April's room rates decrease sharply

War concerns sink early reservations

March 12, 2003 - Advance room rates for the first week of April are down sharply as travelers grow more hesitant to book vacations with war looming in the Middle East.

For the week of March 31, the average Strip midweek room rate is down 24 percent to $104 for rooms booked three weeks or more in advance. And the average weekend rate is down 11 percent to $249.

The results are weak and represent a return to negative territory following strong results for the end of March, said Joe Greff, gaming analyst at Fulcrum Global Partners, an independent Wall Street investment research firm that collected the survey data.

The average rates had increased sharply the previous week, with midweek rates up 50 percent from the year before and weekend rates up 10 percent, driven by the National Collegiate Athletic Association's men's basketball tournament, college students' spring break and convention business.

Over the first quarter, midweek comparisons have been mixed, with six of the last 14 weeks in positive territory.

However, recent results have been generally softer, as fears over a potential war with Iraq appear to have impacted travel demand, Greff said.

Weekend results have been stronger, mostly due to easy comparisons, but compared to 2001, when rates were "normal," results continue to be mixed, he said.

Although room rate performance for the week of March 31 is based on tough comparisons with 2002, travelers are also becoming more hesitant to book vacations ahead of what looks like an increasing chance that the United States is going to war with Iraq, he said.

"In addition, while citywide convention attendance is expected to be considerably stronger than in the comparable period (a year ago), growth is due entirely to one large convention at Mandalay Bay," he said.

Excluding this convention, citywide attendance is projected to be down 50 percent.

"In our opinion, this explains why rates are very strong at Mandalay Bay, and to a lesser extent, Luxor, but still soft on the remainder of the Strip," Greff said.

Other analysts say war worries are weighing heavily on the traveling public.

"If we go to war, airline executives are predicting a 40 percent drop in international travel and a 20 percent drop in domestic," said Brian Gordon, spokesman for Applied Analysis, a Las Vegas-based financial consulting company.

The gaming industry, because it is travel-related, is already beginning to see the effect with the running drop-dead deadlines for the start of hostilities.

"We see people still traveling by vehicle. They tend to be more cost conscious and are looking for better room rates," he said.

"But with the current stock market, a lot of medium- to high-end players are holding back as well," Gordon said.

Mandalay Resort Group's midweek room rates declined 14 percent and weekend rates fell 9 percent, based on data from the companies on rooms already booked.

Comparisons were difficult during the midweek, up 17 percent in 2002, but easy on the weekend (down 1 percent in 2002).

Results at individual properties were mixed with Mandalay Bay and Luxor generating solid room rate growth due to the International Sign Association conference (18,000 expected attendees) at the new Mandalay Bay convention center.

"Our convention center does add to room rates. When we have conventions in, and we do the first week in April, that adds to our raters as it does at Mandalay Bay, Excalibur and Luxor," said Mandalay Resort spokesman John Marz.

Projections for convention business for the remainder of the year are looking strong, he said, and "we are still booking a lot of meetings and trade shows to fill out the holes."

MGM Mirage midweek room rates declined 27 percent during the week of March 31 and 13 percent on the weekend.

Midweek results were affected by the loss of two large conferences at the Mirage and MGM Grand (2,700 delegates) from the comparable period in 2002.

Weekend results did not include one large convention (2,200 delegates) that took place last year and also faced a tough comparison of a 27 percent increase in 2002.

Park Place Entertainment Corp. midweek room rates declined 31 and weekend rates fell 10 percent. Results for the week of March 31, however, were based on tough comparisons.

Last year, Park place midweek rates in the comparable period were up 39 percent, while the weekend rate was up 41 percent.

Park Place hosted one major convention last year at Paris Las Vegas (2,000 delegates) in the comparable period compared with none this year.

Park Place spokesman Robert Stewart confirmed the market is soft during the first week in April throughout the city, but said there are exceptions.

"Caesars Palace is trending up strongly. That's the first (full) month Celine Dion comes alive and we're booked to capacity with strong average daily room rates," he said.

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Article Copyright ©: R. Smith, Las Vegas Review-Journal