For nearly a decade, Las Vegas gambling moguls have bet on the "Field of Dreams" axiom - they built it and people came.
Now, faced with a 25 percent increase in hotel rooms over three years and declining air traffic, the question isn't "Will they come?" but "How will they get here?"Since the opening of The Mirage in November 1989, Las Vegas has experienced a multibillion-dollar explosion of megaresorts, with room inventory jumping from 67,391 to the current 105,347. Some 6,000 rooms have come on line the past year, with 20,000 more expected the next two years.
The visitor volume jumped 15.6 percent after the opening of The Mirage, and 19.9 percent after the opening of the Luxor, Treasure Island and MGM Grand hotel-casinos in late 1993. Since then, volume growth has dropped to less than 3 percent annually, pushing room occupancy rates from the lower 90s to the upper 80s.
Exacerbating the problem in recent months has been a decline in airline traffic here for the first time since 1984 as major airlines cut back on Las Vegas flights in favor of more lucrative business routes.
Airline traffic was down 4.3 percent at McCarran International Airport the first two months of 1998, compared to the same period a year ago. America West Airlines reported a drop of 13.8 percent in February, and Southwest Airlines was down 13 percent. The two airlines are responsible for 53 percent of the scheduled airline passenger traffic into Las Vegas.
Mike Conway, a co-founder and former chief executive officer of America West, says he saw the problem coming two years ago. He's close to completing $50 million in financing for a new airline that will focus on Las Vegas traffic, particularly long-haul flights from the East Coast.
"The Vegas philosophy has been `If you build it, they will come,' " Conway said, referring to the famous film line. "If you build it, they'll want to come. They won't necessarily be able to get here."
Conway hopes to have his new airline operating by the fourth quarter of this year, using four Boeing 757s with 175 seats each. His goal is to expand to a fleet of twelve 757s by the end of the first operating year, 40 by the end of the fifth year. He says the four jets would generate 46,600 new Las Vegas passengers monthly; the 12 would bring in 126,000 monthly.
The passenger count at McCarran was down 35,000 in February - 2,345,720 this year compared with 2,380,764 in February 1997.
Conway's initial focus is on four major Las Vegas markets - Los Angeles, San Francisco, New York City and Miami. He plans to expand service to nine more cities by the end of the first year, adding Seattle, Denver, Chicago, Detroit, Boston, Newark, Atlanta, Orlando and Tampa. His goal is to be in 22 major markets by the fifth year of operation.
Las Vegas' decrease in airline traffic began in late 1997, and the outlook isn't rosy.
"I don't see anything on the horizon that is going to change that dramatically," said Randall Walker, director of the Clark County Department of Aviation.
"The airlines today are in a golden age of profitability," he said in an interview at his office a mile west of the Las Vegas Strip. "In order to sustain that, it's highly unlikely they'll switch to lower-yield markets."
Sen. Richard Bryan, D-Nev., a member of the Senate Commerce Committee, hopes he can come up with some answers when he holds a hearing on the issue here April 16. The meeting will include airline, resort and tourism executives.
"Business fares are much higher than recreational fares, so with the economy soaring, the airlines have shifted capacity to business routes, and that has hurt our air service in Las Vegas," Bryan said.
"We've talked to airline people, and their point is that this is a business driven by how to maximize their profits for their shareholders, and business travel generates more revenue," Bryan said. "This is not a case of lack of confidence in Las Vegas."
Bryan said the city also needs to re-energize its charter market and work to generate more international travel - a move that involves diplomatic hurdles. He said the city cleared one on Wednesday with the announcement that Northwest Airlines was adding direct service between Las Vegas and Tokyo.
"The proposed new carrier is part of the equation as well," Bryan said of Conway's company. "It would provide service to markets we think are underserved."
Walker believes at some point someone will step forward to fill the current void, and believes Conway's concept "will be helpful."
Conway said his company's goal is to restore lost business, not take business away from existing Las Vegas carriers.