Las Vegas executives assess growth of city October 12, 2001 Share 1 -- Travel Weekly brought together a group of tour operators and hotel executives in Las Vegas for a discussion about Nevada's gaming capital. The meeting took place before the events of Sept. 11.Participants: • Bruce Bommarito, executive director -- Nevada Commission on Tourism • Fletch Brunelle, vice president of sales and marketing -- MGM Mirage • Michael Gasta, vice president of sales -- Park Place Entertainment • John Marz, senior vice president of marketing and events -- Mandalay Resort Group • Robert Purdy, director of sales and marketing -- Hyatt Regency Lake Las Vegas Resort • Rossi Ralenkotter, vice president of marketing -- Las Vegas Convention and Visitors Authority • Jack Richards, chief operating officer -- America West Vacations • Diane Steenman, chief operating officer -- Lowestfare.com • Dan Westbrook, president -- American Airlines VacationsModerator: Alan Fredericks, vice president/editorial director -- Travel WeeklyFREDERICKS: Rossi, I wonder if you could explain how Las Vegas positions itself in the market.RALENKOTTER: We've evolved from being a West Coast gaming destination to a full-service resort and convention destination that appeals to domestic and international visitors and convention delegates.What's make it possible for us to attract close to 36 million visitors a year is the fact that we have something for everyone. There's something that travel agents can market to each of their customer segments, whether it's a special event, a large or small convention, corporate meetings or incentive travel.RICHARDS: I've been doing business in the city since 1978, as it has grown from a gambling town to a full-service resort. Gambling is not the only reason they come here. They come for shows, spa, golf.STEENMAN: We are wholesaling Las Vegas and it's become our largest destination, growing at 30% every year. It's really a product everyone wants. The consumer is finding it can meet every price point. There aren't many destinations that can do that all in one.WESTBROOK: As Rossi described it, we've seen Vegas evolve from what was a relatively single-purpose destination to a very broad-based host of activities and attractions. One of the satisfying things to us is that Las Vegas typically appeals to the kind of customer who comes to American Airlines Vacations. Given the demographics of our customers, we try to offer a broad range of product and Vegas is particularly good at that. It has a full range of accommodations and activities.With the agents actively participating in directing what is appropriate for their customers, it works very well. I think the agencies also have been active in getting that message out.FREDERICKS: Have the changes in Las Vegas changed the way you market the product?WESTBROOK: Absolutely. We market the shopping, the dining, the entertainment -- unlike the old days when it was a gaming destination.BOMMARITO: As the primary fulfillment agency for information requests, we can see how the growing diversity of Las Vegas has increased not only the number of requests but the nature of the requests. So we see many more requests for information about things like shopping and dining options.FREDERICKS: It seems to me that Las Vegas has become a kind of year-round World's Fair city. It's almost as if you were in something like Epcot Center but with the addition of the casinos and entertainment.MARZ: One difference is that our customers don't stay here as long as they do at Epcot. If you look at the length of stay of the typical Las Vegas visitor, it's 2.7 or -- if you stretched it -- three days. If you look at the length of stay at any other resort destination, it may be five to seven days.So when someone loosely says we are now a resort destination, we are in many aspects but, in the research we have done, we aren't.Our customers have told us that they don't have enough energy to spend more than two or three days at any one of our places. It's too much for them. We have a lot of eye candy here, we have a lot of wonderful resorts and a lot of amenities, but people can't stay that long.GASTA: Thanks to the growth of the city over the past few years, we've seen it move from gaming to include entertainment and shopping and, today, the city really is promoting 'emotion.'It couldn't be more timely for our properties because people who come here do have an emotional experience.FREDERICKS: Robert, tell us a bit about Lake Las Vegas.PURDY: We're located 16 miles from the Strip. They've made a lake out there that is three miles long and a mile wide.You've got the best of both worlds. You can come to Vegas and take advantage of the Strip and enjoy our golf, the spa and our restau-rants. There's a Ritz-Carlton being built for December 2002.We appeal to an audience that might not have considered Vegas in the past. Our emphasis is not gaming. We do have a casino but it's only 10,000 square feet.FREDERICKS: Rossi, is the development of Lake Las Vegas a sign of what we understand to be that Las Vegas is expanding its geography?RALENKOTTER: It's really more the diversity of the product and looking for new market segments. For future growth, we're going after the convention and incentives market, corporate meetings, special events, along with the inter-national market. Other hotel companies have looked at Las Vegas and want to have their product here. Some of those products are very diverse.What's happening is that some of the product that was in Palm Springs, Scottsdale and so forth is now coming to Las Vegas. By the end of this year, we'll have about 128,000 rooms. By the end of next year, it will be about 132,000.FREDERICKS: You mentioned meetings and conventions. Can you put that segment in perspective?RALENKOTTER: If you look at the year 2000, it was about 11% of our market share, close to 4 million