The story du jour in the popular press is whether Las Vegas is pricing itself out of success.
The stories cite growing resort and parking fees and $26 bottles of water to make one ask whether Sin City has become Gouge City.
Stories focus on declining hotel occupancy and rates and fewer foreign visitors — the most lucrative kind of visitor. And surely, the June air traffic reports were discouraging with foreign passenger counts down 9.8 percent. Air Canada’s numbers were atrocious, down 13 percent year-to-date and 32 percent from May, no doubt thanks to Trumpian bluster and insults.
The flip side, which these stories tend to ignore, is the penny-pinching that is evident at certain properties where some public areas are like walking through a morgue as once 24/7 coffee shops are shuttered at night and restaurants are dark on early weekdays.
Casino operators appear somewhat sanguine about the trends: Canadians will come back some day; capital projects aimed at freshening properties continue; visitation is affected by events; and next year already has a stronger convention calendar, with 140,000-attendee Con/Agg due back, for example. (However, that isn’t growth, as Con/Agg and others then rotate out of town, creating tough future comparisons.)
Indeed, MGM Resorts CEO Bill Hornbuckle was just short of table-pounding bullish on Las Vegas in his company’s second-quarter earnings call, citing next year’s convention calendar and much less construction disruption at his properties.
But the stories questioning the health of Las Vegas are founded on more than bottled water and nostalgia over the lost buffet.
We have become accustomed to Las Vegas being a growth story forever, from the 1930s and ’40s when Hollywood glitterati discovered they were just a short hop away from legal gambling, to the development of the drive-to resorts and the Las Vegas Strip in the 1950s and ‘60s, to the mega-resort boom of 1989 to the early 2000s.
But that was yesterday. Over the past six years, hotel room count has grown a scant 0.9 percent. Recent visitation is down in almost every category. Of course, a portion of that is the closing of Mirage and Tropicana, both of which will be replaced. Hard Rock will rise at the Mirage in 2027 with 600 more rooms than its 3,044-room predecessor. At some point, a hotel will rise in place of the Tropicana next to the new Las Vegas A’s stadium.
Meanwhile, some companies are doing fine. Just ask the Fertitta brothers, who control Red Rock Resorts. They just reported spectacular results and their new Durango Station casino is a home run.
Or ask Boyd CEO Keith Smith. Boyd’s Las Vegas locals properties are growing.
Likewise, it is an accepted fact that Michael Gaughan-owned South Point is packing in free-spending guests.
There are two differences between these properties and their Strip peers: 1) They are riding the wave of population growth as the Las Vegas Valley adds 50,000 residents a year, and 2) They cater to locals who know a good deal and expect to be treated well. No $26 water, no parking fees, no 6-5 blackjack and single-zero roulette.
And, given their high-quality amenities and hotels, they can even tap some of those regional customers turned off by the Strip properties that are so quick to take the fun out of a trip to Las Vegas by taking their money before they even see the casino floor.
So, the Las Vegas Strip may be sound. More conventions will return. But it also may be mature, meaning it is more susceptible to economic trends, consumer confidence and, yes, treating customers well, even those who aren’t on their employer’s tab or plunking down black chips and higher at the gaming tables.
