Even Las Vegas, which still has no peer when it comes to filling a burgeoning inventory of hotel rooms and drawing convention crowds, isn’t entirely immune to today’s economic and real estate financing challenges. Stalled construction on Echelon Place, one of the Strip’s most high-profile resort complexes, and a dip in meetings business are part of the landscape these days.
“Vegas is holding its own as best it can in a very tough economy,” says Carling Dinkler III, president, Las Vegas-based Custom Conventions, a DMC and meeting planning company. “It’s a little more user-friendly than in the past. Customer service has improved. Phone calls are returned more quickly. Just like after 9/11, they step on that advertising pedal a little harder. I’m seeing deals everywhere.”
Kevin Baggar, director of internet marketing and research for the Las Vegas Convention & Visitors Authority (LVCVA), says that the leisure market has helped compensate for some meetings and conventions losses.
“Occupancies are still strong. It’s on the spending side that there’s been an effect. People are spending less,” he says.
“With larger trade shows and conventions, some have done well and some have had challenges. Delegates have stayed for a shorter time and there are more people per hotel room. The number of smaller corporate meetings has declined. Some companies are holding off,” he says.
According to LVCVA figures, gaming revenues were down more than 5 percent for the first six months of this year compared with the same period last year. Visitor volume was off just 0.5 percent and convention attendance off only 0.2 percent. However, total room nights occupied by tourists increased 5.3 percent while those occupied by convention delegates dropped 9.5 percent.
Demand Drop
Gary Schirmacher, CMP, senior vice president-sourcing for Experient, a meeting planning company with offices nationwide, says that with more inventory coming to Vegas, “hotels are more aggressive in making deals than they were a year ago. It’s more of a buyers’ market than we’ve seen at any time since 2003 or 2004.
“Demand is still there,” he adds. “Meeting planners know they get good attendance in Vegas. Probably 20 percent of associations are still seeing delegate increases. Corporate meetings—that is where you’re starting to see a drop-off and budgets being cut.”
According to Schirmacher, meeting budgets are not increasing as fast as costs.
“Groups having a focus on attracting international attendees can make up some shortfalls,” he says. “We see international participation strong with the weak dollar enabling them to consider attending North American meetings.”
A further concern, he adds, is airlift in late October and November, with route cuts in many cities.
“Air is the last thing people book,” he says. “Planners can’t take for granted that an attendee who has registered and booked housing won’t cancel when they see the air prices or schedules weeks after registering.”
Dinkler says he recently had one European IT incentive group cut its budget two months before its Vegas arrival this fall.
“We had to rethink the hotels. As an industry, we have to be a little more creative, think out of the box, do things a tad bit differently to meet expectations. We live in a global economy and everybody is watching the dollars and euros,” he says.
Francine McKanna, president of PRA Las Vegas, a local DMC, notes that “Strip properties are more competitive now, but groups are not spending as much. I started to see this last fall. Where they would stay three nights they are staying two; when four, they are staying three. We’re also seeing groups cancel. We’re under the gun more. Everything is last-minute.”
Michael Massari, vice president of meeting sales and operations for Las Vegas Meetings by Harrah’s Entertainment, says revenue from meetings and conventions for the six properties under the Meetings by Harrah’s umbrella were up modestly while future bookings were down slightly “but still at an acceptable level.”
“We are fortunate. Las Vegas has a natural advantage, and that is helping us through difficult times,” he says. “Where else can you find such a variety of meeting space in one location with all the entertainment, and an airport next door?”
Also helping, he says, is Meetings by Harrah’s one-stop-shop program with one contract and one master bill geared to making the life of the planner easier. Early this year, the program, which had enabled a group to book ballroom space at any of the properties, was extended to group space at all restaurants and lounges and other venues at Bally’s, Caesars Palace, the Flamingo, Harrah’s Las Vegas, Paris and Rio, which together deliver 1 million square feet of meeting space and almost 18,000 rooms.
“Customers are eating it up and are using it at every turn. It gives us a sustainable advantage,” he says.
Construction Halted
An announcement by Boyd Gaming Corp. in August to delay work on its $4.8 billion, 5,000-room Echelon project on the Las Vegas Strip came as a shocker. The company expects construction to resume in nine to 12 months, “assuming credit market conditions and the economic outlook improves.” Work on a sizeable chunk of the project has already been completed.
Echelon plans call for 750,000 square feet of meeting and convention space, and two Morgan’s Hotel Group brands—Delano and Mondrian—among its five hotels. Morgan’s stated it “does not intend to further extend the joint venture agreement on its current terms but expects to evaluate future proposals relating to the project with Boyd.”
In another development delay, plans are now on hold for the $5 billion Plaza hotel and casino that was to break ground on the Strip in December. According to a spokesman, construction may start next year.
Excluding Echelon and the Plaza, $23 billion in new resort development with 23,000 guest rooms is expected to come onto the market in the next three to four years, notes Brian Gordon, principal at Applied Analysis, a Vegas-based research and advisory firm.
“Las Vegas has never seen this amount of development,” he says. “It’s more than the total value carried on the books of the Strip’s existing resorts. It’s a unique time. Fuel prices are affecting people’s attitudes, the housing market has been falling apart, financial markets are affected.”
