July 31, 2008

The price is … strange: Room rates take a curious plunge right around the anniversary of 9-11

By STEVE FRIESS

I am not one of those 9-11 conspiracy nuts. I have an eccentric British pal who does believe that George W. Bush, despite his incompetence at ordering in lunch, was behind the most horrific events of our time. This friend is constantly forwarding e-mails asserting that the Baltimore family behind Vegas casino implosions actually imploded the World Trade Center and made it look to the stupid people of the world as if some “hijacked” airplanes caused their fall.

I reject all this, so I’m sane, right?

Well, maybe. But I won’t hold it against you if you wonder about me after I tell you this:

I am a 9-11 Vegas-hotel-discount conspiracy nut.

Stay wit h me for a moment. Something weird is going on around here.

About a week ago, for reasons I can’t even recall, I took a look at room rates in September at the MGM Grand. I was surprised to notice that in the week of September 7, the resort’s rates fell to their lowest level of the entire month—$100 a night—on that Thursday. That Thursday is the seventh anniversary of the terror attacks. Every other Thursday that month, the rates were the highest of the Monday to Thursday rates. During that particular, auspicious week, the rates fall dramatically.

Odd, thought I. Could it really be that, lo these many years later, there’s still some residual impact on occupancy because people prefer not to travel or recreate on that date?

My brain said no, but my heart said yes, so the next thing I knew, I was obsessively scanning hotels.com to see if other resorts on the Strip saw similar dips on 9/11/08. Here is the list of resorts that see unusual room-rate drops on that Thursday: Luxor, Bally’s, Harrah’s, Bellagio, New York-New York, Treasure Island, Paris, The Mir age, Mandalay Bay, Las Vegas Hilton, Golden Nugget, the Rio, Hard Rock, Wynn and Trump. There may be more.

The Mandalay Bay and Hard Rock were particularly startling. At Mandalay Bay, the room rate is $210 Sunday through Wednesday, then $120 on Thursday, a $90 drop. At the Hard Rock, the rates are $299 Monday through Wednesday and $109 on Thursday. That’s a $190 decrease! The Wynn is also kind of odd: The rate all that week and the week after is $499 per night except on September 11, when it’s $399.

Such enemies of irresponsible and irrelevant speculation as MGM Mirage veep Alan Feldman dismissed the notion of a 9/11 effect, insisting it was a “fluke of the calendar” and noted that there are a couple of large conventions departing on that Thursday. “Nothing to do with the anniversary,” he concluded.

Others did consider these figures to be peculiar. Others such as Las Vegas Advisor publisher Anthony Curtis.

“When we’re looking for the lowest, lowest=2 0rates, we’re looking at Tuesdays and Wednesdays, we don’t look at Thursdays,” Curtis says. The resorts set their rates in part based on demand, and “they get a read on how busy they’ll be a few months out. It might really be something that people don’t want to be here on that day.”

Michael Hughes, editor of the convention business publication Tradeshow Week, also poo-poo’d my theory until he heard some of the data I’d come up with. We looked at the Las Vegas Convention & Visitors Authority’s convention calendar to find that three conventions of more than 13,000 attendees each depart on that Thursday. And even so, Hughes said, “It’s probably a quirk of bookings with the 9/11 factor, too. I think there’s something there to it, but I can’t quantify it.”

How resorts come up with their rates is an enduring mystery, a trade secret that resorts guard as assiduously as KFC protects the Colonel’s recipe. But Harrah’s spokesman Gary Thompson showed a little leg.

“We have a hotel yield-management system that prices rooms i n a manner similar to the way airlines price seats—the more demand for a particular date, the higher the price and vice versa,” he wrote in an e-mail. “The system continuously adjusts rates for every date, so if, for example, somebody wanted to book 200 rooms at the Rio on that date, then the price of the remaining rooms in the unbooked inventory would rise. I would assume that since our room prices are lower on that Thursday, it’s because current demand for that day is less than it is for the surrounding days. But I couldn’t speculate on why that would be.”

I wrote Thompson back with one more question: Does the algorithm for setting prices take into account the occupancy from years past on the same date?

His answer: “Yes, that’s one of the factors.”

And so here’s my theory: These computers have long, sophisticated memories. Earlier this decade, there was a more serious travel stigma surrounding that particular date. There’s a residual effect of that, coupled with all those conventions leaving and already-demonstrated weak demand for that particular date compared to20pretty much any other date that month.

Believe me or don’t believe me. But rooms at Bellagio go for more than $230 every night between September 3 and September 16. Except on September 11. Then it’s the bargain-basement rate of $199.

Coincidence? I. Don’t. Think. So.

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