Betting on Meetings

Meetings & Conventions: Betting on Meetings - June 1998 Current Issue
June 1998
Betting on Meetings

With rapid room growth, casinos need groups to fill gaps

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In the history of gaming towns, it has often been far more difficult for the International Association of Very Important, Hardworking Professionals to get hotel rooms than for the Society of People Who Just Like to Have a Good Time. The first group - imagine this! - actually spends most of its time in meetings. The second group, however, can be counted on to drop wads of cash at the tables and rolls of quarters in the slots.

But in the past, there weren't nearly as many destinations where gamblers could go to part with their money. And in any one town, there weren't nearly as many casino hotels crying out in neon: "Stay here! We're newer! We're bigger! We're glitzier! More fun!"

In this increasingly competitive environment, casinos have been turning to creative sources of revenue beyond gaming: family attractions, high-end shops, quality dining and - yes - even meetings. For some casinos, groups are high rollers of another sort. Conventioneers and meeting attendees tend to pay higher room rates, spend more on food and beverage, use every service of the hotel and even leave a few dollars behind on the casino floor.

That's not to say the door is wide open. When it comes time to book a meeting, planners still are pushed to take midweek dates instead of prime weekend time, and to pay room rates that are higher than average leisure rates, tempting attendees to go outside the block. Yet, there's flexibility in some areas, thanks to more sparkling-new meeting space, larger available room blocks and a wider range of options in pricing and environments.

Growing, growing, overgrown?
Overall in the United States, the rapid growth in gaming revenue is slowing down - this year's growth rate will be less than half that of 1997, predicted a 1998 Bear Stearns report - and Las Vegas will be affected the most.

Las Vegas' hotel inventory topped 105,000 rooms at the end of 1997, and the metro area is adding more than 20,000 rooms by the end of 2000. Included in these figures are massive new themed casinos on the Strip, such as Paris and Mandalay Bay; expansions of existing properties, such as the Rio Suites, and traditional resorts going up in the surrounding valley. Another 50 or so projects are in the proposal stage.

"With all those rooms coming on board, there's a concern about the leisure market being able to drive the demand, room rates and revenue that hotels are looking to generate," says David Peckinpaugh, MGM Grand's vice president of sales and catering.

According to figures from Coopers & Lybrand, new room supply may outpace visitation for the first time in Las Vegas. "In the past 18 to 24 months, there has been a significant increase in room supply without an increase in new attractions," explains Warren Marr, manager of the firm's hospitality and gaming consulting practice in Philadelphia. Most recent room additions came from existing hotels opening new towers, but these don't entice new visitors. "When you have a new must-see attraction, then you see a corresponding major bump in visitation," says Marr.

Will Atlantic City Rise Again? Now celebrating 20 years of gaming, Atlantic City is pushing to reclaim its former status as one of America's top convention destinations. The centerpiece of that effort is a new convention center that opened last year with 500,000 square feet of contiguous exhibit space.

Adjacent to the center is a 500-room headquarters hotel - a non-gaming Sheraton property - to address meeting planners' concerns about getting sufficient room blocks from the casinos. Furthermore, since 1993, the state-run Casino Reinvestment Development Authority has offered low-interest financing to casinos to build more hotel rooms if they would commit a certain percentage of those rooms to convention blocks.

Now Atlantic City offers visitors more than 13,000 hotel rooms, and up to 7,500 of those are committable to group room blocks, according to Noreen Bodman, vice president of communications for the Atlantic City Convention & Visitors Authority.

In 1997, Atlantic City added about 1,300 casino hotel rooms, including expansions of the Hilton, Caesars and Harrah's properties, according to a Coopers & Lybrand report. No new openings are expected this year or next year, but a lot of projects - representing more than 11,000 new casino hotel rooms - have been proposed. The most definite of those is Mirage Resorts' 2,000-room Le Jardin, which may be accompanied by two other casinos built by Boyd Gaming and Circus Circus. (The partners were still in negotiations at press time.) Also likely is an MGM Grand project; the company has been looking for property in town. Several existing casinos have considered further expansions, including Harrah's, which has another 1,500 rooms in mind.

