Wondering where the tourists are

Nicolas and Juanita Cignetti are bringing down Las Vegas just as they built it, a little bit at a time.

The Canton, Ohio, couple has been visiting Las Vegas — sometimes as often as six times a year — since the Rat Pack prowled the Sands hotel and a gallon of gasoline cost 33 cents.

Now gasoline costs more than $4 a gallon and the Cignettis aren’t planning a return to Las Vegas, choosing to stretch their money further at an Indiana riverboat casino or a West Virginia hotel-casino. With airfares rising, the national economy declining and Americans cutting back on everything from road trips to restaurant meals, Wall Street is fearful that middle-class vacationers like the Cignettis who helped fuel the rise of modern-day Las Vegas are ready to turn their backs on Sin City.

“We are just going to hang tight until we see some relief,” said Nicolas Cignetti, 72. “I can wait until prices come down and, if they don’t, so be it.”

He said the couple last visited Las Vegas in March and paid a combined $412 for round-trip fares from Cleveland. When he checked prices for a return trip in May the fare was more than $400 each, twice what the couple was used to paying. So he balked.

Instead, they will catch a bus from Canton to Indiana for an overnight trip to the riverboat casino that costs $84 per person, including two dinners. Or, they’ll drive 67 miles to Mountaineer Casino Racetrack, where a room costs $59 a night and comes with food coupons worth $20.

“There is nothing that is going to compare with Vegas,” Cignetti said. “But the point here is, with what it costs now to go out there, I’m happy with going to Mountaineer.”

Forecasting the demise of Las Vegas is a game that’s as tired as puns on the city’s ubiquitous “what happens here, stays here” advertising slogan.

But for the first time in recent memory, two benchmark indicators of the health of Las Vegas, the number of hotel rooms in development and airline seat capacity at McCarran International Airport, are moving in opposite directions.

According to the Official Airline Guide, seat capacity at McCarran is expected to decline 12 percent in the fourth quarter. Meanwhile, the number of available hotel rooms on the Strip is expected to increase 18 percent by the end of 2009.

That has investors wondering how resort operators intend to maintain the 90 percent occupancy rates to which they’ve grown accustomed with fewer available airline seats for customers and drive-in traffic slacking off as gasoline prices approach $5 per gallon in parts of Southern California, the No. 1 source of Las Vegas visitors.

“In our opinion, this could not come at a worse time for Las Vegas,” Wachovia analysts Brian McGill and Denis Kelleher wrote in a note to investors. “With the cuts in airline capacity, we do not think there will be enough seats to fill the new room supply.”

The circumstances are weighing heavily on resort stocks.

The average daily share prices for MGM Mirage, Las Vegas Sands Corp. and Wynn Resorts Ltd. all sank in May. MGM shares were down 7 percent, Las Vegas Sands dipped 4 percent and Wynn Resorts fell 2 percent. Shares in all three companies are trading near 52-week lows.

News of impending airline cuts won’t help.

The projected cuts slice deep into the core markets for Las Vegas. According to the Official Airline Guide, service between Las Vegas and Los Angeles will drop 8 percent. Service from the Bay Area will drop 9 percent. Phoenix service will drop 15 percent and the declines for Honolulu and Dallas will be near 30 percent.

“They are worried,” said Tom Parsons, CEO of BestFares.com, of the airlines. “You have to be worried, too, in Las Vegas. You are truly a discretionary city.”

At least customers in major markets will still be able to book direct flights to Las Vegas.

Customers in smaller cities are seeing flight options drastically reduced and fares rising dramatically. In some cases they are losing air service altogether.

Late last month Air Midwest, an affiliate of Mesa Airlines and U.S. Airways Express, ceased operations in Ely, leaving the mining town in White Pine County without commercial air service.

Great Lakes Airlines of Cheyenne, Wyo., had been scheduled to take over routes from Ely but backed out because, an airline spokeswoman told the Ely Times newspaper, it would require more federal subsidies to make service financially sustainable.

“Basically, it is taken off the board,” said Ron Williams, manager of the Ely airport.

Ely isn’t alone. Across the nation, airlines are cutting small-town routes to focus resources on major routes. That means fewer choices for rural residents who might want to visit Las Vegas.

“They are going to have to get in their cars and travel to an alternate airport,” Parsons said.

Whether the service is from small towns or major markets, the projected 12 percent decline at McCarran doesn’t mean Las Vegas will lose 1.7 million customers next year, the number of lost seats in the fourth quarter times four.

A major portion of the cuts will come from connecting flights operated by US Airways and others. Phoenix-based US Airways plans to trim Las Vegas service by 20 percent beginning in August.

