MGM Mirage bets it’s time to raise Vegas room rates
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Deflation, we’re told, is a bad thing. Unless it’s deflation of ridiculously high prices -- say, for Las Vegas hotel rooms.
Hotel prices came down in Vegas over the last year as the economy crashed and convention-going withered. Now, some Strip giants including MGM Mirage say the deep-discount days are over.
But the Las Vegas Sun has a long story today questioning the wisdom of boosting room rates. From the Sun:
MGM Mirage executives said demand for the company’s hotel rooms is high enough to warrant an increase in room rates, which have plummeted during the downturn. ‘The weekends are consistently solid now,’ MGM Mirage CEO Jim Murren said during a conference call last week to discuss first-quarter earnings. ‘Even when we don’t have a major event we are able to occupy rooms at a solid level.’ In January, MGM Mirage’s hotels had an occupancy rate in the high 70s -- a respectable number for many major cities but poor for Las Vegas, where hotels have historically operated at higher than 90% occupancy. That figure has risen each month this year, reaching 95% in March and 97% in April, in line with a year ago, before business worsened.
Phil Ruffin, who bought the Treasure Island hotel/casino from MGM Mirage in March, says he also plans to raise rates, according to the Sun.
‘I’m not going to give rooms away,’ he said. ‘That’s a heads-in-beds philosophy. I don’t want the $50 customer.’
But the Sun wonders whether tourists will balk at higher room prices with frugality now a consumer badge of honor:
Whether that strategy works will depend on the reaction of recession-battered tourists such as Judy Del Vecchio, 51, an advertising employee who paid $631 for a five-night stay with her husband in a suite at the Monte Carlo last week. ‘This recession has scared people -- they have a whole different way of thinking,’ Del Vecchio said during a break between fountain shows in front of the Bellagio. ‘They’ll come if they know they’re getting a bargain.’ Cassidy Miller, 27, of Bloomington, Ill., stayed with a friend at Caesars Palace for five days last week for $413, including airfare, and has already booked her next trip: a $580, five-night stay at the Bellagio, including air. Miller, who typically visits Las Vegas once a year, isn’t stuck on the destination. ‘Paying $700 for the same trip would start turning me off -- I can do Mexico for that amount. But these prices are ridiculous. You can’t afford not to go.’
Not surprisingly, the Sun’s unscientific online reader poll with the story found that 85% of the 500 respondents said raising room rates was a bad idea. You’d expect that response not only from tourists but also from hotel/casino workers worried that higher rates could choke off a business recovery.
Given the huge number of new rooms due to hit the Vegas market later this year, the gaming companies may not have much flexibility on rates beyond summer, in any case.
-- Tom Petruno