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Las Vegas Strip Room Rates Slip
by Rod Smith
LAS VEGAS -- The weak economy and a light convention schedule are conspiring to keep Las Vegas advance room rates soft heading into the Memorial Day weekend.
And slippery room demand is likely to cause problems for the gaming industry and its performance on Wall Street, analysts said.
"You see a big pick-up in earnings when you have strong room rates. And they work against you, too, (when rates are declining)," Deutsche Bank analyst Marc Falcone said. "Until we see stronger room rates, we can expect to see sluggish earnings for Las Vegas operators."
The average Strip room rate for the week of May 19 booked three weeks in advance was down 11.6 percent in a Deutsche Bank survey released Monday.
Weekend rates for the same week were down 23 percent while midweek rates were down 0.6 percent in the Deutsche Bank data.
The continuing economic downturn and short booking windows, created by consumer bottom-fishing for discounted room rates, are dulling demand, he said.
A similar survey by Fulcrum Global Partners, an independent Wall Street investment research firm, found the average weekend rate down 16 percent and the average weekday rate down 3 percent.
The results represented a reversal from last week's 11 percent increase in midweek rates and 1 percent increase in weekend rates.
A significantly lighter convention and special events schedule than last year contributed to the soft demand, Fulcrum gaming analyst Joe Greff said.
Las Vegas Convention and Visitors Authority data show Las Vegas will host 47,200 attendees during the week (for conventions of more than 1,000 attendees) compared with 74,950 in the comparable period last year.
Rob Powers, spokesman for the authority, however, said overall convention business has been strong so far this year.
"You have to be wary of year-to-year comparisons just because of the cyclical nature of the convention business," he said.
Greff said travel tensions due to severe acute respiratory syndrome and the war in Iraq may also have played a role in the soft demand, although, he added, the operators have indicated that demand weakness in Las Vegas due to these two factors has become less and less apparent.
"The more likely reason for downward demand pressure this period is the weak economy, in our opinion," he said.
There is likely no effect from the timing of Memorial Day, which is similar in each period, analysts agreed.
Memorial Day weekend is May 24 to May 26, and generally the periods of time around holiday weekends experience peaks in demand, as was the case a year ago.
"In general, booking windows continue to remain very short due to the weak economy and war fears, but occupancy levels are at relatively solid levels for April," Greff said.
At Park Place Entertainment Corp. properties, average weekend room rates were down 18 percent and midweek rates were down 15 percent.
Park Place spokesman Robert Stewart said the booking window still hasn't stretched back out again.
"And marketwide, we're seeing a little softness in the convention business right now and there's a lag in booking meetings (after a disruption such as the war with Iraq takes place)," he said.
For Mandalay Resort Group, weekend rates were down 19 percent and midweek rates were down 4 percent.
And at MGM Mirage, weekend rates were down 19 percent and midweek rates were down 3 percent.
Among major Strip properties, rates were up in tandem only at The Venetian (weekend rates up 10 percent and midweek rates up 74 percent) and the Tropicana (weekend rates up 11 percent and mid-week rates up 7 percent).
Venetian spokesman Kurt Ouchida said the property's group room business through May is booming.
"(It's) incredibly strong. It's another testimony to the strength of our business model," he said.
by Rod Smith
LAS VEGAS -- The weak economy and a light convention schedule are conspiring to keep Las Vegas advance room rates soft heading into the Memorial Day weekend.
And slippery room demand is likely to cause problems for the gaming industry and its performance on Wall Street, analysts said.
"You see a big pick-up in earnings when you have strong room rates. And they work against you, too, (when rates are declining)," Deutsche Bank analyst Marc Falcone said. "Until we see stronger room rates, we can expect to see sluggish earnings for Las Vegas operators."
The average Strip room rate for the week of May 19 booked three weeks in advance was down 11.6 percent in a Deutsche Bank survey released Monday.
Weekend rates for the same week were down 23 percent while midweek rates were down 0.6 percent in the Deutsche Bank data.
The continuing economic downturn and short booking windows, created by consumer bottom-fishing for discounted room rates, are dulling demand, he said.
A similar survey by Fulcrum Global Partners, an independent Wall Street investment research firm, found the average weekend rate down 16 percent and the average weekday rate down 3 percent.
The results represented a reversal from last week's 11 percent increase in midweek rates and 1 percent increase in weekend rates.
A significantly lighter convention and special events schedule than last year contributed to the soft demand, Fulcrum gaming analyst Joe Greff said.
Las Vegas Convention and Visitors Authority data show Las Vegas will host 47,200 attendees during the week (for conventions of more than 1,000 attendees) compared with 74,950 in the comparable period last year.
Rob Powers, spokesman for the authority, however, said overall convention business has been strong so far this year.
"You have to be wary of year-to-year comparisons just because of the cyclical nature of the convention business," he said.
Greff said travel tensions due to severe acute respiratory syndrome and the war in Iraq may also have played a role in the soft demand, although, he added, the operators have indicated that demand weakness in Las Vegas due to these two factors has become less and less apparent.
"The more likely reason for downward demand pressure this period is the weak economy, in our opinion," he said.
There is likely no effect from the timing of Memorial Day, which is similar in each period, analysts agreed.
Memorial Day weekend is May 24 to May 26, and generally the periods of time around holiday weekends experience peaks in demand, as was the case a year ago.
"In general, booking windows continue to remain very short due to the weak economy and war fears, but occupancy levels are at relatively solid levels for April," Greff said.
At Park Place Entertainment Corp. properties, average weekend room rates were down 18 percent and midweek rates were down 15 percent.
Park Place spokesman Robert Stewart said the booking window still hasn't stretched back out again.
"And marketwide, we're seeing a little softness in the convention business right now and there's a lag in booking meetings (after a disruption such as the war with Iraq takes place)," he said.
For Mandalay Resort Group, weekend rates were down 19 percent and midweek rates were down 4 percent.
And at MGM Mirage, weekend rates were down 19 percent and midweek rates were down 3 percent.
Among major Strip properties, rates were up in tandem only at The Venetian (weekend rates up 10 percent and midweek rates up 74 percent) and the Tropicana (weekend rates up 11 percent and mid-week rates up 7 percent).
Venetian spokesman Kurt Ouchida said the property's group room business through May is booming.
"(It's) incredibly strong. It's another testimony to the strength of our business model," he said.