Author Home Author Archives Search Articles Subscribe
Stay informed with the
NEW Casino City Times newsletter!
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!
Related Links
Recent Articles
Rod Smith

New Survey: Gas Prices Could Hurt Las Vegas Gaming

4 October 2005

The Las Vegas gaming industry could be in for a rough ride this fall if gasoline prices pass $3 a gallon in Southern California, a recent survey suggests.

The research by MRC Group, Nevada's largest market research firm, found Las Vegas is likely to lose 48 percent -- or about 5 million -- of its Southern California drive-in customers if gasoline prices get stuck above $3 per gallon.

Roughly 10 million of Las Vegas' visitors in 2004 were drive-in customers from Southern California, or about 27 percent of the city's total 37.4 million visitors.

Further, the survey suggests higher gasoline prices would lead the remaining drive-in visitors to seek air transportation or some other means, although whether they would come at all would be determined by the cost and the availability of flights.

MRC Group Chief Executive Officer Jim Medick said, while some people will continue to come even if gasoline reaches $10 a gallon, the survey suggests Las Vegas may soon feel some of the Californians' pain.

"We're already seeing this happening in Reno out of the San Francisco market. For Las Vegas, the average visitor is going to stop coming at $3.50 or $3.60 a gallon. There's going to be a definite decline in seniors and people on fixed incomes first," he said.

MRC Group found 51 percent of respondents over 21 years old are feeling a big impact on their personal budgets due to the rising cost of gasoline with 39 percent feeling some impact, based on a random telephone survey of Southern Californians.

"That means 90 percent of Southern Californian's are feeling the price of gasoline in the pocket book," Medick said.

"But the big discovery here is that Southern Californians are reducing their leisure time activities and travel as opposed to other activities," he said.

More than half -- 58 percent -- said fuel costs are affecting their decisions about vacations of five days or more, and more than half -- 57 percent -- said their costs are impacting their decisions to go on weekend getaways.

Of more importance to the gaming industry, 48 percent said higher gasoline prices would deter them from planning vacations in Las Vegas. And 39 percent said gasoline prices are leading them to steer clear of California tribal casinos.

The big question for consumers and the industry is at what point will potential tourists begin feeling a real pinch.

Many Los Angeles respondents who have driven to Las Vegas in the past three years said they would stop coming if the price reaches $3.62 per gallon. For Southern California visitors, the cut off was $3.51 and, for visitors from central California, it was $3.86.

At about $5 a gallon, most respondents said they would stop driving to Las Vegas altogether.

"In other words, half the drivers would stop driving to Vegas when gasoline prices hit $3.50 per gallon and 80 percent would have stopped when it reached $4.33," Medick said.

The impact of fuel costs varied by age, with the survey showing Las Vegas would lose seniors first while 21- to 30-year-olds would be among the last to quit coming.

"It is evident that everyone has a different dollar in mind when it comes to how much is too much," Medick said.

"This doesn't mean that everyone will stop coming to Las Vegas, however. Another key discovery is that 47 percent of those who currently drive to Las Vegas would seek another form of transportation while 48 percent would cancel their trip entirely if the price of fuel became too high," he said.

"And of those who would seek another form of transportation than driving to Las Vegas because of high gasoline prices, 84 percent of them selected air," Medick said.

While one public official, who asked not to be named, confirmed that market research by Los Angeles firms tracks with the MRC data, casino companies here said with the average price of gasoline still under $3 a gallon the results have yet to show up in hotel occupancy or room rates.

Industry insiders and experts, remain guardedly optimistic despite the survey's doomsday forecasts, not because gasoline prices will fall back, but because they expect consumers will blink.

Bill Feather, vice president of hotel operations for the Aladdin, which is being rebranded Planet Hollywood, said his property is having its best September ever, with both occupancy and room rates up compared with previous years.

University of Nevada, Las Vegas professor Bill Thompson, who specializes in gaming studies, said history argues that Californians will adjust to higher gasoline prices and keep coming to Las Vegas.

"Without something drastic such as 9-11, we have adjusted in the past and we will in the future," he said, noting that hotel-casino operators can easily compensate for visitors' higher travel costs with room rate discounts and other giveaways.

Keith Schwer, director of the Center for Business and Economic Research at University of Nevada, Las Vegas, said while gasoline price increases are likely to cut into Las Vegas visitor traffic, the slowdown is likely to be mitigated by consumer adjustments.

"Higher prices are an incentive for people to take notice. With higher prices, consumers become more attentive to use; and, producers try to supply more. Still, consumers and producers need time for adjustments to occur," he said.

The MRC survey was based on a sample of 404 with a margin of error of 4.9 percent and was conducted from Sept. 10 to Sept. 25.