Two Way Hard Three | Las Vegas Casino & Design Blog

I just read this article from fellow VegasGang podcast member Dave Schwartz and I really enjoyed it. I think he's 100% correct.

The economics of Las Vegas have fundamentally changed (for the better) and a new 'cheapo-era' is NOT the answer to dealing with a (hopefully) short term problem.


Read archived comments (8 so far)
June 20, 2008 2:34 PM Posted by mike_ch

When you have a 4,000 room luxury hotel, you don't have to price it like you do a 2,500 room luxury hotel. Yet that does nothing to explain the similarities in price between, say, Wynn (less rooms) and Bellagio (more rooms.)

It's not about the hotels being luxury hotels, it's about charging luxury prices. Maybe the Bellagio should go down in price, it has so many rooms that even at a lower rate it will produce a comparable chunk of money to the less populous hotels down the road.

The recent greed streak shown on the strip, from the lousy gaming odds to the near-monopolizing to the nightclub game, can only last so long. Things need to change, not because a recession is coming, but because you can only screw your best customers so many times until they recognize what's going on and don't come back.

After all, who cares if you make less money from someone on their visit if they visit every year instead of every 2 or 3 years? If they feel like they're being robbed, they won't come back as often, and the industry suffers.

As I said again and again and again, after a certain amount of costs are covered, price is nothing more than a barrier to entry, and as you continue to raise it the numbers of willing buyers shrink and shrink. The old math was to cover your costs and attract as many buyers as possible, the new math is to charge more than you really need to and give something a perception of status. Las Vegas doesn't need to stop being luxurious, but it needs to tap into it's scale and stop celebrating the exclusive as heavily as it does now.

June 21, 2008 12:46 PM Posted by motoman

mike_ch, I know you said you're working on a discussion of room pricing. Last thread, I mentioned that these hotels could keep their listed rates high, but extend more (and more generous) offers to their customers and give them a perception of getting a great deal on something special. I think Schwartz's article hit some of the same points.

I used to laugh at the rack rates hotels used to post on those placards hanging in the room doors. And I gotta say, getting a totally comped room when our play clearly didn't merit, certainly didn't hurt our "brand loyalty" to Wynn.

June 21, 2008 1:54 PM Posted by detroit1051

Hunter, I hope you're right that this may be a short term problem. I have no factual sources to quote, but I've heard business in high-end Strip restaurants is down 25% this year and that the failure-to-close rate in high-end Strip area condos is anywhere between 30-50%. Maybe Jeff, Dave, David or others can set me straight if I'm wrong.

June 21, 2008 3:31 PM Posted by Jeff in OKC

How about a different angle. In the car business, the new mantra is "Every revenue opportunity must be maximized immediately because it may never present itself again". Translated, this means "Screw then for as much money as you can right now, because they'll get wise and never come back, anyway". In this light, brand loyalty, and customer retention are less important. I think we're seeing some of this thinking, especially in the nightclub area, where management probably looks at it as a fad, anyway. Is this possible, or am I out of touch?

June 22, 2008 7:02 AM Posted by detroit1051

Speaking of condo closings, The Donald is never at a loss for words, but he can't put a positive spin on this:

June 22, 2008 2:24 PM Posted by kenny

Mike ch, the bellagio should not be the one going down, wynn should because in a year, the wynn is going to have 2000 more rooms (from encore)

June 23, 2008 1:42 PM Posted by mike_ch

kenny: Maybe. Wynn's room numbers are deceptive because of the "hotel within a hotel" thing, which are understandably priced higher due to quantity and appointments. I imagine that when all is said and done, Bellagio will still have more standard rooms in it's two towers than the Wynn complex will have in WLV in Encore.

When you sit back and think about it, we had three luxury hotels open up almost all at once in the late 90s: Bellagio, Mandalay Bay, and Venetian. It's pretty crazy that Bellagio is often considered the top of those three because it opened with more rooms than the others.

I remember at opening, it was predicted that Venetian would get the truly rich while Mandalay Bay would get the young dot-com rich, and Bellagio with it's high room count would get have to live with the wannabe rich who are going over their budgets and tying up their credit.

Adelson went room-crazy and then adjust his prices for the most part, while Mandalay got hindered IMO by being bought out by MGM and being shuffled down from flagship status to just below MGM Grand.

June 27, 2008 5:55 PM Posted by John

I visited LV for the first time last year and must say that they are definitely trying to sell a "lifestyle" in the pricing models of certain things. I do however think that this is something that people buy into and Vegas and as long as it is moderated as to not go to far, will continue to be very successful. Where, what and how that limit is to be determined is, however another issue.