September brings fewer visitors to LV - Business

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Nov. 13, 2008
Copyright © Las Vegas Review-Journal

September brings fewer visitors to LV

Traffic, convention attendance also dwindle

By BENJAMIN SPILLMAN
REVIEW-JOURNAL

"We are going to learn as a state what a bad idea it is to be so overly reliant as a state on gaming revenues.''
ALAN FELDMAN, MGM MIRAGE SPOKESMAN

The number of people who visited Las Vegas in September fell 10.1 percent to 2.9 million, a jarring drop for a community that's already in the throes of a deepening recession.

The decline occurred despite a 21 percent drop in the average daily room rate to $112 and falling oil prices, conditions that typically make Las Vegas vacations more appealing.

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It suggests fallout from the real estate market crash and subsequent credit crisis is finally coming to rest on the shoulders of a community that was addicted as any to the easy cash of bygone boom times.

Visitation, convention attendance, airline and auto traffic and spending all declined for the month.

"It was just unsustainable," said Brian Gordon, a principal at the Las Vegas economics research firm Applied Analysis. "People were spending more than they were making."

Gordon said the sudden derailment of the consumer gravy train caught much of Las Vegas off guard, and is already resulting in discussions about how to create a less volatile local economy.

"To structure business operations around that type of environment, it creates a difficult situation as we come off of those highs," Gordon said.

The September numbers were included in a monthly visitation report from the Las Vegas Convention and Visitors Authority that is considered one of the best indicators of economic activity in Southern Nevada.

In addition to a decline in visitation and room rates, the occupancy rate in the region's 137,690 hotel rooms fell 7 percentage points to 84.3 percent.

The number of arriving and departing passengers at McCarran International Airport fell 13.2 percent to 3.4 million.

Average daily auto traffic on Interstate 15 at the California border was down 8.8 percent to 35,194 vehicles.

Visitation to Laughlin and Mesquite fell 13.3 percent and 38.5 percent, respectively.

"Unfortunately it is across the board," said Terry Jicinsky, senior vice president of marketing for the Las Vegas Convention and Visitors Authority. "People are making their decisions based on how they feel about the economy."

Jicinsky said it is the largest double-digit percentage decrease in visitation since September 2001, when terrorist attacks in New York and Washington, D.C., brought travel to a halt.

MGM Mirage spokesman Alan Feldman said the numbers weren't a total surprise because industry leaders knew at the time September was a brutal month.

But the results, and subsequent turbulence that's shaken major companies like Las Vegas Sands and General Growth Properties to their cores, are still disturbing.

"We had already seen weakening in the marketplace, but September was a pivotal month for the economy and this community," Feldman said. "I think we are seeing historic changes in the market."

MGM Mirage, with 10 resorts and 40,000 hotel rooms on the Strip, outperformed the overall Las Vegas resort industry in September, Feldman said.

Bellagio, the company's premier resort, actually increased net revenue 3 percent in the third quarter.

But even MGM Mirage's numbers weakened as the quarter dragged into September.

Table game volume was down 13 percent in MGM Mirage's Strip resorts. And the company lowered its average daily room rates 8.2 percent to $135 to keep guests coming.

The depth and breadth of the recession are likely to have an impact on Las Vegas beyond the short-term fallout, Feldman said.

Cutbacks have already prompted Boyd Gaming Corp. and Las Vegas Sands Corp. to halt major projects on the Strip and MGM delayed development of a proposed MGM Grand in Atlantic City as well as a proposed joint-venture project on the Strip at Sahara Avenue.

Although long-term projects such as MGM's CityCenter remains on track, Feldman says it may be many years before lenders open their vaults for another major resort project.

"I've heard some say there may not be another building built in Las Vegas for another 10 years," he said.

Skittish lenders could throw cold water on the "build it and they will come" approach to boosting the Las Vegas economy.

Feldman says if that's the case, Nevadans may want to consider expanding the state's tax revenue sources beyond the gambling industry.

