Vegas reluctant to show its hand as it offers bargains

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When Anthony Curtis left his job as a Merrill Lynch stockbroker in 1981 to pursue a career as a professional gambler, Las Vegas was a bargain hunter's Shangri-la. Before the poker skills started paying dividends, Curtis survived the lean years relying on a theory he calls "couponomy." By clipping coupons and tracking casino giveaways and gambling promotions, Curtis was able to eke out an existence based on $5 all-you-can-eat buffets, 99-cent shrimp cocktails and blackjack match-play coupons.

Curtis soon realized that others might benefit from his expertise as a "couponomist." So in 1983, after winning more than $300,000 in local poker tournaments, Curtis used his winnings to finance Huntington Press. The start-up's first publication was the Las Vegas Advisor, a monthly newsletter for visitors to Las Vegas looking to cash in on the best deals along the Strip.

Fifteen years and 15,000 subscribers later, the Las Vegas Advisor is still pummeling readers with promotions for $5 steak dinners and casino giveaways. But times have changed. A vast majority of the Las Vegas kickbacks and enticements have gone the way of the Rat Pack. Curtis has become an advocate for those earlier days, when the little guy was king of the Strip. He's appeared on national TV, advising millions on the disappearing art form of couponomy.

Over the last few decades, Las Vegas has miraculously reinvented itself as a world-class luxury travel destination. Thirty-dollar rooms at the Sands have been usurped by $500 rooms at the Wynn. Five-dollar buffets have made way for restaurants helmed by celebrity chefs including Joel Robuchon, Guy Savoy, Thomas Keller and Mario Batali. Cirque du Soleil regularly sells out 2,000-seat theaters at $150 a ticket. Lavish nightclubs peddle Jack Daniels at $300 a bottle.

The Las Vegas Convention and Visitors Authority, charged with driving demand to Las Vegas, attracted the world's largest conventions to the Strip's three world-class convention centers. Room occupancy perpetually hovered at percentages in the high 90s, making Las Vegas the envy of longtime resort dynamos, including Orlando.

Curtis had all but given up on the resurrection of couponomy. As president of LasVegasAdvisor.com, he regularly tracks room rates along the Strip. In his July 2007 newsletter, Curtis wrote, "I think the ax has finally fallen on super-bargain room rates."

But then the housing market tanked, oil hit $140 a barrel and the major airlines announced price hikes and significant cutbacks in their service to Vegas. Visitation volume to Las Vegas and convention attendance are both down for 2008 and projected to get worse.

When Curtis tracked the lowest summer room rates in Las Vegas for July 2008, he reported in his most recent newsletter that rates were down as much as 45% from 2007, even at some higher-end properties. "Rates are as low as we've seen them since 2003 and 2004," Curtis writes in his latest newsletter. "Whether anyone wants to admit it or not, the fallout from plunging home prices and skyrocketing gas prices is taking its toll on Las Vegas."

Couponomy's resurgence

The days of couponomy are back, at least for the time being. Major hotels along the Strip are posting deals on their websites the likes of which Las Vegas hasn't seen in years. Fly-back offers with credits of up to $500, redeemable for airfare and hotel rooms on return trips within six months of a guest's initial visit, are popping up on the websites of hotels like Mandalay Bay, MGM Grand and all Harrah's properties: Caesars Palace, Bally's, Harrah's, Paris Las Vegas, Rio, Imperial Palace and Flamingo Las Vegas. The Harrah's resorts also throw in $25-a-night restaurant credits (up to $125) good at any of its restaurants citywide. Gas cards up to $50, meant to ease the pain of guests driving from Southern California, are appearing on website deals at Circus Circus and Planet Hollywood and on Vegas.com. Four Seasons Las Vegas offers a "Stay Longer -- Third Night Free" promotion on select dates through the end of the year. Guests booking two consecutive nights receive a third night gratis. Add-ons are back, too, in a big way, with perks such as restaurant discounts and two-for-one show tickets.