The prospect of Mirage's Le Jardin - which will be the area's first full-blown Las Vegas-style theme casino - and competition from new U.S. gaming jurisdictions - also are prompting casinos to redevelop and reposition themselves. Bally's opened its first themed casino area, called Wild Wild West. Caesars is more heavily developing its Roman Empire theme. And Sun International may revamp its Resorts Casino Hotel with a beach club atmosphere, similar to its Atlantis resort in the Bahamas.

Gaming industry analysts feel the city needs to add must-see attractions to keep people in town longer. According to Coopers & Lybrand, although Atlantic City is the most heavily visited destination in the United States, the average visitor stay is only five to six hours - mostly gamblers from New York or New Jersey who make the roundtrip in a day.

"For Atlantic City to remain vibrant and healthy, we have to change with the times," says Bodman. "We have to make it an overall destination; we can't just rest on gaming." As additional evidence of the seaside resort area's move in this direction, Bodman points to recent additions such as a Planet Hollywood, a Hard Rock Cafe, and a Ripley's Believe It or Not! Museum - as well as to coming attractions such as a restored historic lighthouse, a marine life education center and the re-outfitting of the old Convention Hall into a modern special events arena that will not only continue to host the Miss America pageant and boxing matches, but also will welcome concerts, minor-league hockey games and other events.

D.N.

In the near future, additional rooms will come largely from such must-see theme casinos as Mirage Resorts' luxury-market Bellagio, The Venetian, Hilton's Paris and Circus Circus' Mandalay Bay. Nonetheless, Coopers & Lybrand predicts that in 1999, room supply will increase 10.6 percent, while visitation increases 6.3 percent. In 2000, supply will rise 5.5 percent, but visitation only 2.9 percent.

If major new casinos have drawn visitors in the past, why wouldn't demand keep up in the future? One reason is travelers have more choices. At one time, the legalization of gaming elsewhere in the country was expected to benefit Las Vegas, explains Michael Gasta, Hilton Gaming Corp.'s vice president of sales and marketing, who has worked in Las Vegas for 16 years. With gambling in their own backyards, more people (and corporate business) might perceive it as acceptable, try it and become interested enough to head to the big city for the real thing.

But now, says Gasta, "Out-of-state gaming is getting bigger and bigger. It's not just bingo parlors anymore. They have guest rooms and meeting space and they're creating more of an entertainment environment. That has somewhat hurt Las Vegas."

Airline service is another issue. Although McCarran International Airport is adding 26 gates this summer, "So far the major carriers have not signed up for significant assignments to those gates," says Marr. "Southwest and a couple of regional carriers have taken on new gates, but some carriers from the East Coast have actually decreased their air service." He adds, "Passenger traffic was down in December, January and February."

The need for more transcontinental flights becomes even more important with top-end properties entering Las Vegas for the first time. "The person that Steve Wynn [Mirage Resorts' owner] is targeting for Bellagio is not going to want to change planes in Cleveland to get to Vegas," says Marr. "You need to get direct, nonstop service with more frequency from major East Coast hubs."

Group business pays
With all of these issues facing Las Vegas, "Almost all of the first-, second- and even some third-tier properties are getting into the meetings business," says Gasta. "A lot of people who haven't been players are giving a room block to those events held at the Sands [Expo Center] or the convention center. They are doing it for two reasons: They can get a good rate compared to leisure travelers, and it gives them a base of occupancy to build on."

With the exception of a few properties - such as the Las Vegas Hilton, next to the convention center, and The Venetian (a new property being built on the site of the Sands Hotel as part of a complex that includes the Sands Expo Center) - casino operators have considered meetings only as midweek filler when business is low. "Now everyone is realizing there are dollars in the market," says Gasta.

