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Do low room rates hurt Reno?

Mike Sion

Reno’s gaming industry traditionally

braves its fall-winter slow season by lowering

its already relatively low room rates to

lure visitors. From November through

February, occupancy rates fall in northwest

Nevada’s 27,257 hotel, motel, RV park,

condo/timeshare and 28-day rental rooms.

Inclement weather remains a traditional

seasonal concern for the industry, just as it

was before Interstate 80 the main

pipeline to the northern California visitors

market replaced old U.S. 40, ending

fear of days-long snow closures. Foul

weather still can harm casino marketing

off-season efforts, including direct-mailing

advertisements for vacation packages,

entertainment and tournaments.

“You can spend a hefty amount of

money on promotions and advertising, and

all it takes is one snowstorm and your

money’s practically down the drain,

because you can’t force people to drive over

the hill,” says Kimberly Tolkien, director of

marketing for the Atlantis Casino Resort.

With about 54 percent of visitors driving a

car, truck or RV to get to Reno, and about

another 10 percent coming by motor coach

Reno is “a drive market, predominantly,”

Tolkien notes.

But a year-round concern, year in and

year out as traditional as worries about

the weather is whether low room rates,

are harmful to the market.

“This discussion has been happening

for probably the past 20 years,” Tolkien

says. Reno has a relatively low ADR

average daily rate for rented hotel

rooms. The Biggest Little City’s ADR for

2001 was $57.90, which was 73 percent of

the national average: $79.66. Reno’s rate

rose 2.9 percent from the $56.20 in 2000,

but hasn’t grown significantly in recent

history, Tolkien says.

“That’s bad.We’re spending more

money on our properties, we have higher

costs of operation, and not an increased

ADR to show for it.With lower room

rates, really no one benefits. The consumer

benefits, but only the short-term. If you

can’t continue to improve your property

and town, what are they going to come

back for? It’s a short-term quick fix and

really doesn’t do anything for future

growth.”

Visitor count is essential to gaming revenue.

When more visitors among the

region’s annual 5 million-plus guests are in

the Reno and north Lake Tahoe area,

more money is taken in at casino tables

and slot machines. July, August and

September historically are among the four

months with the highest number of

tourists in Washoe County, and

November, January and February are

among the four lowest. Comparing tourist

counts (provided by the Reno-Sparks

Convention & Visitors Authority) and

gross gaming revenue totals (provided by

the state of Nevada Gaming Commission)

for those months for the years 2000 and

2001 shows the more visitors to the county,

the more money taken in from gaming:

* When there were 1,405,014 visitors

from July through August 2001,

$297,212,281 was left on gaming tables

and in slot machines, while the months of

January, February and November 2001 saw

1,068,314 visitors and a gaming win of

$229,915,134.

* When there were 1,484,797 visitors

from July through August 2000,

$317,345,570 was left, while the months

of January, February and November 2000,

which saw 1,103,165 visitors, the gaming

win was $244,868,608.

Hotel-motel occupancy rates generally

correspond to the up and down seasons for

visitors. July through September 2001 had

76 to 79 percent occupancy, compared to

61 to 71 percent in November, January

and February 2001. July through

September 2000 had 76 to 81 percent

occupancy, compared to 58 to 70 percent

for November, January and February 2000.

Reno-area lodging prices generally are

much lower in the off-season than at the

height of tourist season. (See sidebar)

But does lowering room rates actually

fill up rooms?

It’s a tricky topic, says Reno-based

gaming consultant Ken Adams.While it’s

unclear where to draw the line on raising

rates without dissuading customers,

Adams says, he believes higher room rates

actually could fill more rooms. He cites the

Atlantis as an example.

In the third quarter of 2002, Atlantis

room rates went to $66.52, about a 10 percent

rise over same period in 2001.

Occupancy in that period went up 1 percent,

from 96 to 97 percent.

While much of the Reno casino industry

has followed the logic that lower room

rates generate higher occupancy, Las

Vegas’ industry has defied that reasoning

by increasing its room rates and its occupancy,

Adams says.

“I come down on the side of higher

room rates. There’s a perception that the

price is related to quality and value,” he

says. “Higher room rates would communicate

a greater value. It would be to Reno’s

advantage if a higher room rate could generate

the same amount of occupancy.”

One benefit of successfully implementing

that strategy would be increased revenue

for the room tax-supported RSCVA

with which to market the area, Adams

says.

With Reno facing an ongoing challenge

of competing against the spread of

legal gaming across the nation including

Indian tribe-owned casinos in nextdoor

California increasing the number

of overnight visitors to the Reno-Tahoe

area is the key to boosting the region’s

tourist economy, says Deanna Ashby, the

RSCVA’s executive director of marketing.

To increase visitation means selling the

Reno-Tahoe area as a place for a total

vacation experience, Ashby says. Visitors,

for example, could ski, enjoy a spa, shop,

dine and gamble all in the span of a

two-day vacation, she says.

“The RSVCA’s position is to market

ourselves as ‘gaming plus.'”


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