UNLV’s Professor Stephen Miller, who runs their Center for Business and Economic Research, finds that resort and parking fees are driving Southern California visitors from Las Vegas.
There are actually some very basic propositions here, each one of which is completely obvious.
- Higher prices reduce quantity demanded of Vegas vacation travel or nearly everything else (there are very few Veblen goods)
- Small price increases matter most where they’re a larger proportion of total cost
- Travel costs from nearby Southern California are lower so the increases will disproportionately influence whether those consumers come to Las Vegas or not.
- And higher costs, including parking fees, fall disproportionately on travelers coming from a short distance away (who may drive)
There are “500 fewer automobiles crossing the border” between California and Nevada daily, with I-15 freeway traffic down 1.1% over the last 10 months.
While visits to Las Vegas are up 0.5% (so essentially flat) so far in 2019, they would be higher without these increased costs. Resort fees have recently topped $50 a night at some properties and have been tagged as a detriment to resort casino businesses in the city. Some hotels are now stacking ‘venue fees’ on top of resort fees even.
With 12,000 rooms coming online in Las Vegas over the next 5 years the hotel industry there faces a dilemma. Higher prices drive people away and make it harder to fill rooms especially at non-peak times. Resort fees serve as a price floor, preventing hotels from discounting enough to keep rooms full. Las Vegas is a city where ancillary revenue usually exceeds room rates, so keeping rooms full is crucial at almost any price.
Several states attorneys general are currently investigating fraudulent resort fee practices by hotel chains, and booking sites like Expedia are even frowning on the practice.
[…] Resort fees have been shown to drive people away from Las Vegas, especially travelers from nearby Southern California who take on increased importance with more people willing to drive than fly. […]