Vegas becomes odds-on favorite for tourists, industry
By Bonnie Harris
Los Angeles Times
The nagging travel slump that has most of the U.S. tourism industry facing a recovery crapshoot has positioned Las Vegas as a high-stakes winner — with packed hotels, rebounding room rates and profits for the city's leading casino giants.
Vegas has emerged as a strong bet in an uncertain economic climate largely because more leisure travelers and convention-goers are driving to Sin City rather than flying to places such as San Francisco and New York since the Sept. 11 attacks.
Gaming and tourism statistics show that Vegas has almost fully recovered from the travel slowdown that paralyzed the country immediately after the terrorist attacks, and analysts note that the industry's high-rolling companies are spending with bullish confidence, seemingly oblivious to the worst bear market in decades.
"Everywhere you look in Vegas says there's huge bets being placed on the future," said Keith Schwer, director of the Center for Economics and Business Research at the University of Nevada.
"There's growth, crowds, construction ... and the latest earnings suggest not everyone is giving away rooms at significant price reductions anymore. There are considerable profits being made."
Indeed, much of the recent gains reported by casino companies were attributed to higher hotel revenue; the Las Vegas Convention and Visitors Authority said that the weekend rates have returned to pre-Sept. 11 levels and that the city's hotels are running at a consistent 93 percent occupancy rate. Overall, average daily room rates were about $76 through August — down about 5 percent from a year ago.
As a result, Park Place Entertainment Corp., the largest casino company and operator of Caesars Palace, Paris Las Vegas and other Vegas marquee names, said net income for the third quarter was $40 million, or 13 cents a share, compared with a loss of $101 million, or 34 cents, a year earlier.
MGM Mirage, the No. 2 casino company, reported a $69.6 million third-quarter profit after a $14.4 million loss a year earlier. And Harrah's Entertainment Inc., the No. 3 company, said its profit rose 63 percent. All three companies also raked in more revenue during the quarter.
"Gaming revenues like this indicate rising consumer confidence and an improvement in discretionary spending," said David Givens, an associate economist with Economy.com. "It's believed to be an early indicator of economic growth."
Givens pointed to the construction boom under way in Las Vegas, including a new tower at MGM Mirage's Bellagio hotel that will add 925 rooms to the resort and increase its capacity by nearly 25 percent, as well as a $225 million expansion of the Mandalay Bay hotel and casino that will add 1,125 rooms.
And Steve Wynn, the casino mogul who led the city's transformation of the past two decades with the creation of theme-oriented resorts such as Treasure Island, Mirage and Bellagio, is preparing for a comeback after selling his Mirage Resorts Corp. to MGM Grand Inc. two years ago. Last week, he took his company, Wynn Resorts Inc., public and raised at least $400 million to finance plans to build a $2.4 billion, 2,700-room casino and resort called Le Reve on the Strip. Groundbreaking is scheduled for this month, with opening set for April 2005.
"When you come here you do not think 'slowdown,' " said Erika Brandvik, a spokeswoman for the Las Vegas Convention and Visitors Authority. "When you see everything that's going on here you do not think 'downturn.' "
Still, shares of the top Vegas casino operators fell after earnings were reported last week. Analysts speculated that was because forecasts were either lower than expected or the companies didn't provide enough guidance for the future.
Jason Ader, a gambling analyst with Bear Stearns Co., said he anticipates another two or even three "tough quarters" for the high-end gaming industry as consumers resume their search for travel deals in what continues to be an unsettled economy.
"Competition for the tourist dollar is going to remain high," Ader said. "Vegas is recovering better than most destinations, but they can't claim they're completely out of the woods yet."
City tourism officials say a full recovery isn't far away, in large part because of an increase in convention business that has already exceeded 2000 levels for the year. Through August of this year, nearly 4 million conventiongoers have traveled to Las Vegas, bringing in an estimated $4.4 million for the city during their stays. That compares to 3.8 million conventiongoers for all of 2000, when convention spending totaled $4.2 million.
And while the number of visitors arriving by air was down 6.2 percent through August, drive-in traffic increased 11 percent for the same period — a jump that is attributed mostly to Californians, who account for a full third of the city's total annual visitors of 35 million.
Michael Reichartz, vice president of sales at Travelscape.com, a subsidiary of Expedia.com, said Las Vegas remains the Web site's No. 1 destination for online bookings. Even as room rates continue to creep back up, demand hasn't slowed, he said. Bookings for the holidays are already up over last year, when visitor numbers pushed hotel occupancy levels to 97 percent throughout the city.
"Vegas has a lot going for it right now," Reichartz said. "First, it's a destination that attracts more risk-takers to begin with. It's also not a total family vacation spot like Orlando, which relies heavily on people traveling with their children. And finally, it's still a great deal."
