Bargain Basement Room Rates Won’t Last

According to a story in the Las Vegas Sun, the MGM loses $3 million per month every time its occupancy rate drops one point.  However it loses $5 million per month every time it drops its room rate by $5.  Like all the businesses here in Vegas, MGM management is trying to walk the tightrope between filling its rooms and setting the costs.  For visitors, that’s meant that recent room rates have gone down dramatically because occupancy rates have been kept high, despite the recession.  The Bellagio, MGM’s premier property, only saw a one point drop in its occupancy rate for the 4th quarter of last year, logging a respectable 93 percent occupancy rate as bargain shoppers snapped up luxury rooms at rock bottom prices.  Less expensive properties saw steep declines.  After all, a room is like an airplane seat, if you don’t fill it, that night’s revenue is gone forever. 

At one time, everything revolved around gambling. Vegas kept room rates artificially low, brought in top notch performers like Frank Sinatra and Elvis to perform in free lounge acts and handed out free drinks, all to support the gaming dollar. That changed a couple of decades ago when Vegas realized that it could make good money on those things that were once free.  Now there are numerous luxury properties that are anything but cheap:  the Bellagio, The Wynn, the Venetian, the Encore and more; tickets to headliners are casually over $100 each and food – should we say cuisine? – can easily set a couple back a few C-notes. Right now rates as as low as they will ever be.  As soon as the economy picks up speed, so will hotel room rates.

Image printed with permission, copyright Alan Goya, www.GOYAphotography.com