As Las Vegas Recovers From Pandemic Decline, Room Rates Rise Quickly

It was bound to happen, but even though there might be an inevitably to it, there’s still going to be sticker shock.

Here it is.

Las Vegas is getting more expensive and there’s no telling how much more costly a trip to Sin City is going to be in six months to a year.

To put the discussion in perspective, travelers need to recall that Las Vegas has been through traumatic economic times. No region in the country was hit harder economically by the COVID-19 pandemic than Las Vegas. Tourism was wiped out for a handful of months and unemployment spiked. As a consequence, prices – especially, hotel rates -- were depressed.

However, the Vegas recovery is on and it’s already showing up in how much visitors are willing to pay to enjoy the city’s excitement.

Record Stretch For Vegas Casinos

From a gaming perspective, the Vegas recovery has been underway since pandemic restrictions started to be lifted. In March, Nevada total gaming win – everything from casino slots and table games to online sports wagering – enjoyed a record 12th consecutive month of at least $1 billion. The previous record was eight straight months (October 2006-May 2007).

And the hospitality industry, which has been dogged by a badly depressed midweek market because business groups were hesitant to travel as coronavirus cases spiked (plus a general labor shortage) is beginning to stir. That is partly fueled by a burst of big entertainment and sports events.

The Las Vegas Convention and Visitor Authority’s most recent report on visitation illustrates recent changes in room rates, using as a comparative touchstone the pre-pandemic month of February 2019.

Average Daily Room Rates Increasing

The average daily room rate (ADR) in February 2022 for Las Vegas (the Strip and Downtown), was $149.52. In February 2021, with the city still coping with COVID-19 restrictions, the ADR was $98.03, which by most comparisons, was a bargain. For context, the pre-pandemic February 2019 ADR was $130.06. That February 2022 ADR was actually slightly ahead of the February 2019 number even when adjusted for inflation.

However, the ADR becomes even more interesting when paired with room occupancy statistics.

In February 2019, the blended occupancy rate (weekdays and weekends) was 87%. In February 2022, the blended occupancy rate was 69.3% – a decrease of nearly 18 percentage points. Yet, the declining occupancy was coupled with an inflation-adjusted increase of about 2.5% in room rates.

All of that raises the question: If occupancy rates return to pre-pandemic levels, will that trigger even bigger increases in room rates?

While the figures may portend that bit of bad news for the traveling public (and good news for casino-hotel operators), some observers see it differently.

Expert’s Take on Cost of Vegas

Anthony Curtis, publisher of the Las Vegas Advisor, a longtime online and print Vegas newsletter detailing the city’s best bargains for hotels, dining and shows, sees a more nuanced landscape.

”When things started opening up again in Las Vegas, visitors were showing up with a lot of that pandemic money in their pockets and they had money to burn. That showed up in the gambling and they didn’t really care about the room rates,” Curtis said.

”So, the operators saw that they could offer lesser quality service that you could see in them being short-staffed in restaurants and hotels, in the truncated menus, and even with fewer in-room amenities, and get away with it.”

However, these are challenging times for average travelers, Curtis pointed out. Inflation is pinching household budgets and high gasoline prices are impacting travelers who drive to Las Vegas from California and Arizona. Airfare increases are impacting tourists from further away. So, a confluence of broader economic conditions might start to impact tourists and then force hotel-casino operators to hold the line on room rates, and perhaps even lower them a bit.

Las Vegas Creates Its Own Demand

Yet, there is no denying that Vegas has a long history of creating its own demand. The late Benny Binion gave the city a lesson in that when the former owner of downtown’s Horseshoe Casino helped bring the National Finals Rodeo to the city in the mid-1980s. In one master stroke, a traditional dead time in Vegas between Thanksgiving and Christmas was transformed into a bustling couple of weeks with the town filled with real and wannabe buckaroos.

By now, creating demand has been elevated to an art form in Las Vegas.

Curtis himself illustrated that point in describing how the town brought in the wildly popular K-pop group BTS for two weekend shows, April 8-9 and April 15-16, to play at 65,000-seat Allegiant Stadium, home of the Las Vegas Raiders.

”Those concert-goers will be at Allegiant for the first weekend and stay the entire week for the second show. So, it’ll be a week-plus event for the city with those fans going to restaurants, nightclubs and day clubs. Then, on the heels of that, there’ll be spring break, and then there’s the NFL draft (April 28-30),” Curtis said.

”What we hope to do at Las Vegas Advisor is point out to more bargain-minded visitors the in-between times when there isn’t quite as much demand.”

Business Travel’s Impact On Rates

On the gaming industry side of the equation, casino-hotel operators are looking forward to a return of business group travel. Convention visitation was an estimated 439,000 in February 2022, which was down more than 41% from 2019. Business travelers typically spend more money than average tourists (possibly, because they are on expense accounts), and that puts upward pressure on room rates. The National Association of Broadcasters conference, a group that brought more than 90,000 people in 2019, rolls into Vegas April 23-27.

Also absent from Las Vegas as a result of the pandemic have been international travelers. Airport passenger counts (planing and deplaning) were down 8% in February 2022 from the same month in 2019. Airport passenger counts have been down consistently throughout the pandemic. For instance, in January 2022, it was down 19% from January 2019. A return of international travelers would also likely drive up hotel prices.

Meanwhile, Curtis argues that all is not lost for bargain-minded travelers. He said the two biggest financial considerations regarding Las Vegas trips for average tourists remain hotel and transportation expenses.

”If the gasoline prices and the airfares stay high, the casino operators will have to give travelers some help to get them into town – and that’s with room rates,” Curtis said. “Look, we still have (hotel-casino) deals listed in our Top 10 at the Advisor where off-the-strip, even with the resort fee included, you can get a room in the $55 to $75 range.”