Tuesday, February 25, 2003
Copyright © Las Vegas Review-Journal

Post-race room rates plummet

Major Strip resorts expect lull after NASCAR event before late March rebound

Guests check in Monday at the MGM Grand. Room rates are tumbling 27 percent for major Strip properties for the week of March 10. Photo by Clint Karlsen.

Las Vegas room rates are down sharply for the week following this weekend's NASCAR races, but are rising again toward the end of the month, survey data show.

Weekend and weekday rates are tumbling 27 percent for major Strip properties for the week of March 10 compared with the same period a year ago. But NCAA March Madness and college spring break will send rates rebounding again toward the end of March.

Midweek results for the year-to-date have been mixed compared with last year and 2001. Weekend room rates in 2003 have been strong compared with 2002, but mixed compared with 2001, according to survey data from Fulcrum Global Partners, an independent Wall Street investment research firm.

Softness in the market is the result of some conventions held in Las Vegas last year being held elsewhere or being scheduled later this year, and tough comparisons with 2002 when midweek rates increased 18 percent and weekend rates rose 19 percent compared with 2001, Fulcrum gaming analyst Joe Greff said.

"That said, results were weak and below expectations," he said.

Despite the calendar shift of a number of conventions, there are still a larger number of convention delegates expected in Las Vegas this year compared with last, Greff said.

However, this year's meetings and conventions are concentrated in fewer venues than they were last year, which could partially explain soft property-level results.

"In addition, room rate weakness could be attributable to disruption caused by concerns over a possible war in Iraq," he said.

For the week of March 10, midweek and weekend rates declined for the majority of major Strip properties.

The exceptions were Boyd Gaming's Stardust and the privately held Aladdin, where midweek room rates increased 50 percent and 40 percent, respectively, compared with the same week in 2002.

Mandalay Resort Groups average room rates were down 41 percent for the midweek period in the second week of March and 35 percent on the weekend.

Despite, soft results for Mandalay this period, results in 2003 have been relatively solid. For the year to date through March, average midweek room rates have increased 8 percent and weekend rates have increased 11 percent, Greff said.

MGM Mirage's average room rates declined 17 percent during the March 10 midweek and 20 percent on the weekend, compared with the year before.

This was largely due to the fact that Bellagio and Mirage hosted two conventions last year with a total of 4,200 delegates that did not occur in the comparable period this year, Greff said.

Park Place Entertainment Corp.'s room rates declined 17 percent during the March 10 midweek and 22 percent on the weekend.

Room rates are surprisingly soft because Park Place Entertainment is hosting the majority of large events in Las Vegas during the period and the number of expected delegates is significantly higher than last year, 37,600 compared with 8,000 last year, Greff said.

For the year to date, Strip room rate results have been at or above projections from the operators, he said.

"Our sense is that some of the top tier hotels like Bellagio and Mandalay Bay have experienced solid occupancy and rate gains over last year (Bellagio given its prominent position on the Strip, and Mandalay given its new convention center)," Greff said.

Domestic table play, while still down from normal levels, has not worsened. And Chinese New Year's may have been slightly more profitable than expected, he said.

However, Greff characterized March as spotty and said it remains a "weird" month because of war jitters and the Strip's loss of the Conexpo/ConAGG convention in March, a convention which changes location every three years.

At Deutsche Bank, analyst Marc Falcone agreed that January and February room rates had been solid, but added that March was proving to be much weaker.

"Generally, we're encouraged by trends in the first two months of the quarter, but March is too early to call," he said.

Wall Street, Falcone said, remains "cautiously optimistic" about Las Vegas, given the data available to date.