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You are here: Home / Uncategorized / Tourism: The Lay of the Land

Tourism: The Lay of the Land

July 1, 2010 By Nevada Business Magazine Leave a Comment

Whether in the glow of Las Vegas neon, on Lake Tahoe ski slopes or under rural Nevada stars, the Silver State’s tourism industry plugs steadily along toward a rebound from its steep fall.

Industry officials would love to spur the recovery of Nevada’s behemoth industry at a faster pace from nearly two years of severe decline in both leisure and convention travel, but they still see reason for guarded optimism in the modest strength of recent visitation and room tax data.

“While we are certainly happy to see continued positive signs for the tourism industry, it is still too early to say that we are in a recovery period,” said Rossi Ralenkotter, president and CEO of the Las Vegas Convention and Visitors Authority. “We need to see continued positive growth in all of the visitor and economic metrics. The visitation growth over the past eight months is encouraging; however, visitor-spending continues to be lower than in the past.”

Come on Back

Tourists are trickling, not flooding, back to Las Vegas, as much by car as by air. Passenger counts at McCarran International Airport fell for a third straight month in April, though some of that decline may be attributable to the volcanic ash that affected Europe. Airport traffic is down 3.9 percent thus far in 2010, as more than 12.7 million passengers have used the airport this year, compared with more than 13.2 million last year.

The LVCVA forecasts a 3 percent growth in visitation for 2010. In April, visitation to Las Vegas ticked up by 0.9 percent over the same month from last year. Convention attendance picked up for a second straight month after flagging through January and February. Average daily room rates (ADR) snuck upward to $97 per night, a 3 percent increase from the same period the previous year. In April 2007, ADR stood at $148 per night.

Crowing about a Las Vegas hotel room for less than $100 seems more a win for a tourist than a resort, but any growth in the industry that employs nearly 30 percent of the state’s workers is considered notable at a time when Nevada’s economy searches for the bottom of one of the nation’s steepest declines.

Recovery?

Ralenkotter said he watches a few key metrics to measure recovery. The first is the Consumer Confidence Index, which indicates how readily people are willing to spend their discretionary income. The Index has shown growth in the past couple of months and is currently just above 63. The Index needs to surpass 90 to indicate a positive outlook on the economy and above 100 indicates strong growth.

The other key indicator for the travel industry as a whole, Ralenkotter said, is the national unemployment situation. National unemployment improved slightly to 9.7 percent in May, while Nevada hit 13.7 percent and Las Vegas moved to 14.2 percent – both record highs – in April.

“We need to see more people getting back to work in order to improve the economy and the travel industry,” Ralenkotter said. “We will be much more confident in saying recovery is under way when we have seen several consecutive months of positive growth in all of our key metrics.”

Keen eyes focus on CityCenter, the gleaming flagship of MGM Resorts International, as the barometer of Las Vegas’ ability to stop its slide. Its $8.5 billion price tag and massive scale would invite stares even if it were built in boom times, but CityCenter arrived in December 2009 after the only other major Strip projects started during the recession – Fontainebleau and Echelon – abruptly halted construction.

“Right now, CityCenter is going to be a bellwether of how the industry does,” said Alan Feldman, senior vice president of public affairs for MGM Resorts International. “Let’s face it: it is the thing that in large part is driving this increase in tourism. Everyone wants to see the new kid on the block.”

At the heart of CityCenter’s 76 acres is Aria Resort and Casino, a luxury property that added nearly 4,000 new hotel rooms to Strip inventory. The resort came out of the gate slowly, reporting an operating loss of $66 million and occupancy of 63 percent in the first quarter of 2010.

“CityCenter, like every other business in town, is being affected by the economy,” Feldman said. “Under these circumstances, given that we’ve had month-over-month incremental growth, it’s a very good sign.”

Feldman attributed much of the struggle to flagging convention business, which he said should rebound by the fourth quarter of 2010. Convention attendance buoys midweek occupancy in hotels in both Las Vegas and Reno. CityCenter anticipates its convention business surging late this year and into 2011, as advance bookings jump over this year’s levels.

“Convention rates have a very important impact on the rest of the rate structure,” Feldman said.

These groups typically pay higher rates that result in a boost to the hotel’s overall pricing, allowing other properties to play off those increases. A mid-June search on Aria’s website showed midweek rates as low as $119 per night next month, as well as a “Grand Opening” offer for two nights at $149 including a $100 resort credit.

Slashed rates and package deals are nothing new, of course. Popular travel website Orbitz displayed midweek July rates at four-star hotels for $50 per night on the Las Vegas Strip and $39 per night in the Reno-Sparks area.

Marketing Nevada

Despite budgets cut by declining room tax revenue, marketing efforts continue to be strong. A recent morning featured an LVCVA-backed ‘Camp Vegas’ billboard ad sponsorship for the Today show on NBC and less than five minutes later on the same network, a Travel Nevada giveaway promotion on a local news morning show.

“It is more critical than ever to continue to aggressively market the destination,” Ralenkotter said. “Consumers are being more selective in how they spend their travel dollars, so it is critical Las Vegas is top of mind. We have been very flexible with our marketing plan and have made strategic adjustments based on consumer research.”