However, 51 percent of the seats it will cut are on connecting flights, which means they are on flights with customers who aren’t getting off here anyway. That means they won’t be missed by resorts.

There’s also a chance airlines will simply squeeze more people onto the remaining flights.

Southwest Airlines, the carrier with the biggest presence at McCarran, has plans to keep growing service in Las Vegas and operates flights at about 75 percent capacity, meaning its planes have room for passengers bumped by competitors.

“The (Official Airline Guide) has never been a tool we use for a guide,” Rosemary Vassiliadis, deputy director of aviation for Clark County, said of the guide’s projections. “What we look at is load factor.”

Deutsche Bank analyst Bill Lerner concurred.

Lerner, who is based in Las Vegas, said the Official Airline Guide’s projections make it easy to overstate the impact.

“The point is there is excess capacity, so there is room to cut without meaningfully impacting visitation to Las Vegas,” Lerner wrote in a note to investors.

Cuts by the so-called legacy carriers also provide opportunities for other airlines.

Las Vegas-based Allegiant Air has posted double-digit growth even as the industry is reeling by targeting small towns with little competition and by bundling airfare with hotel rooms.

There is also potential to offset the domestic cutbacks with service from foreign countries.

The Las Vegas Convention and Visitors Authority recently overhauled its foreign outreach program in an effort to boost the international segment of Las Vegas visitors from 12 percent to 15 percent by the end of 2010.

The authority will spend about $18 million next year on marketing and outreach in other countries, including marketing subsidies for foreign airlines that agree to serve Las Vegas.

Changes to federal government policies already in the works are expected to increase the number of Chinese and Korean visitors.

The weak dollar also encourages foreign visitation.

“With the devaluation of the dollar, it is like America is on sale for them,” said Kathy Anderson, travel and tourism manager for General Growth Properties, which owns Fashion Show mall on the Strip and malls in The Venetian and Palazzo hotel-casinos. “It actually ends up paying for their vacation.”

