Supply & Demand is Your Friend in Las Vegas

The recession has hit Las Vegas hard as most readers of ECG know. The economy may turn around next year, but that may not change things much in the casinos of Las Vegas. With all of the building in Las Vegas over the past few years there should be a deluge of hotel rooms on the market next year.

In their reports, debt analysts at Deutsche Bank and CreditSights zeroed in on the impending flood of new hotel rooms on and near the Las Vegas Strip — a market struggling with an oversupply of rooms, slot machines and gaming tables.

“The challenge for the casinos will be to maintain hotel occupancy even as new supply is brought on over the next 14 months,” CreditSights said in its report.

Even without taking into account the 3,815 rooms at the stalled and bankrupt Fontainebleau resort, analysts say new rooms coming online at CityCenter and elsewhere will pressure the Las Vegas industry.

CreditSights noted that lower room rates are helping to fill Las Vegas hotels, but sales of condominium units on and near the Strip have come to a near standstill with 2,200 vacant units on the market.

Simple economics says that if supply is greater than demand then prices will fall until demand increases. Las Vegas isn’t like the rest of the world. Casinos can offer a variety of different comps to keep room rates relatively stable, but in general if you search for a cheap room in Las Vegas this year and next you should find it.

I typically try to treat myself to a little luxury when I take trips to Las Vegas. I’m curious to see how this effects the higher end hotels.

Chalk one up for the consumers!