The effects of the economy trickled up to Nevada’s primary tourist destination. Housing woes and job losses postponed vacations for leisure travelers and skittish corporations canceled all but the most essential business travel. The severe struggles of the California economy resonate particularly deeply, as 26 percent of Las Vegas visitors came from the Golden State in 2009.

“While we have not seen a distinct change in the demographic of our visitors, the recession has certainly caused a change in their habits – specifically in their spending patterns during their visit,” Ralenkotter said. “We expect to see a different kind of consumer when we emerge from this recession, not just in the tourism industry but throughout the economy. The recession has made the consumer much more conscious of their spending and therefore we have seen a decline in spending across the board.”

Getting people into rooms represents only part of the battle, though. As travelers come determined to spend less once they arrive, searching out promotions and special offers becomes the norm. Yet for resorts, restaurants, spas and shops, only so many 2-for-1 coupons and free desserts can be handed out while still turning a profit.

“As a result, the low-budget traveler has largely gone away,” said Ellen Oppenheim, president and CEO of the Reno-Sparks Convention & Visitors Authority. “The middle- and upper-budget consumer is still interested in traveling, but at a lower price point.”

The Reno-Tahoe market experiences the same slow mending as Las Vegas right now, also relying on motorcades of Californians to fuel recovery.

“We are seeing some encouraging signs,” Oppenheim said. “Four of the last five months, hotel room tax has been ahead of the same month from last year. Not huge amounts, but nonetheless ahead. That’s following 21 consecutive months of declines.

“That’s definitely moving in the right direction. Do I think the economic recovery is complete? Not by a long shot, but we are seeing some encouraging signs in people’s willingness to travel. I do believe there’s some pent-up demand.”

Oppenheim said her region, which bills itself as “Far From Expected”, promotes its outdoor opportunities as much as its resort options. She talks about the area as “authentic.”

“Refreshingly offbeat is sort of the DNA of how we would describe it,” Oppenheim said.

That means the typical Reno-Tahoe tourist looks largely the same as in the past, Oppenheim said.

“What they’re looking for when they come remains somewhat consistent, in that regard,” Oppenheim said. “How they’re traveling is somewhat different. They’re now acting more like those more modest travelers — looking for deals, looking for value.”

Oppenheim pointed to 17 new flights coming into Reno-Tahoe International Airport – most of which arrive from the Los Angeles basin – added between January and June this year as evidence of continued hope for a rebound.

Overall, the Reno airport saw a modest year-over-year increase of 1.5 percent in April, as more than 309,000 passengers used the facility. It was the second straight month of growth for the airport, great news following a total annual decline of more than 15 percent in 2009.

Rural Rebound

Reaching for an entirely different segment of the travel market is the Nevada Commission on Tourism (NCOT). The state agency seeks to bring visitation to Nevada outside the Las Vegas and Reno areas. NCOT’s heavy focus on attracting outdoor enthusiasts to rural parts of the state allows it to target a different traveler than the one who typically looks for a Vegas vacation.

NCOT Director Dann Lewis arrived here from Maine near the end of Nevada’s tourism drop, as both statewide gaming and lodging tax revenue completed dips of nearly 20 percent each from FY 2007 levels. Having seen what he hopes is the bottom, Lewis points to an important fact in looking for signs of recovery: rural Nevada didn’t have as far to fall in the first place as the Las Vegas and Reno markets did.

“The I-80 corridor from Reno east out as far as Elko to Wendover – their decline has been considerably less than the Reno-Sparks area or Las Vegas,” Lewis said. “I was out in Elko a few weeks ago and was surprised at how busy it was.”

Elko can rely on fairly steady business travel because of its proximity to Nevada’s healthy mining industry, but the conventions and meetings that generally buoy the state’s major markets through midweek ebbs do not come as often to the rurals.

“Business travel in general is still quite weak,” Lewis said.

Lewis saw his overall budget slashed from $17.7 million in FY08 to $13.6 million in FY09, and NCOT estimates put this year’s final FY10 budget at $10.6 million. The budget for this year’s summer campaign is $2 million, down as much as 80 percent from some past years. NCOT staffing also fell by 23 percent over the past year.

Yet NCOT is just one of many agencies and companies in Nevada learning to do more with less. Much of the advertising done by the commission used to be on TV, but Lewis is moving NCOT online with Google ads, website partnerships and streaming video. In fact, the same TV commercials which air in Nevada and California are also available via streaming video, and NCOT can track how many people watch the video and how long they watch it. That technology is being utilized heavily in markets throughout California, Utah and Arizona.

“We can track it on a real-time basis,” Lewis said. “We can make adjustments on the fly. We’ve had some really strong success with that.”

Lewis worked with Southwest Airlines to make Nevada a “featured destination” on the company’s website homepage, then allowed Nevada hotels to pool together to cover the cost of the advertisement. In fact, interest from within the state for the Southwest partnership remains so strong that NCOT has repeated it with different properties.

The move to a larger online presence helped increase awareness of Nevada tourism opportunities by 7 percent in the Los Angeles market, Lewis said.

“Overall, just looking at some of the national figures, there are areas that are definitely beginning to show strength in the leisure travel area,” Lewis said. “We’re not seeing it out here to the same degree.”

Filed Under: Uncategorized

Paul Krakovitz: Intermountain Healthcare

Edward Vance: EV&A Architects

Scott Arkills: Silver State Schools Credit Union

Tonya Ruby: Cox Media Las Vegas

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