Hotel rates help to fuel turnaround

Feb 26, 2002 9:19 AM

Steadily increasing room rates and rising consumer confidence has analysts predicting that the travel/lodging industry is poised for a recovery.

According to Wall Street investment firm Bear, Stearns & Co., room rates at Strip hotels were higher than those from a year ago for the first time since Sept. 11

Midweek room rates were up 6.8 percent to $141 on average, while weekend rates were up 9.5 percent to $253.

Fueling the optimism was solid increases at the major Strip operators. Park Place Entertainment (PPE) reported midweek rate gains of 6.4 percent, while MGM Mirage and Mandalay Resorts posted gains of 2.8 percent and 10.1 percent, respectively.

Bear, Stearns predicted the upward trends will continue through 2002.

The ability to increase room rates after the Sept. 11 downturn is key to a recovery, more so than the task of bringing customers back to Las Vegas, according to the president of Harrah’s Entertainment, Gary Loveman.

Loveman said recently that promotions and marketing efforts have helped bring the travel business back to Las Vegas, nearly to the point before September 11.

He added that raising room rates to their pre-September 11 levels was a more difficult task.

Helping to ease that task is a “silver lining” in the economic slowdown: with a limited supply of hotel rooms, and virtually no new construction on the immediate horizon, will make it “considerably easier for demand growth to outpace supply growth,” according to a Bears, Stearns report.

Based on the slowdown of construction coupled with the tightening of money markets to fuel new construction, Bear, Stearns is predicting for the lodging industry “a strong rebound in performance during 2003 and for several years thereafter.”