Luxury City Center May Cause Room Rate Drop

While City Center, an 8.5 billion dollar project opens in an era of uncertainty, the Sahara hotel-casino in Las Vegas is temporarily closing two of its three hotel towers and its buffet, citing slow business during the holiday season.

 Deutsche Bank analyst Andrew Zarnett estimates Las Vegas Strip's room supply to increase by approximately 15 percent (10,000 new rooms) over the next 12 months, starting with the opening of CityCenter (5,895 rooms) this month. "Based on our analysis, we expect same-store Las Vegas revenues to decline by 10 percent and EBITDA to decline by approximately 20 percent as new capacity cannibalizes existing Strip operators." EBITDA, a profitability measure, means earnings before interest, taxes, depreciation and amortization.

Despite a bump in visitation to Las Vegas, gaming win fell 10.2 percent in October vs. October 2008 as statewide win of $800.3 million slumped 11.5 percent.

Due to the lingering soft economy, hotels are slashing prices even through the holiday season. Some are offering irrestible offers.

For example, Mandalay Bay is offering free Black Eyed Peas tickets for two with a hotel booking on Dec. 29 or Dec. 30.

Aria, the new City Center hotel, is offering $109 rooms Sunday - Thursday, and $159 Friday and Saturday rates. This also includes a $25 in free play. Mobile users text ARIALV to 37160 for this offer. Stay at Aria anytime in January, and you will also receive an additional $25 in freeplay and $50 in Food and Beverage.

These low-launch rates that Aria is offering could have a ripple effect with the other luxury hotels. Luxury properties will now have to go to battle stations and lower their prices in a battle for middle-market customers, and in turn forcing the middle-market to go after the low end.