Counting on the carriage trade

The average cost for a gallon of gasoline compared to the same time last year was up 17 percent in California and Arizona this spring; 16 percent in Nevada.

Prices of staple foods including milk, eggs and meat have also risen at double-digit rates.

Midwestern tourists who flew here earlier this year for $400 per couple, round trip, now report being quoted summer round-trip fares of $400 ... per person.

Shall we blame "greedy milk and air-fare speculators"? When the Federal Reserve creates new "dollars" at an effective annual rate of 16 to 18 percent, annual price hikes in the same range are thoroughly predictable.

But few Americans get 17 percent annual raises. So many a middle-class American family now considers a vacation closer to home.

Airlines are responding by trimming flight schedules. The Official Airline Guide reports service to Las Vegas from Los Angeles will drop 8 percent by year's end. The decrease in seats from the Bay area will be 9 percent; from Phoenix 15 percent; from Honolulu and Dallas closer to 30 percent.

The investment that funds the construction of new resorts on the Strip is predicated on continuing 90 percent hotel occupancy rates. The current rate of 89 percent isn't bad -- though it's been achieved by a 2.7 percent reduction in average room rates, to about $132, the Convention and Visitors Authority reports. But how will things look by year's end?

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

On the bright side, a 12 percent decline in passengers passing through McCarran won't really mean a loss of 1.7 million tourists, because 51 percent of seats scheduled to be cut are on connecting flights -- travelers who were never going to get off the plane here, anyway.

Some of the seat cuts also represent excess capacity. No hotel loses a guest if the airline simply cuts an empty seat.

Still, it's a challenge. In the old days, the approach of first resort would have been to bundle up some junkets -- agree to come gamble, and the hotel would subsidize your room and meals, maybe even arrange a discounted air fare.

Las Vegas-based Allegiant Air has been posting double-digit growth even as the rest of that industry suffers a tailspin by bundling air fares with hotel rooms. Is that the answer?

No, it increasingly appears the Las Vegas marketing brain trust will resist the urge to woo middle-class bargain hunters who balk at cover charges and $100 show tickets, bypassing fancy nightclubs and eateries in search of the dollar beer and hot dog.

Instead, leaders of the Las Vegas Convention and Visitors Authority last month unveiled an $18 million effort to attract more foreigners.

About 12 percent of the nearly 40 million people who visit Las Vegas annually come from outside the United States. The goal will be to increase foreign visitation to 15 percent by 2011; 18 percent by 2020.

More than 40 million Chinese people traveled overseas in 2007, for example, and Chinese tourists are the biggest spenders in many places they visit, shelling out an average of $6,000 each when they come here.

"With the devaluation of the dollar, it is like America is on sale for them," explains Kathy Anderson, travel and tourism manager for General Growth Properties, owners of the Fashion Show mall, as well as the Shoppes at Palazzo on the Strip.

Rich American club-goers and foreigners to whom America is a newly discovered weak-dollar "bargain." Will the combination be enough to replace the vanishing middle-class American family on what's now considered a "low-ball" $500-a-day budget?

It's a high-risk play. But we could build our own Boot Hill out of pundits who've confidently predicted that Las Vegas has finally gone too far -- that the miracle in the desert was about to run out of sparkle.

We roll the dice and see.