Business

November 22, 2009

Economy has Vegas losing out

Dependent upon tourism for revenue, desert mecca is struggling to draw visitors.

SUZETTE PARMLEY The Philadelphia Inquirer

LAS VEGAS — After he scored a room at the Excalibur online for $24 a night, Mario Ellis hopped in his car and headed for Sin City.

“I had to jump on it,” said Ellis, 42, a UPS driver from Los Angeles, a key drive-in market for Vegas. He had his hours and overtime cut this year, so he’s on a budget.

He hadn’t eaten in any fancy restaurants since he arrived Sunday. He hadn’t gone to any shows or shopped. And instead of the $2,000 to $3,000 he’s had to gamble with in previous years, Ellis hoped to spread $600 over his four-night stay. Slots and sports betting only, no expensive table games.

It’s that potent one-two punch that has had Las Vegas and Atlantic City reeling all year long: the bad economy and slashed discretionary spending.

But the desert gambling mecca, with more than 150,000 hotel rooms (easily overshadowing Atlantic City’s 17,107) and heavily dependent on convention business, is having the tougher time.

Fewer people are visiting, let alone spending. Casino floors are half-empty during the day. As Ellis played the slots at the Paris Casino last week, he was surrounded by rows of lonely machines.

Taxi drivers up and down the Strip complain that they wait a long time between pickups. The fares they do get negotiate every rate and no longer tip even minimally.

Even fewer flights are landing here — US Airways Group Inc. announced last month that it was cutting arrivals in half — so Vegas hotels are heavily discounting to lure folks back.

High-end casinos such as Mandalay Bay are offering rooms for $109.99, with a special two-night-minimum promotion that includes a 50 percent discount on a suite upgrade, a two-for-one House of Blues restaurant voucher, $25 resort credits on food, beverage, or merchandise, and 30 percent off tickets for The Lion King.

Not a good omen for other casino towns — or tourist destinations in general.

“What happens in Vegas doesn’t stay in Vegas. What happens in Vegas spreads out to all the rest of us,” said Meryl Levitz, president and chief executive officer of the Greater Philadelphia Tourism Marketing Corp.

“When Las Vegas greatly lowers its rates, consumers don’t think of it as Vegas being Vegas. They think along the lines, ‘Well then, I should be able to get a good deal anywhere.’”

In September, for the first time since May 2008, the number of visitors to Las Vegas went up year over year — 4.3 percent. But the average daily room rate was down nearly 25 percent, to just over $92 a night. Gambling revenue was down 3.6 percent, the 21st straight monthly decline, according to figures released by the city’s convention authority.

All the big casino companies are feeling the pinch. Las Vegas Sands Corp., which owns the Venetian and the Palazzo on the Strip, as well as the Sands Bethlehem Casino in Pennsylvania, reported a $123 million net loss for the third quarter that ended Sept 30.

Conventions and meetings, which drive midweek room occupancy, are way off. Attendance is down 27.1 percent compared with the same period in 2008; the number of gatherings is down 18.2 percent.

One reason: restrictions on using federal-bailout funds for certain types of corporate travel, said Rossi Ralenkotter, the authority’s president and CEO. The other: Las Vegas’ reputation as a lavish meeting destination.

With the supply of convention visitors dwindling, luring back the leisure traveler became a priority, Jacob Oberman, a casino consultant with Los Angeles-based commercial real estate firm CB Richard Ellis Group Inc., said at a panel at last week’s Global Gaming Expo on filling hotel rooms in a down economy.

“All in all,” Oberman said, “the leisure customer that they are filling rooms with is a lower-spending customer than the convention-meeting groups of the past.”

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