Effect of gas prices on Las Vegas economy has been minimal so far, but resorts are wary
Sam Morris / Las Vegas Sun
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It’s been a while since the Southern Nevada tourism industry experienced gas pains.
But with the pump price closing in on $4 a gallon in Las Vegas and the average price for a gallon of unleaded fuel hovering around $4.40 in Los Angeles, some resorts are starting to think about how they’re going to market their properties if prices continue to soar.
A report issued Monday by New York-based Moody’s Investors Services said the Las Vegas economy is on the road to recovery, but it also cautioned that higher gasoline prices could result in visitors spending more for transportation and less on trips and entertainment.
“With crude oil currently trading at its highest level since 2008 and high gasoline prices, consumers could pull back on discretionary spending and travel to Las Vegas,” the report said.
But so far, prices that have shot up 90 cents a gallon since mid-December in California haven’t affected travel habits, said Kevin Bagger, senior director of marketing for the Las Vegas Convention and Visitors Authority.
“It seems that consumers may be somewhat desensitized to the higher prices because they’ve seen them before, and changing their behavior may not be specific to a vacation,” Bagger said. “They can cut corners other ways — riding bikes, buying less at the grocery store. But when it comes to leisure travel, it hasn’t gotten there yet.”
Local resorts haven’t seen a pullback in travel, but marketing experts are gearing for that possibility.
Kimiko Peterson, director of advertising, public relations and social media at the Silverton, said her property has had an excellent first quarter, with several weekends in March sold out in the hotel.
Despite that success, the Silverton is planning a “Fuel Frenzy” promotion in July, directed at locals, in which customers can win free slot play and gasoline cards. The campaign includes a radio station promotion.
Peterson added that when gasoline prices skyrocket, her company’s best tactic is to encourage visitation with lower room rates — which is what it will do in June when summer rates of $35 on weekdays and $55 on weekends will be reintroduced.
Bagger said the LVCVA regularly communicates with resorts to gauge advanced bookings and determine whether gasoline prices are affecting them. Sometimes, the agency that markets the Las Vegas destination looks to third-party travel resources to validate their resort partners’ findings.
So far, he said, there’s been no indication that advance bookings have been affected.
“One of the things we learned during the recession was that we have to be flexible in our messaging,” Bagger said. “We can update our campaigns and messaging quickly to respond to the circumstances.”
How would the message change?
Bagger said properties would likely plot their own courses and that, like the Silverton, room price-point control can dictate the message. If a potential customer needs an incentive to travel, knocking down the price of the room is an efficient motivator.
Bagger said in 2008, some properties offered gas cards to guests.
Gary Thompson, a spokesman for Caesars Entertainment, said his company hadn’t seen a downturn in travel that could be attributed to higher gas prices.
He said one tactic the company used in the past and could offer to customers again was the ability to trade points from the company’s Total Rewards loyalty club for gas purchases.
Like many of their resort counterparts, Caesars is seeing higher occupancy rates and average daily room rates, thanks to increased international travel and improvements in convention and business bookings. Thompson said the company hasn’t had to be too concerned with the spike in gas prices because international and business components have been so robust.
But even air travel costs are a concern that can be attributed to the rise in fuel. Last week, Southwest Airlines, the busiest commercial air carrier at McCarran International Airport, reported it didn’t expect to be profitable in the first quarter of 2012 because of increased fuel costs. To drum up volume, the airline announced a fare sale through March 29.
Thompson said that although there hadn’t been any actions by the company for consumers, Caesars properties in Mississippi had begun establishing carpool networks for casino employees.
At what point will resort companies begin taking measures to mitigate higher fuel costs? The consensus opinion seems to be when the price of fuel hits $5 a gallon.
“That seems to be the psychological barrier,” Thompson said. “We never saw it get that high in 2008, but that seems to be about the point where people start thinking about restraining their travel.”
The LVCVA expects to continue to deliver a message emphasizing the overall appeal of Las Vegas and its value proposition rather than focusing on gas prices. Some marketers have noted that even with a 50-cent spike in pump prices, the cost of a round trip by car from Southern California is only going to be about $15 more — probably not enough to deter a traveler from making the trip.
“But there’s something about that $5 price point,” Thompson said. “I think it’s just psychological, and if it gets that high, you don’t really think about it only costing $15 more to make the trip.”