delegates and close to 4 billion dollars in revenue for the community. It's like the Cadillac of our product line. It allows us to position business midweek, and first-time visitors are a part of that mix, so it's a very important part of what we're doing.With the new developments, three of the seven largest convention centers in the U.S. will be in Las Vegas. We have the ability to host groups of 20 and groups of 250,000.MARZ: We're adding about 1.8 million square feet of convention space. The revenue from rooms is so important to us as a company that we needed to figure out a way to maximize that revenue.As a city, not just Mandalay Resort Group, we have something for the convention customer that nobody else in the world can match, and that is that we are very affordable.FREDERICKS: Jack, can you describe the package-tour segment?RICHARDS: We move about 500,000 people a year to Las Vegas on tour packages and use about 1 million room nights a year. We're actually selling almost as many midweek as weekend rooms. Our business is up substantially year over year.Our average length of stay is 3.7 nights, considerably higher than the average stay in Las Vegas. We move a significant number of people from the East Coast, who stay almost four nights.In good years, it's very difficult to get hotel rooms, so we applaud the building of new resorts. In slow years, we have adequate access to hotel rooms. As a rule, over the past two years, we've requested and received additional rooms from these gentlemen.WESTBROOK: We don't generally have difficulty with room inventory. We understand the trade-offs a hotel has to make on a daily basis between the return they get on a room in different distribution channels.As a whole, Las Vegas hotels manage those trade-offs better than some other destinations. They make sure that everybody has enough to stay in business and to retain strong relationships with the destination, and, at the same time, take care of the interests that they have and the financial success of their properties.FREDERICKS: Can you give a status report on electronic vis-a-vis telephone bookings coming in from the trade?WESTBROOK: We're at the point now where 99 percent of our bookings for Las Vegas are through the CRS, which is exactly what we think it ought to be, both for our purposes and for the agency's purposes.RICHARDS: We're different because of the different markets we serve. We have a much lower percentage of electronic bookings. We're not in all the systems, only three of them, so our percentage is much lower. Our overall mix of electronic business is 50%.WESTBROOK: We're available now through all the systems and through an agency Internet site. Over the course of the last 10 years, we've done everything we could to empower the agencies to use those channels because we believe it is in their best interest, as well as our own, to book not only Las Vegas but other packages, as well.One continuing challenge we have is the terminology. When you talk in terms of "packages," it conjures up a host of limiting and restricting characteristics.FREDERICKS: Is the term "packages" a misnomer?WESTBROOK: I think it is. We talk in terms of "individual vacations." Our responsibility is to give the agency community the ability to absolutely customize any vacation package. Everything we sell is sold on a component basis, partly because we believe that the unique role of the agent -- that nobody else will ever be able to automate -- is in matching the travel experience to the customer.In the old days, you had to leave on a Thursday and come back on a Sunday, or you had restricted days of travel. Now you travel when you choose in terms of the day of the week and the time of the flight. You travel the class of service you want, you pick the hotel you want, the type of room, the number of nights -- everything about the package can be tailored to the customer.STEENMAN: We work directly with consumers plus we do have packages that agents can sell, and I concur about the flexibility. In our case, as an Internet company, we find that the customer can learn about the various options on the Internet and then book there with us.FREDERICKS: Let's turn to the position of the retail travel agencies in your marketing effort.BOMMARITO: We market a lot to the retail travel agent on a statewide basis. We feel that they are a strong component and always will be a strong component.MARZ: The travel agent is important to us. There were a lot of people who said a year or two ago that travel agents wouldn't be around in five or 10 years. I don't believe it. I think travel agents play a very valuable role for their clients and they have access now to in-formation because of the Internet that they never had before. So they book products differently now.We think agents will still be important five years from now. It's a matter of how they get their information and how they choose to do business with wholesalers and with us. That dynamic is changing and we're changing with it.PURDY: Travel agents are a critical component. Their awareness of our resort, because we're new, is very important.Hyatt puts a big emphasis on the retail travel agent with a national sales force that calls on them in every feeder market possible. We do blitzes in every major city and every Hyatt resort gets involved in those. We distribute collateral not only on Las Vegas but other Hyatts as well.FREDERICKS: Hotel people tell us that agency business is important because it comes in at a higher rate than business from other channels.BRUNELLE: We looked at that recently. The highest rate, the rack rate, is most likely to come from people calling us directly but the business that comes through the CRS mimics that very closely.From our perspective, we look at the travel agent sector as a two-pronged approach, selling directly to the agents and through the tour