from previous months and little effect from oil prices.

Sources at Aladdin said surging gasoline prices have had no adverse effect on its business, which they described as booming. Bookings at the property, which is being converted to a Planet Hollywood Hotel and Casino, are very strong for Memorial Day and up from last year, they said.

Reservations for Memorial Day weekend are similarly mixed across properties owned by MGM Mirage.

MGM Mirage spokesman Alan Feldman, for example, said his company is seeing some softness in advance reservations for Circus Circus and its properties in Primm.

Although high gasoline prices may be starting to take a toll, Feldman said he expects to see some offsets as families that otherwise might have taken long driving vacations this summer to visit national parks or relatives come to Las Vegas instead.

"Even after the offset, though, I expect (business) will get slower this summer," he said.

Harrah's spokesman David Strow said there has been no evident effect on the seven hotel-casinos his company operates here and none is expected.

That may be partly because Harrah's is just completing the integration of its Total Rewards program with the Caesars Entertainment operations that it bought last year.

Matthew Jacob, senior gaming analyst at Wall Street-based Majestic Research, said although it is difficult to separate out factors causing some softness in the market, the price of gasoline has to be having some effect.

"If fuel prices continue to ramp up, it may be a cause for concern, even though, (historically,) the gaming industry has been resilient to broad economic trends," he said.

Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas, said the Memorial Day weekend will serve as a barometer for how the current gasoline price surge will affect hotel-casinos here.

Schwer said that although any new sharp price increases inevitably will result in some visitors not coming to Las Vegas, the relatively low cost of Las Vegas as a destination may lead some consumers to substitute vacations here for ones in costlier destinations.

Nevertheless, Jacob said Las Vegas hotel-casinos are likely to experience a slowdown if gasoline prices continue to climb.

And overall, Schwer said it is likely increasing gasoline prices will have a drag effect on local hotel-casinos, cutting into the strong growth rates the properties have experienced over the past couple of years.

"In the final analysis, it is likely spending will be relatively flat compared with year ago levels. There might even be a very modest percentage decline. But we should expect the adversity impacts of higher fuel prices on travel spending will be far less than the percentage change in gas prices."