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Rod Smith
 

Observers Foresee Continued Growth for Vegas Room Rates

25 May 2005

LAS VEGAS, Nevada -- Defying normal supply pressures, hotel occupancy rates and room rates are expected to surge in the next 12 months despite increasing supply, a Lodging Industry Investment Council Survey released Tuesday said.

Gaming industry experts said the survey of top lodging investors and executives underscores the strength of Las Vegas despite its construction boom.

University of Nevada, Las Vegas professor Bill Thompson, who specializes in gaming studies, said the survey bodes well for Las Vegas.

"People are traveling more. There's a 'do it' psychology. All this terrorist hype on TV rather than keeping us at home, is leading us to get out and get away," he said.

MGM Mirage Chairman Terry Lanni said visitors are trying to put daily news behind them and simplify their lives.

This partly explains the surge in travel to Las Vegas and the appeal of new urban lifestyles including entertainment, restaurants and shopping opportunities, he said.

Deutsche Bank analyst Andrew Zarnett said the survey underscores how much baby boomers, now that they are empty nesters, are interested in spending money and time on leisure travel.

"And Las Vegas is and will continue to be a big beneficiary of that national trend," he said.

The survey found hotel room rates nationwide may increase by as much as 6 percent and occupancy levels are likely to increase 2 percent to 3 percent over the next 12 months, with double-digit increases possible in some markets such as Las Vegas.

The survey is not a scientific sampling, Jim Butler, chairman of the Los Angeles-based Global Hospitality Group and council co-chairman, said. It is a survey of 100 hospitality industry owners, investors, lenders, corporate real estate executives, operators, consultants, brokers and lawyers.

Survey respondents also said the condominium hotel craze just starting to hit Las Vegas is expected to continue over the next 12 months and will flourish unless there are major problems or investor lawsuits.

However, because of the ready availability of capital, they also say returns on investment are likely to be low by historic standards.

However, respondents were sharply divided on where the lodging industry is in its business cycle. Some said real estate prices, room rates and occupancy have peaked, but others said a peak will not be reached until after 2009.