Effect of gas prices on Las Vegas economy has been minimal so far, but resorts are wary

/ Las Vegas Sun

An aerial view of the Las Vegas Strip on Tuesday, March 13, 2012.

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The gas prices at a Shell gas station on East Cactus Drive off of St. Rose Parkway in the southern Las Vegas Valley on Tuesday, March 20, 2012.

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Kurtis Keeler of Jamestown, New York, replaces a pump after filling up at a gas station on Blue Diamond Road Thursday, April 14, 2011.

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.”

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  1. I know the higher jet fuel prices have definitely made me thinking twice about visiting Las Vegas this summer. In looking at package deals on popular travel sites, I used to be able to get air and hotel for about $400 a person. Now, the cheapest I am finding is about $550 to $600 per person.

    While gas may have a nominal effect for California residents (and those driving to Las Vegas), they do have a larger impact on those flying in from the midwest.

    Hopefully this summer the prices will drop a bit so I can have a nice vacation otherwise I may have to suffice with hitting up the local tribal casinos in the area.

  2. Velotta is whistling past the grave yard. The visitor count may be slowly rising but the amount they each leave behind is not. One reason? They spend twice as much on fueling their vehicles and many more dollars on using other modes of transportation to get here. The high cost of energy has not come about by accident but by deliberate actions taken by Osama Obama and his fellow travelers to cause the rise and further their "green" agenda. And, of course, it does not help that there are some 25 million American's either unemployed or under-employed as Osama Obama takes his fund-raising duties more seriously than he does his obligation to the American people. How many of you can afford to pay $36,000 to attend one of his fund raisers? Most of you probably don't even make 36,000 bucks a year at your job! Don't let his Cheshire cat-like grin fool you. Osama Obama is just another politician and a not-so-very-good-one at that!

  3. Velotta:

    This is just a different version of a recurring problem: Getting enough/the right people in and out of Las Vegas. We've had it with airlines, we've had it with rail, we've had it with cars.

    The root of this problem is this: No casino operator sees this has his/her/its problem. Somehow they think their job begins when people arrive (by some magical process -- carpet, perhaps) and their job ends when people leave (by some mysterious process of no importance). Their jobs begin and end at the door of their joint. (excuse me, venue). They are not concerned with transportation until no-one/not enough someones/the little spenders show up inside their joints/venues.

    Take away Southwest and Allegiant and tell me with a straight face that we would be "in recovery". With those 2 carriers gone, we would have rooms for $19/night on weekends. We are just lucky that they both were expanding and we were a key destination to build their traffic. But years ago, when people saw the importance of air travel to this town's future and proposed starting airlines to serve us, there was less than no support from the casinos -- it was not necessary, the Moguls said: ("If we build it, they will come."). We've all lived through that working and then not working.

    SoCal visitors account for 25% of our visitors. 92% of those SoCal visitors arrive and leave by their own cars. 92% of 25% = 23% of our visitors arriving by car from SoCal and thus sensitive to higher/lower gas prices. That changes breakeven (and employment) dramatically. Since profit is the proper concern of CEOs, how visitors from SoCal get in and out of Las Vegas IS worthy of their executive attention.

    It can't be air, because fuel prices hit short-hop carriers (such as Southwest) disproportionately. This will cause them to have to raise fairs which reduces visitor volume and/or what visitors spend here.

    It can't be rail, because we now have only 1 rail line in our out of here and until at least 2014, it is fully loaded with freight. And it will be years until we could build any sort of rail alternative that could carry the loads required to replace car traffic coming up I-15 from SoCal.

    Cars is where we are, and that is the problem we must solve.

    Party buses? If they ran on Natural Gas, that would keep costs in line. They would have to be frequent and probably direct to the hotel (since 98% of SoCal visitors know where they will stay before they leave, this is do-able). The sticking point is that a high percentage of SoCal visitors use their cars to visit other places while they are here, we need a replacement for those. (We might be able to adapt the "shared-car" concept and loan guests cars for their use while they are here (liability issues?), but would that cut into car rental volumes or profits?
    .

  4. Being that a lot of senior's drive in from Palm Springs, Ranco Mirage Ca. etc.We are loosers before they leave home. I drive an Infinity Q-45. It cost me (24) cents a mile to drive at the present price of ($4.50 a gallon. According to (Google Maps) I am 269 miles from the Tropicanna. At (24) cents It will cost me $64.80 to drive one way. Round trip will cost me ($129.60). That is the cost of a suite at the "Palazzo" for one night. (M-T) We usually go to Las Vegas (5) times a year. Not any more at these prices. Maybe once or twice a year at these prices. We have (6) Indian TRIBALCasino's whith-in (30) miles from my house. AGUA-SPA-FANTASY-SPOTLIGHT 29-AUGUSTINE- & SOBOBA if i want to drive another (10) miles. They offer free drinks - comp's and daily drawings to all players - Inexpensive showrooms.. Sometimes they offer a free trip to Las Vegas. No hotel expense. No extra gas needed. Home at night in your own bed. Las Vegas has caused it's own disdain by paying big bonuses to non-deserving indivuuals. I may plan a bus trip or two to go to Laughlin for awhile.

    Ace's

  5. Ace's: If you paid $20 each way and someone else did the driving, would you visit Las Vegas more often and the local casinos less?

  6. NO, WE STILL WILL DRIVE IN FROM PALM SPRINGS TO VEGAS BUT NOT AS OFTEN. INSTEAD OF ONCE A MONTH IT WILL BE ONCE EVERY TWO MONTHS OR THREE MONTHS. "THERE IS NO PLACE LIKE HOME".

    VEGAS, IS A 280 MILE DRIVE ONE WAY.
    AND WE HAVE SO MAY IN OUR AREA- SAN DIEGO,SYCUAN, BARONA, PALA, OCEANS 11, TEMECULA, HARRAH'S, PAUMA, AND (7) LOCAL CASINOS SAN MANEUAL, MORONGO REDEARTH ALL WHITHIN 130 MILES OF PALM SPRINGS NOW.

    THE WEEKEND TRAFFIC FROM LOS ANGELES USED TO BE BUMPER TO BUMPER TO VEGAS. NOW IT IS A SUNDAY DRIVE.