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Hate Resort Fees? Las Vegas Executives Don’t Care.
Resort Fees. The traveling public despises them, however, Las Vegas executives have embraced them with the sheer passion and vigor that can only be compared to newlyweds on a honeymoon.
Vegas regulars have been screaming from the rooftops that a tipping point is near and many vow that they’ll never return, opting for other, less expensive destinations. I’ll let you in on a little secret though – Vegas casino operators hear your threats and displeasure and frankly, they don’t care. They don’t care because the customers getting priced out by a $30-$50 a night fee aren’t big enough spenders to stress losing.
They care so little and are so confident that visitors will continue streaming in that they ratchet up the nightly resort fee seemingly every few months. Caesars Entertainment and MGM Resorts just announced that they would again be raising their resort fees almost in lockstep with each other in early 2018. Awesome!
As casino operators don’t break resort fees out on their financial statements as its own line item, I figured I would try to estimate the revenue gathered from “providing” internet and a fitness center. Who the hell uses a fitness center in Vegas anyway? Nobody I want to know.
I figured Las Vegas Sands was a good candidate to dig into as they feature two Las Vegas properties (Palazzo and Venetian) with an identical resort fee making the math pretty straightforward.
Venetian and Palazzo have a tad over 7,000 rooms combined, for our purposes, well just use 7,000. If you multiply that 7,000 rooms by 365 nights in a year, you know that Las Vegas Sands could sell up to 2,555,000 room nights per year.
In 2017, Las Vegas Sands Las Vegas operation reported a 91.7% hotel occupancy rate. It’s easy to determine then that in 2017 Venetian and Palazzo sold roughly 2,342,935 room nights (91.7% of the total 2,555,000 room nights available for sale).
Applying the 2017 resort fee of $39 (it’s $45 now!) to those 2,342,935 nights means that Palazzo and Venetian would collect roughly $91,374,465 (or $105,432,075 if you use the new 2018 rate) per year in resort fees. Now, we’re aware that there are situations where resort fees are comped… but the numbers are pretty damn close, and that’s a lot of cash for nothing generated by 2 properties. Can you imagine what operators with a much larger footprint like MGM and Caesars are pulling in?
The introduction of fees on everything begs the obvious question – When do tourists just stop coming to Las Vegas? When will Las Vegas become too expensive? Las Vegas Sands’ occupancy rate numbers over the years don’t suggest we’re there yet (Gathered from LVS Annual Reports). The graphs below demonstrate occupancy rates rising while the “average daily rate (ADR)” resorts charged for rooms also rising. Note: Resort Fees are not incorporated into the Average Daily Rate figure, however, they have been on the rise as well.
The occupancy graph tells the story. Venetian and Palazzo aren’t losing room night sales due to rising room rates / resort fees and honestly, those staying home don’t matter. If you are scared off by a $100 – $150 fee over a 3 night stay, you aren’t a big enough spender to be missed. Not to mention, customers that gamble and are valuable to the casino aren’t paying resort fees anyway.
This excerpt from the MGM Resorts 2017 annual report hits the nail on the head “During the year ended December 31, 2017, Las Vegas visitor volume decreased 2%, Las Vegas Strip REVPAR increased 2% and Las Vegas Strip gaming revenue increased by 1% compared to the prior year”. In lay terms, there may have been a few less visitors to Vegas as a whole, but we made more money per available room and saw an increase in gaming revenue. Sounds like resort fees are working quite nicely for them.
The positive results at MGM Resorts were confirmed in Caesars Entertainment’s 2017 annual report which boasted that they have “Increased rooms revenues of $19 million during 2017 resulting from an increase in resort fees and occupancy rates”. Again, increase in fees, revenue AND occupancy rates.
Another key benefit to charging resort fees is that resorts don’t pay online travel agents (sites like Travelocity, Expedia, etc) commission on the resort fee as they would if it were part of the room rate.
From the Casino’s perspective, the resort fees are working. After all, money for nothing is a hell of a deal and cold hard cash means more to shareholders than our feelings.
I digress – Let’s chat through another fee visitors and locals detest.
I bet you also hate paying for parking in Vegas? Again, resort executives hear your cries of anger, but don’t care.
Paid parking in Las Vegas is a play, in part, to capitalize on convention traffic and patrons looking to park for events at T-Mobile Arena as well as the new Raiders Stadium behind Mandalay Bay which is expected to be Monorail Connected to the rest of the strip soon.
According to the Las Vegas Convention and Visitors Authority, convention attendance in 2017 was up 5.3%, although overall visitation was down 1.7%. Many convention attendees rent cars and are reimbursed for parking (and resort fees) by their employers. Easy way to make a buck if you are a major casino operator.
It is interesting to note though that in 2016, 59% of Las Vegas visitors got around town using a car – 43% of which using their own personal vehicle and 16% employing a rental. Could “pay for park” in Vegas be the magic elixir that pushes people away from driving and the Las Vegas Monorail to profitability?
The same theory holds true for parking fees. If you are going to be scared off by a $15 daily parking fee, you likely aren’t worth all that much to me as a casino.
I feel the pain. I despise handing over my Visa for a resort fee while checking in for my Vegas vacation but I work it into my budget and consider it part of the room rate. I understand the need to charge more for rooms as millennials particularly aren’t gambling like previous generations, but I want the resorts to make it transparent. Add resort fees to the room RATE listed instead of making it a separate item.
As it stands, I still find Vegas to be a cheap destination and while I find the pricing strategy to be dishonest, I’ll still pony up for my Vegas fix.
Little folks like us may not have a lot of pull or a fat bankroll, but we can keep the discussion going and vote with our wallets if we feel compelled. Make noise because the fees are running out of control and because the practice of resort fees is plain dishonest.
If you feel fees have gone too far don’t give up on Vegas completely. Choose properties off the beaten path that don’t charge for these “amenities” and choose not to support this madness.