But Las Vegas would much prefer it if you didn't know that the Strip is on sale. To that end, the hotels have thus far avoided any campaigns suggesting that summer travel to Las Vegas is a bargain. Most of the package deals are tucked away on websites or distributed through email to valued-customer lists. As of yet, there's been no widespread consumer call to action based upon lower room rates along the Strip.

The LVCVA, in an effort to stay one step ahead of the floundering economy this year, voted in March to increase the budget of its annual summer marketing campaign from $4.5 million to $11.5 million and to kick off the campaign in March this year, rather than May. Dubbed "Vegas Right Now," the extensive television, print and online campaign was designed to encourage Las Vegas travel by highlighting all the new things happening in the city this summer. "We're capitalizing on the continued evolution of Las Vegas attractions to drive demand right now," LVCVA Senior Vice President of Marketing Terry Jicinsky told Travel Weekly in March. Problem is, other than a few new pool parties, there really isn't that much new to Las Vegas this summer. The next big casino resort, Steve Wynn's Encore, isn't slated to open until the end of the year.

The Vegas Right Now campaign has managed to increase traffic to the LVCVA's VisitLasVegas.com website by 34%, but once those visitors arrive at the site, they find few answers to the questions posed by Vegas Right Now: "Why Las Vegas? Why right now?" The LVCVA has found itself touting summertime concerts by the likes of Coldplay and Journey, despite the fact that many of these artists will perform in scores of cities this summer. After poking around, visitors to the site can uncover some of the package deals and reduced room rates offered in Vegas this summer, but the notion that Vegas is on sale is conspicuously absent. Only recently have some Vegas Right Now advertisements began incorporating hints regarding value.

"In general, the city does not want to admit that it's discounting its product," Curtis said. "They're afraid they're going to diminish their brand: the upscale, more expensive Vegas.

"They've worked very hard here to upgrade and upscale Vegas," he said. "They've changed Vegas from just a gambling place with a whole bunch of other amenities to an upscale resort that also has gambling. You know, kind of flip-flopped it.

"Upscale Vegas is something that is very important to the revenue models of all these new places that we see going up, and they simply want to protect the status of that brand right now," Curtis said. "I happen to think it doesn't hurt one bit to say it's discounted."

The LVCVA's goal is to develop a marketing concept that the individual hotels can work with, said Jicinsky. "Rather than focus solely on the discounting of rooms, which may or may not motivate people to make travel decisions, we want to take the first step and focus on the excitement of the destination as the reason to choose to travel.

"We don't want to position the destination to be required to have these price points in the market because the advertising campaign is saying that," Jicinsky said. "We believe you would run the risk, when the market started getting better, of building this expectation in your consumer base of a price point that then may not be available through your hotel community."

"The trick is, how do you get the word out without creating a price war?" Bill Eadington, professor of economics and director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno, recently told the Las Vegas Sun newspaper. "The stereotype image of Las Vegas as a place where everything was cheap is an image that Las Vegas didn't necessarily like. Instead, they're trying to attract customers who think very little about price and instead want prestige."

"We can't change our market segment based on a dip in the economy," Jeff Voyles, professor of hotel management at the University of Nevada, Las Vegas, also told the Las Vegas Sun recently. "We have to be able to sustain the growth that we have."

As the debate continues over whether to advertise reduced room rates, there's no disguising the fact that economic factors are having a noticeable effect on the Las Vegas economy.

Not since the months following 9/11 have Las Vegas visitor statistics been so low. Visitor volume was down three of the first four months of 2008 and is expected to stay down. Average daily room rates have been dropping steadily. Gaming revenue is off nearly 4% for the year, prompting Nevada Gov. Jim Gibbons to call an emergency state budget meeting and declare that this year, for the first time in more than 30 years, tax revenues have fallen below revenues from the previous year.