"We are going to learn as a state what a bad idea it is to be so overly reliant as a state on gaming revenues," he said. "When that pipeline isn't being filled and, in fact, revenues are falling off we are going to feel it in a really, really serious way."

Contact reporter Benjamin Spillman at bspillman@reviewjournal.com or 702-477-3861.

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Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background. Free Nevada Meat Tokens wrote on November 13, 2008 02:44 PM: -10.1% in September? --The month that ended nearly two weeks __BEFORE__ the stock markets crashed and wiped out most peoples' 401k and Mutual Funds while 284,000 people lost their jobs all across America? http://www.youtube.com/watch?v=weWmTldrOyo Leric Goodman wrote on November 13, 2008 01:35 PM: Moe is right. Just what is Las Vegas' competitive advantage now, (1) with airline travel being so difficult (with striping off shoes and belts [soon to be replaced by nothing-left-to-the-imagination M-wave personal inspection machines for our safety and convenience]), (2) with gasoline prices being too high for many to make the drive (oil prices are lower, but this is only temporary, we will see $100 per barrel and higher), (3) with gambling at a riverboat, Indian, or on-shore casino nearer where customers live, and (4) the internet providing more intense stimulation, not to mention the economy being in the tank for quite a while ?? moe wrote on November 13, 2008 01:00 PM: when their is gambling in almost every state why come to vegas????????? j young wrote on November 13, 2008 11:17 AM: Time to see the opportunities... For instance.. Brand New LUXURY Homes by National Builder in the North West at AUCTION with minimum bids starting at $99,000! Previously valued up to $750,000. ALL BIDDING WILL BE DONE ONLINE. Auction is closing soon... See www.fre.com/295Z1 for all details on how to bid. Homes are open now for viewing. Attractive Financing. REALTOR COMMISSIONS. Leric Goodman wrote on November 13, 2008 10:22 AM: Bravo, Blue1! Trying to reduce the "hold" just deepens the loss of business and reduces profitability over the long term. The same is true in the other "profit-centers" as well. Blue1 wrote on November 13, 2008 09:57 AM: As I've said many times in the past, if the Las Vegas casinos would actually loosen their slots, the word would get out locally, nation-wide and the gamblers would return! As things stand it's almost impossible to win at the slots or video poker in Vegas. Corporations have tighten-up their machines to get every last drop of profit out of them. It doesn't take long for a gambler to figure it out and move on, perhaps to a Indian casino. Then throw-in all the taxes to rent a car at the airport or a room and it's, bye, bye Vegas... The corporation need to give-up the greed and learn to please the customer again like Vegas did back in the 60's. Can anyone remember the phrase from a bye-gone era, "recession proof"? Leric Goodman wrote on November 13, 2008 09:51 AM: This slowdown is an opportunity to rediscover and return to the fundamentals that made Las Vegas great: cheap rooms, cheap food, top entertainment at no cost, make money on gambling. Of course this refocusing on the objective of making money the old-fashioned way means that the corporate types need to abandon all that "profit-center" stuff they learned in Business School. Downturn wrote on November 13, 2008 04:48 AM: $135.00 per night for a strip room? This is the lowered price? .....Better get William Shatner on the job! Vegas Vic wrote on November 13, 2008 04:30 AM: It seems that suggestions for adding additional room taxes will be tossed out the window. Continuing to gouge the tourists is NOT the way to solve the financial woes of Nevada. That's basically biting the hand that feeds you. As this financial morass deepens, Las Vegas and Nevada as a whole, will continue to see gambling and room revenues dropping. Raising taxes is not going to solve any problems. What is necessary is for the over-bloated government personnel rolls to be trimmed of fat. Raises will have to be tied to the lagging economy, just like those in private businesses. Guaranteed raises for "existing" in the job need to be done away with. As with private businesses, raises will have to be based on performance on the job, not just showing up every day. John wrote on November 13, 2008 02:32 AM: I do not think we have seen a big enough economic downturn yet, people most notably, locals still seem to be living a life of free-wheeling by going to events and gambling. that is NOT sound personal finance mgmt. EOS!