New Year’s rates, guest numbers flat

The new year in Las Vegas means out with the old and in with, well, more of the same. At least when it comes to the resort industry.

Hotel rates for New Year's Eve and the number of guests at what's billed as "America's Party" are expected to be similar to last year -- a trend that could continue throughout 2008 and last until the current $40 billion construction boom results in new room inventory in 2009, 2010 and 2011.

Tourism boosters expect about 303,000 people to come to Las Vegas to celebrate the New Year's holiday, leaving behind nearly $212 million in nongaming economic impact.

Room rates for holiday stays didn't rise above the rate of inflation, meaning prices were flat compared with last year.

"They are up a couple of bucks," said Bryan Allison, vice president of marketing with the hotel-booking Web site Vegas.com.

Room rates fluctuate rapidly so prices can be tough to pinpoint. Hotels want to get as much as possible for a room during peak demand but don't want to be stuck with an empty bed because hotel room nights are a perishable commodity that become worthless when no one checks in.

But comparisons are possible. Last year, there were last-minute rooms at the Tropicana for $238. This year rooms at the Tropicana were going for $253 on Thursday. Rooms for New Year 2007 cost $379 for a last-minute booking at Mandalay Bay and were sold out the year before that. As of Friday afternoon Mandalay Bay was available for $345 a night for a two-night stay beginning Sunday.

"It could just be the way the holiday fell," said Allison, noting Jan. 1 falls on a Tuesday, which means revelers could be split between celebrating on the weekend or waiting for the actual holiday.

There are at least 10 new nightclubs and hip restaurants on the Strip that recently opened, will open this weekend or will open shortly after the new year begins.

But new clubs and restaurants tend to replace old clubs and restaurants. With hotel occupancy running better than 90 percent on the year -- and at nearly 100 percent on big weekends -- it takes new room inventory to boost the number of people coming to town.

And new rooms have been in short supply recently.

When the $1.8 billion Palazzo opens in January it will be the first major new property on the Strip since Wynn Las Vegas opened in 2005. Red Rock Resort, located about 10 miles from the Strip, opened in 2006.

Before those, the last new resort opening on the Strip was the Aladdin in 2000, said Kevin Bagger, director of Internet marketing and research at the Las Vegas Convention and Visitors Authority.

The number of available hotel rooms is about the same as it was three years ago and less than 6 percent higher than at the end of 2002.

"It will feel, I think, a lot like 2007," Bill Lerner, a Las Vegas-based analyst for Deutsche Bank, said of the upcoming holiday and ensuing year.

The supply problem is expected to come to an end in a big way in 2009. That's when the first 5,700 or so rooms of a boom of about 40,000 are expected to become available.

MGM Mirage and Boyd Gaming along with some new players to the Las Vegas market are in the process of building multibillion resorts. The biggest of those is the $7.8 billion CityCenter by MGM Mirage, billed as the largest privately-funded development in the country.

Of course, the supply boom could come with its own problems.

Lerner says the vast majority of new rooms will fall in the luxury category. He questioned whether mid-market and value customers would continue to stay on the Strip.

More importantly, Lerner wonders whether the transportation infrastructure will be able to support enough new air and ground traffic to keep the rooms full.

McCarran International Airport is near capacity, and a new airport isn't expected to open until at least 2017.

"There is a bit of a math problem in the pipeline," Lerner said. "Something will go awry, I suspect. But I don't think 2008 is when it will happen."