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

ad-high_impact_4
Business
President Trump’s tariffs could raise costs for real estate developers, analysts say
President Donald Trump made his fortune in real estate, but by slapping tariffs on imports from close allies, developers in Las Vegas and other cities could get hit hard.
Las Vegas business and tariffs
Barry Yost, co-owner of Precision Tube Laser, LLC, places a metal pipe into the TruLaser Tube 5000 laser cutting machine on Wednesday, June 20, 2018, in Las Vegas. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Nevada Film Office Connects Businesses To Producers
The director of the Nevada Film Office discusses its revamped locations database and how it will affect local businesses. (Bailey Schulz/Las Vegas Review-Journal)
Opendoor isn't the typical house flipping company
Unlike most house flippers, the company aims to make money from transaction costs rather than from selling homes for more than their purchase price.
The Venetian gondoliers sing Italian songs
Gondolier Marciano sings a the classic Italian song "Volare" as he leads guests through the canals of The Venetian in Las Vegas. (K.M. Cannon/Las Vegas Review-Journal)
Building In Logandale
Texas homebuilder D.R. Horton bought 43 lots in rural Logandale. (Eli Segall/Las Vegas Review-Journal)
Indoor farming in Southern Nevada
Experts discuss Nevada's indoor farming industry. (Bailey Schulz/Las Vegas Review-Journal)
Former Fontainebleau could have become a Waldorf Astoria
Months after developer Steve Witkoff bought the Fontainebleau last summer, he unveiled plans to turn the mothballed hotel into a Marriott-managed resort called The Drew. But if Richard “Boz” Bosworth’s plans didn’t fall through, the north Las Vegas Strip tower could have become a Waldorf Astoria with several floors of timeshare units. (Eli Segall/Las Vegas Review-Journal)
LVCVA CEO Rossi Ralenkotter announces plans to retire
Rossi Ralenkotter, CEO of the LVCVA, on Tuesday confirmed a Las Vegas Review-Journal report that he is preparing to retire. Richard N. Velotta/ Las Vegas Review-Journal
Cousins Maine Lobster to open inside 2 Las Vegas Smith’s stores
Cousins Maine Lobster food truck company will open inside Las Vegas’ two newest Smith’s at Skye Canyon Park Drive and U.S. Highway 95, and at Warm Springs Road and Durango Drive. Cousins currently sells outside some Las Vegas Smith’s stores and at Fremont Street and Las Vegas Boulevard. (K.M. Cannon/Las Vegas Review-Journal)
Las Vegas home prices to continue to rise, expert says
Lawrence Yun, chief economist at the National Association of Realtors, gives homebuyers a pulse on the Las Vegas housing market. (Eli Segall/Las Vegas Review-Journal)
NV Energy announces clean energy investment
The company is planning to add six solar projects in Nevada, along with the state's first major battery energy storage capacity. Bailey Schulz/Las Vegas Review-Journal
3 Mario Batali restaurants on Las Vegas Strip to close
Days after new sexual misconduct allegations were made against celebrity chef Mario Batali, his company announced Friday that it will close its three Las Vegas restaurants July 27. Employees of Carnevino Italian Steakhouse, B&B Ristorante and Otto Enoteca e Pizzeria, all located in The Venetian and Palazzo resorts, were informed of the decision Friday morning. Bastianich is scheduled to visit the restaurants Friday to speak to employees about the next two months of operation as well as how the company plans to help them transition to new positions.
Nevada has its first cybersecurity apprenticeship program
The Learning Center education company in Las Vegas has launched the first apprenticeship program for cybersecurity in Nevada. It was approved by the State Apprenticeship Council on May 15. (K.M. Cannon/Las Vegas Review-Journal)
Las Vegas union members voting to authorize the right to strike
Thousands of Las Vegas union members voting Tuesday morning to authorize the right to strike. A “yes” vote would give the union negotiating committee the power to call a strike anytime after June 1 at the resorts that fail to reach an agreement. (Todd Prince/Las Vegas Review-Journal)
Small businesses struggle to find qualified candidates
A 2018 survey found that over two-thirds of small businesses in Nevada find it somewhat to very difficult to recruit qualified candidates. Bailey Schulz/Las Vegas Review-Journal
Nevada secretary of state website offers little protection against fraudulent business filings
Property developer Andy Pham tells how control of his business was easily seized by another person using the secretary of state website.
Caesars may be going solo in its marijuana policy
Several Southern Nevada casino companies aren’t following Caesars Entertainment’s lead on marijuana testing.
How much is the Lucky Dragon worth?
Less than a year-and-a-half after it opened, the Lucky Dragon was in bankruptcy.
Gyms and discount stores take over empty retail spaces
Grocery stores used to draw people to shopping centers. But many large retail spaces have been vacant since 2008. Discount stores like goodwill and gyms like EOS Fitness are filling those empty spaces, and helping to draw shoppers back in. K.M. Cannon/Las Vegas Review-Journal
Funding source of Las Vegas stadium for the Raiders is sound, expert says
The stadium is funded in part by $750 million of room taxes, the biggest such tax subsidy ever for a professional sports stadium. Robert Lang, executive director of Brookings Mountain West and The Lincy Institute at UNLV, says that is a good use of public funds. (Richard Velotta/Las Vegas Review-Journal)
Las Vegas needs light rail, expert says
Robert Lang, executive director of Brookings Mountain West and the Lincy Institute said he is afraid of a "congestion mobility crisis." Las Vegas needs a light rail system, he said, to accommodate the city's growing number of attractions. (Richard Velotta/Las Vegas Review-Journal)
Three takeaways from Wynn Resorts' Earnings Call
Matt Maddox came out swinging in his first earnings conference call as Wynn Resorts chief executive officer, boasting of record Las Vegas quarterly revenues and applicants lining up for work.
Star Wars VR Comes to Las Vegas
Sneak peak at the new "Star Wars: Secrets of the Empire" VR experience at the Grand Canal Shoppes.
Elaine Wynn continues her fight to change Wynn Resorts board
Elaine Wynn, the largest shareholder of Wynn Resorts Ltd., is seeking to kick a friend of her ex-husband Steve Wynn off the company’s board of directors. (Todd Prince/Las Vegas Review-Journal)
Zillow is getting into house flipping in Las Vegas
Las Vegas Review-Journal real estate reporter Eli Segall says flipping houses has waned in popularity after the housing bubble burst.
Ellis Island Buys Mt. Charleston Lodge
Ellis Island, which operates a casino, brewery and hotel just off the Strip, purchased the Mt. Charleston Lodge in early April.
Casinos to be penalized for allowing drug-impaired customers to gamble
Nevada Gaming Commission Chairman Tony Alamo talks about an amendment making casinos subject to the same disciplinary standards of preventing people to gamble if impaired by drugs as they are for letting them play while intoxicated by alcohol.
Terrible Herbst to open large travel center in Southern Nevada
The 50,000-square-foot commercial travel center will include 96 fuel pumps and the third White Castle restaurant in Southern Nevada. Wade Tyler Millward reports.
Art Bell’s Top 10 Shows
A selection of radio host Art Bell’s most popular shows.
TOP NEWS
News Headlines
Home Front Page Footer Listing
Circular
You May Like

You May Like