"It's a very profitable segment, from room rates to banquet revenue to the length of stay to the profile of the guests," says Danielle Babilino, vice president of sales for Paris Casino Resort and Bally's Las Vegas. "The leisure traveler...shops for the best value. The planner is willing to pay what it takes to produce the convention. The conventioneer on an expense account has a larger budget; most will gamble and use room service and the concierge and all the amenities in the hotel."

Gambling still drives the properties, but "if the market starts to tighten, the casino hotels are going to look at business in a different light," says Marr. "They can look at the gaming profile [how much attendees are likely to spend in the casino] of a group and offer lower room rates, or they can just lower their expectation on the gaming profile and take more traditional groups. As higher-end products enter the market, you'll see a higher percentage of their revenue coming from non-gaming sources."

As evidence of their new dedication to conventions, casinos point to recent expansions in meeting space. Among the projects: Caesars Palace added 110,000 square feet of function space last year, the MGM Grand Hotel/Casino completed the 380,000-square-foot MGM Grand Conference Center in April and the Rio Suite Hotel & Casino will open a 100,000-square-foot convention center by early 1999.

New properties are being designed with large amounts of meeting space. Bellagio will open with 125,000 square feet, Mandalay Bay with 100,000 square feet, Paris Casino Resort with 130,000 square feet, and The Venetian will be connected to the Sands Expo Center, which is expanding to 1.6 million square feet of space.

"Our whole strategy is completely different from other hotels in Las Vegas that are casino-based operations," says Jeff Beckelman, vice president of sales and marketing for The Venetian. "We are building a complex targeted to the convention and trade show industry." As opposed to the former Sands Hotel, a casino-based operation with limited meeting space, the primary business at the Venetian will be large trade shows at the Expo Center, plus smaller trade shows and conventions.

"We just made a $90 million investment in conventions," says MGM Grand's Peckinpaugh. "That's probably the biggest message we can send to the industry." With its new conference space and the upcoming addition of 2,000 hotel rooms, the MGM Grand wants to host more events entirely in-house. "We are trying to self-contain as much business as we can."

Much of the new meeting space is being designed to address planners' concerns about losing attendees when they pass by the casino on the way from their guest rooms to the conference rooms. (See "Being There" on page 75.) For example, the Aladdin Hotel & Casino, which is being rebuilt, has been designed so that the casino and convention area will be on separate floors. Similarly, the MGM Grand Conference Center is a separate building from the casino, with its own entrance, valet parking and bus area.

Along with the extra meeting space, casinos are beefing up their convention services. The MGM Grand has added sales and service staff. According to Peckinpaugh, everyone in convention sales and service will take the Certified Meeting Professional (CMP) exam. Plus, at the beginning of this year, the property launched its first small meetings program - Grand Meetings - to target events of 150 rooms or fewer on peak night.

With the opening of Bellagio, which will target corporate and incentive customers who typically hold events at Four Seasons or Ritz-Carlton resorts, "our company [Mirage] is making a commitment from a service level," says Chris Flatt, vice president of hotel sales and marketing. "We will have 8,000 employees for 3,000 rooms; the service ratio to the guest is going to be very, very high."

Planners also may see a difference in service as traditional hotel companies enter the Las Vegas casino market. (Four Seasons is partnering with Circus Circus, Marriott is working with MGM Grand, and Regent is developing a resort.) "The major hotel brands are used to dealing with meeting planners on a regular basis - that's their bread and butter," says Marr.

MGM Grand is capitalizing on its new relationship with Marriott, and not only by getting access to the chain's customer database, national sales staff and reservations system. Says Peckinpaugh, "We have sent our convention services staff to spend time in Marriott's large convention hotels in Anaheim, San Francisco and Orlando to...see how we can utilize their systems and approach and combine it with our unique property."

Price and policies
One of the benefits of all the building in Las Vegas, according to the casinos, is that they now will be able to offer planners more options. With the opening of Bellagio, Mirage Resorts will have four Las Vegas properties at different price points. Likewise, when Paris is finished, Hilton and Bally's will have four properties, totaling about 12,000 rooms - 10 percent of the city's inventory.

