This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.  Find out more here  Close
Vegas hotel performance back on track
January 31 2012

Steady increases in occupancy led to double-digit ADR growth throughout 2011 in Las Vegas.

  • Year-to-date occupancy in Las Vegas through November was 84.8%, up 3.7% from that same time frame in 2011.
  • Occupancy in Las Vegas is somewhat of a different animal because Las Vegas hoteliers understand the importance of ancillary revenue.
  • One source said the LVH being adjacent to the convention center helps with demand generation and may have allowed the owner to move forward without chain affiliation.
By Jason Q. Freed
HNN contributor


LAS VEGAS—After steep dips in performance metrics—including a 22% dip in room rates from 2008 to 2009—Las Vegas hotels are back on track.

Performance data from the Las Vegas Convention and Visitors Authority through November shows Las Vegas hotels are performing in line with hotels throughout most of the United States … that is, they’re recovering steadily, but still short of peak performance numbers.

Year-to-date occupancy in Las Vegas through November was 84.8%, up 3.7% from that same time frame in 2011. The metric that most resembles a recovery, though, is Las Vegas hoteliers’ ability to increase average daily rate 10.8% through November 2011 as compared to year-to-date November 2010.

“If you’re able to maintain occupancy, and you’re able to grow ADR it shows some recovery in the destination,” said Scott Russell, senior research manager at the convention and visitors authority.

Sources said hotel occupancy in Las Vegas is somewhat of a different animal when compared to other regions in the U.S. because Las Vegas hoteliers understand that ancillary revenue (i.e., gaming, food and beverage) is as important, if not more, than hotel revenue. Therefore, rooms might be “comped” or discounted to attract gamblers, which results in inflated occupancy numbers.

Still work to do
And 84.8% still falls well short of the 90.4% occupancy the convention and visitors authority said hotels recorded in Las Vegas during 2007.

“There’s still a bit of work to go,” said Abhijit Pal, senior director of strategic accounts and gaming for the Las Vegas market at Expedia.

However, Pal said occupancy in the mid- and high-80s means people are back to business and higher occupancies will lead to even more ADR strength.

“We think that 2011 performed well,” he said. “We saw a strengthening of ADR in the marketplace pretty much in line with the market numbers. A double-digit increase in ADR with softer increases in occupancy means the marketplace is moving in the right direction.”

Shannon Okada, VP and associate director of gaming and VP consulting and valuation for HVS in Las Vegas, expects performance metrics will continue to ramp up during 2012 but that performance won’t be “super awesome.” Still, it’s a 180-degree turn from 2009, when President Obama twice used Las Vegas as an example of financial irresponsibility, which Okada said was “a big factor” in dips in visitors to Las Vegas on both the leisure and corporate sides.

The fact that occupancy remains soft when compared to peak years indicates the Las Vegas market is still absorbing major additions to room supply, such as CityCenter (5,800 rooms) and The Cosmopolitan of Las Vegas (2,995 rooms), Okada said. In 2011, through November, Las Vegas room inventory increased 3.4%. While the Sahara closed its doors, properties such as the Tropicana were renovated and included the opening of new towers or wings.

“Visitor volume is increasing on the weekends,” Okada said. “When you have visitors and demand on the weekend that’s what also helps drive rate. When occupancy gets to this level—the whole idea is to get that base so you can revenue manage and yield on the leftover rooms.”

Branding on the Strip
One of the emerging trends in Las Vegas is hotel-casinos debating whether it is valuable to align with a franchise.

During the past 18 months, Las Vegas has seen a handful of independent resorts attach themselves to a chain  for the additional distribution, and sales and marketing capabilities, such as the Venetian/Palazzo resort and its affiliation with InterContinental Alliance Resorts and The Cosmopolitan and its affiliation with Marriott International’s Autograph Collection. On the flipside, the LVH - Las Vegas Hotel & Casino earlier this month broke its affiliation with Hilton Worldwide after its license agreement expired.

“Any additional database for an operating casino helps. The reward-tracking systems are great, and they help properties extend their database outside the market,” HVS’ Okada said.

Chains “bring benefits to the table, such as distribution on the brand.coms, some loyalty benefits and corporate negotiating benefits,” Expedia’s Pal said. “Is there a value there? Absolutely. But in Vegas the brands themselves are often bigger than the chains.”

Pal said the LVH being adjacent to the Las Vegas Convention Center helps with demand generation and might have allowed the owner to move forward without chain affiliation.

“If you look at the LVH, we see nothing but strong results for them,” Pal said. “It’s hard to make a conclusion from the data perspective that they will take a hit.”

Del Ross, VP of U.S. sales and marketing at InterContinental Hotels Group, said the partnership between IHG and The Palazzo/Venetian is meeting expectations “in all cases.” It also is bringing added benefits that weren’t expected when the partnership was announced in 2010.

“We knew in our large group sales that our clients and corporate accounts wanted to have giant meetings with 5,000 attendees and would need massive amounts of meetings space. Prior to this relationship, we didn't have that facility,” Ross said.

However, independent properties affiliating themselves with a chain does bring operational challenges. Okada said he expects there are some conflicts of interest. For instance, tracking room revenue mixed with gaming revenue and which entities are compensated accordingly could be complicated.

Ross said, while it caused each partner to think outside the box, it isn’t an issue at the Venetian/Palazzo because those properties operate significantly different from other properties on the strip.

“From the beginning, that resort was built for meetings—there is 2.2 million square feet of meetings space,” he said. “It’s not a casino-hotel that has meeting space, it’s a convention hotel that has casinos. So everything they do is built around having a meeting; they’re less dependent on comps and discounts.

“The InterContinental Alliance brings a new source of revenue and a new source of customers.”

Login or enter a name   Post Your Comment  Check to follow this thread via email alerts (must be logged in)
(4000 characters max)

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.

Industry CEOs’ opinions on Marriott/Starwood
Sharing economy might be in Choice’s future
Industry outlook: A crash or soft landing?
Modular construction and hotel design
Spanish chains ramp up global expansion
Top CEOs: Both good, bad signs for hotels
Extended Stay America's Lopez, Part I
Extended Stay America's Lopez, Part II
ALIS 2016: LIIC members share opinions
Consultants share trends, advice for 2016
HSMAI Digital Marketing roundtable
ESA’s Lopez talks expansion, change
STR: US results for week ending 6 February
Financial experts analyze hotel consolidation
A roundup of US hires, promotions
STR: Airbnb’s impact on Manhattan compression
Brand X factors to watch for
Contact Us
Hotel News Now
18500 Lake Rd.
Suite 310
Rocky River, Ohio 44116
Copyright © 2004 - 2016 Hotel News Now, a division of STR, Inc. All Rights Reserved.   Privacy