Resorts all-in for high-end market

December 24, 2007 4:55 AM
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For decades, Las Vegas has reveled in its tourist-friendly image: Casino customers were allowed to feel like big shots with bargain-priced food and rooms, free show tickets, liberal comps and a fair shot at the tables and machines.

But lately, the saga of Las Vegas has evolved into a Lifestyles of the Rich and Famous story line: Expensive rooms, classy spas, gourmet restaurants and trendy nightclubs have made the city’s storied amenities accessible by mostly the upper crust of visitors.

The affordability of Las Vegas — or lack thereof — has coincided with the expanding corporate influence on resort operations.

According to Economics 101 in the 21st century, the corporate philosophy is to constantly find new and larger revenue streams, often times worrying more about pennies spent than pennies gained.

The result has been higher prices for customers across the board, and a shrinking return on their gambling bankroll.

A room with a ... phew!

In the past, Las Vegas visitors were content to spend $80 to $100 for a good, clean hotel room, where they could park their suitcases while they whooped it up all night in the casino.

Today, resorts’ emphasis on luxury accommodations has made the cost of rooms a stretch for most cost-conscious visitors.

The Venetian, for instance, was able to raise the average daily room rate in the first three quarters of 2007 by $22 from a year earlier — to $259 per night — after spending $100 million on renovations that garnered the hotel five-diamond status from AAA.

For the extra money, guests are treated to double the number of pillows on each bed to four, increased thread count to 260 on their sheets, flat panel TVs, automatic drapes and shiny marble fixtures in the bathrooms, among other cryptic amenities.

You can find more of the same at Wynn Las Vegas, the reigning champion and market leader in average room rates at $282 a night.

While spending three bills a night for a hotel room may sound excessive, it’s probably becoming the norm. Resorts currently planned or under construction are expected to offer comparable upscale accommodations.

The Venetian’s sister property, the $2.6 billion Palazzo, opens its doors later this month, and is reputed to be fancier than the Venetian.

Across the street, Wynn’s $2.2 billion Encore property opens in 2009, presumably with another Mobil five-star ranking.

The $2.8 billion Fontainebleau, along with MGM Mirage’s $7.8 billion CityCenter are scheduled to open later that year. Boyd Gaming’s $4.4 billion complex, Echelon, is scheduled to open in 2010, and developer Elad plans to spend more than $5 billion to open The Plaza hotel and casino on the Strip in 2011.

It’s not likely tourists on the cheap will find a spot to crash among that rogue’s gallery of high-line hotels.

And, as budget options like the Stardust and Frontier disappear from the landscape, it will become increasing difficult to find a "cheap" hotel room, especially on the Strip.

"The more Las Vegas is perceived to be a really high-class destination the bigger the market gets," said Steve Wynn in a recent interview. "That’s a good thing for all of us."

Well, perhaps, if you’re among the Rich and Famous.

Casino squeeze play

Changes in casino games are more subtle than the upscaling of resort accommodations, but they are still significant.

The tightening of slot machines, drying up of casino comps and introduction of games with astronomic hold percentages have made casino play a more expensive proposition than in the past.

By garnering 65 percent of all gaming revenue, slot machines are the foundation of any casino operation. And, over the past few years, the amount slot machines have "held" has increased significantly.

Over the past 12 months, slot machines in Nevada held 6.12 percent of all money bet by gamblers. The resultant 93.8 percent returned to players is the first time in the state’s history slot customers took back less than 94 percent.

Much of the increased return has come from the proliferation of penny slots, which held more than 10 percent over the past 12 months.

Table games haven’t been immune to tightening tactics. Many casinos have reduced the payout for a natural blackjack from 3-2 to 6-5, and player-friendly options such as surrender have been cut back sharply.

Moreover, many of the new games, bonuses and player options — such as Casino Surrender, Super Sevens, Pair Square and Even Money — are basically high-hold gimmicks that pad the house edge.

Comps, an endangered species

A few months ago, Wynn Las Vegas stopped giving free drinks to video gaming players in its bars and lounges. While the action attracted the attention (and ire) of some players, it was actually part of a growing trend.

Comps have always been a staple of the casino, in which ordinary customers would be rewarded for their play. The theory was that the house was willing to donate amenities because players would lose more than the cost of the freebies.

And the system worked. The multi-billion dollar empire of Las Vegas was forged off losses left in the desert by tourists, who still went home feeling like they "made out okay" with their free shows, rooms and buffets.

The tightening and subsequent drying up of casino comps began with the advent of the players’ rewards card. By tracking a customer’s play, casinos could determine levels in which players could "earn" their freebies.

Unfortunately, pit bosses and floor supervisors lost much of their discretion in allotting comps as computers and bean counters sifted through the hours and rate of play to determine who gets what.

In the process, comps have become harder to get, especially for occasional visitors.

The newest wrinkle in reeling in comps involves tracking a casino customer’s losses, besides his rate of play. Some pit bosses on the Strip have recently revealed that they are recording how much a customer wins or loses when they leave the table.

The upshot is that losing is becoming a salient requirement for earning comps.

With resorts getting top dollar for everything on its menu, long time visitors probably long for the days of $1 shrimp cocktails, $4.95 prime rib dinners and free blackjack match-play coupons.

Unfortunately, the corporate philosophy doesn’t allow for nostalgia. There’s no profit in it.