Academics
Bob Boughner: Developing Las Vegas
Robert Boughner, President and CEO of Echelon Resorts, discussed Las Vegas customer spending trends and the ways in which they affect the development of the Strip. Boughner noted that three main factors have driven an increase in revenues on the Strip in the past decade: increased visitation, greater spending on lodging, and the addition of more upscale properties. From 1990-2004, only one-third of revenue growth came from an increased number of visitors; the rest came from increased spending. Las Vegas convention visitation had grown at more than three times the national rate, resulting in higher spending and more attractive demographics—however, while convention customers had predictable spending patterns, they also proved to be a much riskier market: one which is highly sensitive to economic changes. This decrease in convention business played a significant role in the 9.8% ADR decline from 2007 to 2008. Other effects of the poor economy currently faced by Las Vegas properties include decreased spending on gaming and name brand shopping and dining guests electing to split plates or order a prix fixe menu. However, just as Mr. Loveman noted, these changes do not mean that guests expect less; on the contrary, they expect more for their dollar. Customers are also more prudent about the nature of their purchases, shying away from any product branded as “luxurious” or “indulgent.”
The state of the economy has resulted in the delay of many developments, including one of Mr. Boughner’s. Rather than build, companies are electing to renovate existing properties and reposition brands to meet changing customer preferences, though even these changes will not occur for at least another year in most cases. Bougher admitted that he did not know how long many of these projects will remain in the pipeline. However, he remains optimistic that we will eventually recover from these economic hardships—the open question for him, and the rest of the country, is “when.”