"I believe we are in the midst of the worst fiscal crisis in the state's history," Gibbons said. Average daily auto traffic into Las Vegas is down nearly 5% for the year, and passenger traffic at McCarran Airport fell nearly 6% in April and is expected to decline even more. Finally, hotel occupancy levels have dipped below 85% in recent months, prompting some to speculate whether record-breaking occupancy levels of 95% and higher are a thing of the past.

US Airways, Delta and United have each announced plans to cut Las Vegas service by the end of the year, resulting in a 12% decrease in available seats to Las Vegas by January. Just the cutbacks at US Airways are going to reduce the number of available seats to Las Vegas by 7,200 per day, Wachovia analyst Brian McGill speculated recently in a note to investors. The combined impact of airline reductions could result in 6 million fewer visitors to Las Vegas next year, he wrote.

"With nearly 11,500 hotel rooms coming on line beginning this December," McGill wrote, "the Las Vegas Strip needs an additional 2.8 million visitors a year. In almost all cases in the past, a significant increase in room capacity was matched with a major increase in airlines' seats into Las Vegas. With the current outlook, it appears that will not be the case in 2009. This could lead to a lower level of occupancy, and Strip operators will be forced to lower [room rates] to stimulate visitation."

The Las Vegas hotels face a big problem, said Stephen Miller, chairman of the economics department at the University of Nevada, Las Vegas. "They've got 32,000 new rooms coming on line in the next two years, and with energy prices up, and the number of seats on airlines going down ... they're going to have to lower room rates."

"I know there are some marketing people who have said they don't want to ruin their brand by lowering prices," said Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas. "But if there are no heads in the beds, that's total revenue that's lost.

"I think that what you will see overall is a movement toward more value-oriented rates and packages," he said.

But will price cuts be too little, too late?

Travel agent Renee Derr, owner of Four Star Travel in Cortland, Ohio, estimated that 18 months ago, Las Vegas represented 25% of her sales. Today that number has dropped to about 10%. While she says she's aware that Las Vegas hotel rates are down, she's not familiar with the Vegas Right Now campaign.

Regardless of hotel rates, Derr said, the current airfares make travel to Las Vegas prohibitive for many of her customers. "I have people calling me and checking and checking, but they're not buying it because the airfare is so high. So it's great that the hotels are low, but when the airfare is high, it's kind of equaling out, and I wouldn't say that's any big sale. I'm not looking at these hotel rates and going, 'Oh wow, this is great, I've got to call everybody I know.'"

Las Vegas sales are also down at Germantown Travel in Germantown, Wis. "Wisconsin people always went to Las Vegas because they liked the good deals ... but it's not a cheap date anymore," said travel agent Joy Haizel. "The rooms may have come down, but the food prices are still up and the show tickets are still up, and everything else is still up."

Haizel said she's not aware of the Vegas Right Now campaign and neither are her customers. "There's nothing that we're seeing that's promoting Vegas right now. If they would advertise that Vegas is on sale just as a rule, that it's a good buy, and that food prices are down and show tickets are down, then perhaps more of our customers would get interested."

Regarding the discounted room rates available on Las Vegas hotel websites, Haizel said, "We don't search out those kind of deals on the Web because we don't get commission on Web deals. That wouldn't benefit us at all."

Casinos 'slow to react'

"Honestly, the casinos have been a little slow to react," said Richard Reed, CEO of Insider Viewpoint of Las Vegas, regarding Las Vegas' response to current economic conditions. "I would have thought by now they would have drastically cut some hotel rooms. They did it to some extent, but I would have thought they would have done it a lot faster."

Reed tracks hotel price trends and casino deals on his website at www.insidervlv.com. Recently, Reed said, he was approached by the head of promotions at a major Las Vegas casino, who asked him to poll his website readers regarding the weak economy and what types of casino promotions or specials would be most enticing to them. Of the first 10 responses Reed received, all requested lower room rates.

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