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On the Alert for Softening Room Rates in Las Vegas

Hotels: Building boom is finally generating speculation that prices just have to come down.


For several years now, the hotel-casinos of Las Vegas have operated in an economic universe all their own: At rates far outpacing the overall U.S. economy, they keep building new rooms, and the tourists of the world keep responding by arriving in ever larger numbers. In the corner of the desert, it seems, supply creates demand.

Hence the current building boom, which has delivered a few of Europe's greatest hits to the Las Vegas skyline and prompted a new wave of speculation among close watchers of the city.

Some say hotel rates are softening, and that things have to slow down. In January, Terrence Lanni, chief executive of the MGM Grand, called for more restrictions on hotel construction in the area. Since then, Lanni has canceled plans for a 1,500-room collaborative project with Marriott in Las Vegas, saying he will instead look at options in other cities.

"There's definitely a softening [of prices] because of the extra inventory," says Bob Diener, president of Hotel Reservations Network. (HRN, accessible via the Internet at or by telephone at (800) 964-6835, acts as a clearinghouse for hotel rooms at discounted rates.)

When Diener and I did a quick scan recently of HRN for the night of Monday, April 26, we found these reasonable room rates: Mandalay Bay Resort & Casino at $99, the Hard Rock Hotel at $79, Monte Carlo at $89.

Other soft-market theorists point to the Bellagio, which opened in October with rates of $150 per night and beyond, but fell below $100 on many weekdays this winter.

There's some evidence of softening in prices based on a hotel survey published in the Las Vegas Advisor newsletter. When the editors called around in March 1998 and asked for weekday and weekend rates for the following May, the best weekday quotes they heard among upscale hotels were $69 from Luxor, $89 from New York-New York and $99 from Bally's. A year later, the same exercise yielded $59 from the Las Vegas Hilton, $60 from the MGM Grand and $69 from Luxor.

The Advisor's survey of the best upscale weekend prices also shows a price drop: Last year they ran from $105 to $125 at the MGM Grand, Las Vegas Hilton and Bally's, compared with $99 to $109 this year (at the Las Vegas Hilton, MGM Grand and Luxor).

Yet other observers cite widespread enthusiasm over the new Mandalay Bay complex (which opened March 2) and insist that the market is really quite strong. And that, of course, is bad for us consumers.

"They've held the [price] line pretty well," says Anthony Curtis, publisher of the Las Vegas Advisor. "I haven't seen a big [price] drop because of the new places coming on line. But I think that's coming. I think there's going to be a delayed effect."

In any event, the city is full of new rooms, and the annual summer slump, when temperatures soar and room rates fall, isn't so far away. So the landscape is worth a bargain-hunter's scrutiny.

Even though casinos are less likely these days to use their hotel operations as loss leaders to draw in gamblers, a Las Vegas hotel room is still a remarkable product. Its price may fluctuate almost as often as air fares do, depending on seasons and conventions and days of the week, but on the whole, a Las Vegas room costs far less than a comparable room in Manhattan or San Francisco.

The average daily rate paid by all hotel and motel guests in the Las Vegas metropolitan area was $65.51 last year, up from about $58 in 1996, despite a slump in overall occupancy from 90.4% in 1996 to 85.8% last year as citywide inventory climbed to about 110,000 rooms. Among major hotels on "the Strip" (Las Vegas Boulevard), the average rate has been crawling along with the national inflation rate--$83.05 last year, up from about $80 in 1996.

(If you're determined to pay as little as possible, bypass the Strip and head for downtown Las Vegas. There, redevelopment efforts notwithstanding, industry surveys show average room rates remain about $45.)

At the Mandalay Bay, 3,300 rooms are on offer (prevailing low-end rates of $99 to $149, a reservations operator said), along with 15 restaurants, a 1,700-seat showroom and a House of Blues venue for live music. Also in the Mandalay Bay complex is the casino-free, very high-end Four Seasons, which expected to bring the last of its 424 rooms into service this week. The Four Seasons' introductory Las Vegas weeknight rate is $195, with breakfast for two thrown in. Meanwhile, at the Four Seasons hotels in Beverly Hills and New York, rates typically start at $340 and $415 respectively.

The Las Vegas Four Seasons spokeswoman, Lori Kennedy, notes that "we are having to respond a little bit to the market. We wouldn't necessarily be as reactive in other cities. But other cities aren't as volatile as Las Vegas."

Now consider the calendar.

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