"We hope to be able to do in-house conventions within three or four properties - even to the point of having one contract," says Hilton's Gasta. "The four properties all offer a very different environments and different pricing." To start, Paris and the adjacent Bally's will be sold as one property, with 30 percent of their total rooms dedicated to the convention market. one sales department and one convention services team will serve both properties.

Also, with more rooms within a company's portfolio to meet weekend leisure demand, "I think you are seeing more flexibility from properties as to the [group booking] patterns that are acceptable," says Peckinpaugh. "And you're seeing the ceiling on the number of rooms that hotels will commit to conventions increasing."

MGM, Bally's/Paris and Bellagio salespeople said they'd be willing to book groups on weekends - depending on the dates and whether any special events, such as concerts or boxing matches, are scheduled. Paris and Bally's could allot as many as 1,000 to 1,500 rooms for a weekend convention block. "We need to get the midweek block in first," qualifies Babilino. "But we recognize that, with 5,800 rooms between two complexes, weekend business is a necessity."

Meet me in Mississippi Among the newer gaming markets, Mississippi stands out as the hot growth prospect. Already known regionally as a vacation beach resort, the Mississippi Gulf Coast now offers 12 casinos - nine with hotels - in the towns of Biloxi and Gulfport.

The area's guest room and meeting space inventories continue to grow. The two Grand Casinos will each have about 1,000 rooms by year-end. The newest property to open, Imperial Palace, will have 1,088 guest rooms. The Mississippi Coast Coliseum and Convention Center expanded by 80,000 square feet last fall. And Mirage will enter the market with its 1,780-room Beau Rivage next year.

"There is a major shift going on there," says Warren Marr, a gaming analyst at Coopers & Lybrand. "Beau Rivage will be setting new standards from a theming standpoint and quality level. This is certainly a market that will continue to increase its attraction to group business."

The Mississippi Gulf Coast Convention & Visitors Bureau claims it doesn't face as much of a challenge as other city bureaus do in getting meeting room blocks from casinos. "I've worked in Las Vegas and Atlantic City, and this is about the most cooperative place," comments Stephen Richer, the CVB's executive director.

"We have some pretty sophisticated people here, and they understand the value of that business from Sunday to Friday morning," adds Richer. (Beau Rivage, for one, expects meetings to be one-third of its business.) And with a total inventory of about 12,000 rooms - 7,000 in non-casino hotels - the Gulf Coast is able to house conventions on weekends.

Mississippi's success with casino gaming has even prompted the tiny town of Tunica to enter the meetings market. Only a half-hour drive from Tennessee's Memphis International Airport, Tunica has nine casinos, including brands like Bally's and Harrah's, all with function space. "They are now competing with Memphis for meetings business pretty significantly," says Marr of Coopers & Lybrand.

Three years ago, Tunica had only a handful of hotel rooms. Now, it has 6,000 rooms and about 140,000 square feet of meeting space. This year's debut of Circus Circus' Gold Strike brought 1,200 rooms onto the market, and the Grand Casino is adding 600 more rooms this year. Developer interest is high enough that the town could soon have as many 10,000 rooms.

While the fledgling destination initially focused on leisure travelers, it's already going after meetings, in particular association groups of up to 1,000 for Sunday through Thursday. "This is really our first year," says Bill Canter, director of sales and marketing for the Tunica Convention & Visitors Bureau, formed a year-and-a-half ago. The area's first meetings guide was released this spring.

Tunica has just begun adding the recreation necessary to draw more groups: Two of its three theaters opened early this year, its first golf course opened in May and its second is opening in October. Plus, it has Memphis nearby.

The town's efforts are paying off. It is now being included on many Mississippi associations' destination rotations, and is drawing groups from Tennessee and Arkansas, as well as some national business. For now, there's no rush to step up the pace of growth. Says Canter, "We are learning to crawl before we walk."

D.N.