Las Vegas officials might be wishing the city's now-legendary ad campaign -- "What happens in Vegas stays in Vegas" -- applied likewise to news coverage of the gaming mecca's tribulations. Las Vegas frequently has been cited over the past several months as evidence that economic times really are tough. In large part, this is because the area has been so hard hit by the housing-foreclosure crisis. At the same time, the country's credit crunch is taking a toll on the extensive Las Vegas development pipeline. Boyd Gaming Corp. announced in early August that it would suspend work on the 87-acre Echelon megadevelopment on the Strip for as long as one year, depending on market conditions. The following month, joint venture partner Morgans Hotel Group, slated to develop and run the Mondrian and Delano hotels in Echelon, significantly reduced its investment obligations.
Other Strip strife includes the scrapped Crowne Las Vegas casino-hotel project, significant delays for the Plaza Las Vegas, and serious financial woes for the Cosmopolitan Resort and Casino, which will no longer be a Hyatt. In September, Las Vegas Sands Corp. chairman and CEO Sheldon Adelson loaned Sands $475 million of his own money to avoid cash-flow problems.
The United States' economic downturn affects many destinations, but what happens in Vegas is particularly noteworthy. This meetings and conventions hub typically has weathered hard times better than most, and for that reason any bad news in "typically recession-proof Las Vegas" becomes big news.
"I've been here 19 years, and many of my colleagues have been here that long or longer," says Alan Feldman, senior vice president of public affairs for MGM Mirage, "and there's not a one of us who ever believed Las Vegas was recession-proof. That it was recession-resilient was true, and that's true today."
The Las Vegas marketplace is robust and diverse, and it historically has resisted recessionary effects longer than most. "We have many different cash registers here," explains Feldman. "We have our rooms, we have our food and beverage, we have our entertainment. Obviously, we have our gaming. And we have a variety of things that drive all of those revenues, from leisure travel to meetings and conventions."
But no destination is immune to the current economic woes. "This is a totally different type of economic environment that we are all competing in," notes Rossi Ralenkotter, president and CEO of the Las Vegas Convention and Visitors Authority. "If you look at all of the things happening in the national economy as well as worldwide, all of those things impact travel." Ralenkotter cites rising unemployment, fuel costs, housing foreclosures, stock market volatility and plummeting consumer confidence levels among the factors presenting challenges to every U.S. destination.
He also points out the need to maintain perspective -- particularly when it comes to meetings business. "For the first six months of 2008, our visitation for conventions and meetings was basically flat," he says. "When you look at various shows, and the impact of the economy on different types of industries or different types of associations, you see that some were impacted more than others. But across the board, we held steady with the first six months of '08 vs. the first six months of '07."
Most numbers are down, however. Year-to-date figures through August 2008 vs. the first eight months of 2007 show occupancy dipping by 2.4 percent and the average daily room rate falling by 7.7 percent, according to the LVCVA. Convention attendance is down 3.4 percent, following this August's particularly troubling 22 percent decline over figures for the same month in 2007.
At MGM Mirage, which runs 10 properties on the Strip, "revenue is down across the board, somewhere around the 15 percent range," says Alan Feldman. But MGM Mirage properties still are running more than 90 percent occupancy, he notes, adding, "We are, in 2008, comparing against an all-time record year in 2007. And, in truth, we're still making a little bit more money today than we were in 2005, and very close to where we were in 2006. We're making money. We're not making as much money as we did last year, and Wall Street is in a tizzy over the whole thing. But I think it's important to remember that we're not dealing with the economic reality in other markets around the country and in other industries. The major unknown is how long this will last and whether it will worsen."
Las Vegas has 136,000 hotel rooms to fill, with another 32,000 rooms expected to come online by the end of 2011. Despite some project delays and cancellations, the city continues to build. "There are still a lot of cranes up in the air," says Ralenkotter. "We'll add close to 4,000 rooms this year," he notes, pointing to Steve Wynn's 2,034-room Encore, set to open in December, as well as the 202-room Aliante Station and 307-room Eastside Cannery as key success stories. "We'll add almost 17,000 rooms in 2009. So the confidence in the marketplace continues."
Meanwhile, construction on CityCenter, the most mammoth of megadevelopments, continues on schedule. When it opens in late 2009, the $9.2 billion joint venture of MGM Mirage and Dubai World will add nearly 6,400 rooms to the Strip, divided among the 4,004-room Aria Resort & Casino, 1,543-room Vdara Condo Hotel and two 400-room boutique properties -- the Mandarin Oriental and the Harmon Hotel, Spa & Residences. The complex also promises 300,000 square feet of convention space.
Feldman says MGM Mirage already is signing room-block contracts at Aria for the 2010 Consumer Electronics Show, and the property is getting a "very, very healthy response." The company anticipates the market will begin to rebound in the fourth quarter of 2009 -- and the opening of CityCenter will play a big part of that in Las Vegas, to the tune of 12,000 new jobs and a heavy amount of spending as the project wraps up.Meetings outlook
As of late summer this year, meeting bookings remained strong. Las Vegas Meetings by Harrah's posted an increase in second-quarter group sales over last year, according to Amy Dosa, sales marketing manager for Harrah's Entertainment. She notes, though, that room rates have dipped since last year. "Groups that in the past could have afforded Flamingo now can afford Caesars," she points out.
Dosa does admit Harrah's is seeing "more availability for future years." For those willing to take the risk, Harrah's actively is pursuing multiyear deals that provide a lot of added value, she notes.
MGM Mirage is seeing small changes in its group business, according to Feldman, leading the company to look to leisure business to balance the equation. "We're not seeing an overall reduction in the number of events, but we are seeing a reduction in the number of room nights or the number of attendees."
Planners also are booking meetings with a shorter lead time, Feldman adds. Today, it's a bit more likely they'll find space. "Las Vegas hasn't been the greatest place to do something last-minute in recent years," he says. "This actually may be a good time to take another look."