MarketWatch: Las Vegas feels airlines' pain

[marmar]

Airfare hikes, capacity cuts start to pinch Las Vegas

By William Spain, MarketWatch


(MarketWatch) -- Soaring fuel prices are starting to hit home in Las Vegas as cash-strapped airlines hike fares and cut capacity at McCarran International Airport - Sin City's tourism lifeline - leading to pressure on room rates and lower spending levels by visitors.

US Airways, Delta and United are among the carriers curtailing flights to Vegas and there are predictions that total capacity could be down by double-digits percentages or more by autumn, following declines of 3% and 6% in the first and second quarters, respectively. At the same time, the average cost of plane tickets jumped more than 10% in March, according to the Bureau of Labor - and that may pinch even more.

US Airways alone will chop its capacity in half starting in September, reducing it by 7,200 seats a day while eliminating its entire night hub operation based in Las Vegas. Wachovia's Brian McGill estimated that could - taking into account load factors and connecting passengers - reduce by 5%, or 1.9 million people, annually.

That cut was far higher than anticipated, McGill noted, as "previously, we believed that the capacity (cuts) coming out of Las Vegas could be 12% across the entire industry."
But now, "it is quite possible it could eventually be greater than a 15% capacity reduction into Las Vegas."

Rather than capacity cuts, which can be offset by increased loads, more flights by discounters and other factors, Deutsche Bank analyst Bill Lerner wrote in a recent note that "the real issue could be the related inflation in airline ticket prices' impact on spend per visit in the resort corridor."
"In our view, the real risk . . . appears to be a redistribution of visitors' budgets following airline ticket price increases," he said. "As the cost of transport to Vegas increases we suspect visitors will continue to come at similar levels as 2007, as we have seen year-to-date, but simply spend less during their stay or shorten their visit.

Total visitation to Vegas was up 0.4% through March, although revenue on the Strip was down in the mid single digit percentage range.

At Boyd Gaming, "the bigger issue is the rising airline ticket prices (that are) more likely to impact visitor spending patterns or trip duration," said spokesman Rob Stillwell. "We don't think capacity cuts will have a material impact because there's already excess capacity." ......(more)

The complete piece is at: http://www.marketwatch.com/news/story/airfare-hikes-capacity-cuts-start/story.aspx?guid=%7BF6045F48%2DC0C8%2D44ED%2D9CEB%2DFAF1E60E4D24%7D

[saltpoint]

1. Howdy marmar. Timely post.

I'm from a time when commercial air travel was thrilling and exalting. Of late it's hyper-expensive and more or less a Greyhound station in the sky.

Did you get to the Obama / Gore event last night? The crowd must have loved what they heard.

[marmar]

2. Good morning Old Crusoe.....YES I DID!

It was incredible! 21,000 or so people - lines to get into Joe Louis Arena snaking every which way along the Detroit River, up the ramps to the PeopleMover (an elevated automated train that loops around downtown Detroit) .... and so much excitement!
Obama has gravitas like no one else - it was his usual stump speech, adapted for Michigan, but still sounded new and incredible. .... And Al Gore will ALWAYS be The Man!

[saltpoint]

3. Damn, but you got to see a truly historic event. I'm pretty jealous.

Bravo!

[tanyev]

4. I'd be happy to take Amtrak to Vegas.

If only Amtrak went to Vegas. x(

[dysfunctional press]

5. the planes almost never stop coming into McCarren airport.

my wife's godmother used to have a place a little south of las vegas- it was amazing to see how the planes were constantly lined up in the air to land- like a never-ending conga line of aircraft.

[KharmaTrain]

6. The Rollers Aren't Quite Rollin'

I guess the days of the $99 round-trip airfare to Vegas is history. I had a business acquaintance who would hop the cheap plane, get a room for next to nothing and cavort in the casinos and cathouses for a week. He probably did all of this for under $1,000...and always lost his shirt (in more ways than one). I have a feeling he's playing closer to home these days.

Last weekend, my daughter had planned to take a train from Chicago to Denver. The train was cancelled due to the flooding...we checked airfares and found it would cost $500 for a roundtrip...a ticket that went for $140 about a year ago. And that didn't count the extra costs for baggage or sodas.

The airlines are driving themselves over the abyss...I know many who are staying away from flying if they're looking to get away at all. This definitely has to be hitting the major tourist destinations.