operators. We see agents as a good conduit to talk to the consumer.We find that retail agents are more productive with closer-in markets and we need the tour operators for markets that are further away.FREDERICKS: How have the origin markets changed for Las Vegas?RALENKOTTER: The biggest shift has been the southern California marketplace. Even though the numbers of people coming from southern California have increased, the market share has dropped from 50% 20 years ago to 30%.East Coast and international market share have increased. The ease of getting here from cities domestically and internationally has brought about this shift.To continue the growth, you need to go out and cultivate new customers. Each year, about 25% of our visitor base are first-time visitors. That has been part of our success story.Part of that is because of the new product that the hotels have presented. That's part of the reason we run 90% occupancy.Coming back to travel agents and wholesalers, 31% of our business comes from them. That's 10 million visitors a year, so the agents and wholesalers are very important.GASTA: Agents play a large role for our product, especially in giving a comfort level to people who have never been here and may be intimidated by the size of the city, the amount of hotels, where they should stay, what they should do and so on.I think FIT buyers are using the Internet to study what they should be doing but then go and confirm that with their travel agent, and get a vote of confidence from them.FREDERICKS: Let's talk about how the Internet fits into the picture.BOMMARITO: It provides a lot of information and makes the consumer, both those who use agents and those who don't, much more educated and knowledgeable.On a statewide basis, the hotel asso-ciation sees Internet reservations growing significantly.STEENMAN: I think travel agents have a tremendous opportunity here to become Internet-savvy. But some of them are reticent to allow their agents to use the Internet.I see it as an opportunity for them because the people who use the Web will get a lot of information there but will want to use the luxury of a travel agent to do the work for them.MARZ: We're doing so much business over the Internet and haven't even scratched the surface of its potential. Our customers over the Internet are not so much Californians, they are people from the Midwest, the Southeast and the Northeast. Maybe they never got to us before, but they are coming to us on a direct basis where we used to rely more on the wholesale segment.There are so many different distribution channels within the Internet. There are our wholesale partners; our retail partners, such as Travelocity; there are the LasVegas.coms, and all of the other portals that bring people to us.You have to look at all the distribution channels and figure out how they work for your own business. In our minds, whatever is happening today will be different tomorrow.PURDY: One of the things the Internet does is that it allows for rapid implementation. You don't need to be in a consumer publication three months in advance. You have inventory you need to sell and you can do it.Hyatt is launching E-meetings and we're going to have live inventory for all of our hotels to book five to 100 rooms on line.RICHARDS: We have a bookable Web site, and 97% of what we book there is for Las Vegas. The amounts are in the millions of dollars. The booking engine is very important. People want to get on the Internet, book and get off.We have a separate commissionable Web site for agents at Awvtravelagents.com. We register our agencies -- we do business with about 13,000 -and we have the ability to pay different levels of commissions there. When we launched a few months ago, 1,100 travel agents registered in the first 30 days.WESTBROOK: We launched our agent-only Internet site before we launched the consumer site. They can be reached at AAvacations.com. There's an area within the home page for agents.We've recreated the booking system essentially with the CRS in mind because that's what the agents are used to, and they can go through it a lot more quickly. It's fully commissionable and open to any ARC-accredited agency.A lot of agents will use the site to gather information but they'll go back to the CRS to book it. I think people basically are comfortable with the CRS. We've invested a lot of money in CRS training that has created a comfort level.BRUNELLE: We have consumer-direct booking on our own Web sites. The MGM Grand also has a travel agent area where agents can put in their IATA number, book and get full commission. We're evaluating how we can expand that to the rest of the group.The Internet also is important in terms of capturing information about consumers so, for example, we may use e-mail for our casino customers and send them information in that vehicle.GASTA: There are an awful lot of vendors out there offering a wide range of products on the Internet.In the meetings and conventions and travel agent markets, even in casino marketing, the opportunities are great on the Internet. We have five properties in Las Vegas. By the time we finish rebuilding the Web site for the last one, we go back and start all over again. We started with a small room-block segment and we have to build on that weekly.RALENKOTTER: Our site is Vegasfreedom.com and we look at it as an information source and an advertising vehicle both to our customers and to agents and wholesalers. Twenty-two percent of our customers are using it to get information, and 8% are booking Las Vegas on the Internet. We're even looking at it as the way to certify travel agents so that they can become certified Las Vegas sales people.We want to give agents as well as consumers information on line about shows, special events and convention information. We're even looking at providing daily room availability in town.