Continued from Page 1
opinion … it is quite possible it could
eventually be greater than a 15% capacity
reduction into Las Vegas.”
Those cuts would come just a few
months before an 18% increase in room
supply in late 2008 and 2009, with the
opening of Wynn Encore, City Center and
Fontainebleau and expansions at the Hard
Rock and Caesars Palace.
“With nearly 11,500 hotel rooms coming
on line beginning this December, the L.V.
Strip needs an additional 2. 8 million visitors a year,” McGill wrote. “It is conceivable
the airline reduction could approach 3 million visitors a year, if not more. This could
mean a nearly 6 million visitor deficit that
arises, if the new rooms are to be filled at
In addition to the airline cuts, airfares
are expected to rise about 20% to all tourist
destinations, including Vegas. And drive-in
business is on the decline as a result of high
“We continue to remain cautious on the
fundamentals for the Las Vegas Strip,” Mc-
Gill wrote. “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, this
appears that it 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
Alicia Malone, with the
Las Vegas Convention and Visitors Authority, said the LVCVA was closely monitoring
the impact of the airline cuts and “is prepared to adjust marketing strategies as necessary to drive demand and attract visitors.
Additionally, the LVCVA works closely with
McCarran Airport and the airlines themselves to discuss transportation issues and
discuss new initiatives.”
She also noted that Las Vegas continued
Year to date (Jan.-April)
2008 2007 Change
12.93M 12.94M (0.1%)
cut as airlines
93.8% ( 3.8%)
Total occupancy levels
89.1% 90.9% ( 1.7%)
$135.67 $146.53 ( 7.4%)
Average daily room rate $132.74 $138.28 (4%)
524.1M 530.9M ( 1.3%) Gaming revenue on Strip
2.25B ( 2.6%)
( 5.5%) Air arrivals, departures 15.05M 15.33M ( 1.8%)
83,253 89,757 ( 7.2%) Average daily auto traffic 80,391 83,390 ( 3.6%)
Source: Las Vegas Convention and Visitors Authority
to be served by nonstop flights from 127
markets and via connecting flights from
many more markets.
“Even with the announced reductions
affecting certain routes, there will still be
enough capacity to transport visitors to Las
Vegas; the flights may just be more full,” she
Alan Feldman, a spokesman for MGM
Mirage, said that while the airlines’ cuts
were certainly not good news, he did not
expect the impact on visitor volume to be as
dramatic as some observers were predicting.
“There are shifts in
the airline marketplace
that are going on where
the international carriers
seem to be doing incredibly well,” Feldman said.
“Certainly, business at
our high-end properties
is doing incredibly well. On any given day
at the Bellagio, 8% of our rooms are occupied by foreigners. Last month, it was 34%
at the Bellagio. … Not everyone is feeling
this economic pinch.”
He also noted that other carriers might
step in to fill the routes that have been cut.
But for now at least, the outlook is decidedly gloomy.
Las Vegas, which over the last few years
‘We continue to
remain cautious on
for the Strip.’ — Brian
McGill, Wachovia analyst
has experienced one of the greatest boom
periods in its history, started to see its numbers drop at the beginning of the year.
Last week, the city released April data
showing drops in visitor volume, room
rates, occupancy rates and gaming revenue.
The only number on the rise was room inventory, which increased 2.6%.
In April, visitor volume was down 1.5%,
and hotel occupancy dropped 3.8%, to
90%. For the year, visitor volume was down
0.1%, while hotel occupancy was off 1.7%.
Room rates were down 7.4% last month,
to $135.67. For the first four months, rates
declined 4%, to $132.74.
Gaming revenue has also been down all
year, dropping 1.3% on the Strip in April
and 2.6% for the year.
Early in the year, Las Vegas resort operators had been optimistic about the likelihood of a quick turnaround. Now, they are
settling in for a longer slowdown, aggressively cutting rates to keep occupancies up,
“I think the rest of the year is going to
stay pretty much where it is,” Feldman said.
“I don’t think anyone expects a major turnaround before the end of 2008. What we
can be looking forward to is that ’09 will
be better, and that maybe before the end of
this year we’ll begin to see some economic
indicators looking more positive.”
Airline-watchers are witnessing a cascade of
revised forecasts about cutbacks and down-sizings.
Among the latest announcements:
• Air Tran said it is reducing its fleet, originally expected to number 147 aircraft by
year’s end, to somewhere between 135 and
140; it is operating 143 today. The carrier
has sold two aircraft and has also deferred
18 deliveries from Boeing.
• Delta, which earlier projected a 10%
domestic capacity reduction in the second
half of the year, now expects domestic capacity to be down 13%, though it also expects international capacity to rise 14% for
the same period.
The carrier had previously announced
plans to scratch the equivalent of 15 to 20
mainline and 60 to 70 regional jet aircraft
by the end of the year.
• Northwest, updating an earlier plan to
reduce domestic capacity 5% in September and retire 15 to 20 aircraft, said it now
expects to reduce mainline system capacity
in the fourth quarter by 8.5% to 9.5%. It
also will accelerate the retirement of certain
aircraft. It said it would remove 14 Airbus
and 757 aircraft from its fleet and further
reduce its DC- 9 fleet from 94 aircraft at the
start of the year to 61 by year’s end.
Northwest said it would achieve the cuts
by reduced flying rather than dropping any
cities from its system, thereby maintaining
the size and scope of its network.
• Virgin America said it would reduce
capacity 10% in the fourth quarter by “
targeted cuts” in off-peak periods to adjust for
seasonal demand, though it will continue
to add service in growth markets. It also remains committed to launching New York-Las Vegas service in September. Also still on
the drawing board are new routes to Chicago from Los Angeles and San Francisco.
ARE YOU A PERILLO
PERKS MEMBER YET?
Sign up today & enjoy all Perillo has to offer.
The benefits of Perillo Perks.
Perillo’s Italy & Hawaii Tours are easy sales!
“BRAVO!” t o all of our Perks members.
Order your 2008 Italy & Hawaii
1- 800- 431-1515
Join Perillo Perks at