They’re baaaaaack: The return of the Las Vegas tourist

Here is the scene at Spago in Caesars Palace on a rainy night in January 2008: A table full of guys, dressed expensively and badly. Although there wasn’t such a thing then as Jersey Shore, this crew would’ve been perfect for the genre. They had probably sold a pile of shoddy mortgages in Orange County for the infamous Countrywide Financial, or run a construction Ponzi scheme in Phoenix, or maybe they were derivatives traders for the one that destroyed us all, Lehman Brothers.

Whatever the case, they began their meal—remember, this is Spago—with flowing vodka mixed with Red Bull. There were multiple trips to the bathroom, where they seemed to be doing their part to help one side or the other in the Colombian civil war.

And then, this classic line: “Give us your most expensive bottle of red wine.”

Those were the days, weren’t they? We rode the wave of Alan Greenspan’s easy credit. Life was a never-ending night at the club: borrow some more, get me in the door; if I spend some more, I’ll be a player.

“For most of the past couple decades, Vegas could be described as, ‘Throw caution to the wind,’” says Billy Vassiliadis, CEO of R&R Partners, the advertising firm charged with selling the Strip brand to the world.

“The notion of adult freedom and excitement was very motivating for consumers, and they were willing to spend a lot of money on it,” says Vassiliadis, whose firm gave us “What Happens Here, Stays Here.”

We were, as Vassiliadis puts it, the “No Worries Generation,” for whom “Everything was fine, and everything was going to be fine.” For some, this meant second homes and a new car every year, and, if the moment called for it, a last-minute trip to Vegas and the most expensive bottle of red wine at Spago that left a few grand in the coffers of our Strip operators, as well cash in the pockets of our bellhops, bartenders, room attendants and strippers.

Bill Hornbuckle, MGM Resorts International chief marketing officer, recalls marketing messages from before the recession. “Everything in moderation? Yeah, right.” And, “Parents Gone Wild.”

But something seems to have changed. Although the picture isn’t entirely clear yet, there’s a growing recognition among consumer psychologists, economists and some of the Strip’s most important marketers, that we’ve seen a fundamental shift in consumer behavior and attitudes among some of our most vital customers and, perhaps more important, potential customers.

“There’s a supposition that we’re in a new normal,” says Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W.P. Carey School of Business at Arizona State University.

Consumers remain concerned about unemployment and perceived instabilities in the economy. High gas prices brought on by chaos in the Middle East are just the latest catalyst for sales of Ambien.

All this anxiety has caused what marketers and economists call “risk aversion,” a hoarding instinct that could be preventing people from taking a weekend escape to, Vegas.

As McPheters notes, we’re also now suffering the opposite of the “wealth effect”—that’s when people tend to spend more freely when they believe their net wealth is increasing. But with trillions of housing wealth down the drain, Americans have been feeling poorer for years now, and thus, they’re less profligate in their spending.

The end result: After hitting a 2007 high of 39.2 million, visitor volume slipped 7 percent to 36.35 million in 2009, before climbing back to 37.3 million in 2010.

For marginal operators, that was crippling enough, but the scarier number was “the spend,” the average amount customers spent per stay. For MGM, customers were spending as much as 30 percent less during the worst of the recession, both by buying steeply discounted rooms and then declining to let loose, Hornbuckle says. Even now, spending is still down 15 percent from pre-recession levels.

From the numbers, it’s clear: This hasn’t been a typical recession. And what’s problematic is that this may not be just garden variety belt-tightening. Instead, we may be seeing a shift that’s more fundamental, a new consciousness that has seeped into our brains.

Although no one would compare this recession to the Great Depression, it’s worth reminding ourselves of the indelible mark the decade of the 1930s left on the entire culture. It bred an obsession with saving and frugality, values that may have helped build the country, but are—let’s face it—not compatible with the kind of spending or attitude needed to keep Vegas afloat.

We’re clearly a long way from that. Still, Baba Shiv, an expert in consumer behavior at Stanford University’s Graduate School of Business, has noticed in his research subtle shifts in consumer psychology.

Shiv, who uses psychology, neuroscience (including brain scans) and economics to understand consumers’ idiosyncrasies, says he believes people have rediscovered the long lost pleasure of saving. He cites surveys and other data, including the number of times consumers check their bank balances and 401(k)s. As the recession began, that obsession may have been a sign of anxiety, but now, as saving has increased and the stock market has rallied in the past two years, he hypothesizes that consumers are taking pleasure in watching their wealth grow.

Consumers are also more likely to pay in cash or use a debit card now instead of using credit cards, Shiv says. Again, he says, this is another sign that Americans have rediscovered the primal pleasure of saving over borrowing.

This raises a key question for Las Vegas: If saving and frugality are now thick in the cultural and economic bloodstream, are we in trouble?

“The image of Las Vegas is more consistent with a consumerist mentality,” says Larry Compeau, a professor of consumer behavior at the Clarkson University School of Business in Potsdam, NY. “It’s the freewheeling lifestyle and all the trappings of it, and one of those trappings is going to Vegas and dropping a significant amount of change. But a lot of that has gone by the wayside.”

The notion of a budget conscious consumer no longer interested in the Vegas bacchanal sounds downright frightening. But the trend is more complex, and it actually offers our city opportunity.

On behalf of the Las Vegas Convention and Visitors Authority, R&R Partners conducted extensive research, using focus groups and surveys and tagging along with tourists as they spent time here.

The conclusion: We’re still in the game, but we need to step it up. R&R found 45 million “persuadable” Americans, or 41 percent of the traveling public.

These are people who have a slice of the American dream—a stable job, a home, a family.

They have money to spend on a vacation.

And, they want value. Ouch.

It’s a cringe-inducing word I heard a few times in my interviews around town, and I have to say, it surprised me. When I think value, I think Wal-Mart or Costco, and everyone agrees that’s not what we want to be.

But that’s not quite what we’re talking about here.

“That’s the fine line,” says Cathy Tull, the LVCVA’s senior vice president for marketing. “Value isn’t bottom line price. It’s about the experience.”

By value, Vassiliadis says, we mean that customers want to feel like they got what was promised, that they can come away from the experience with a tangible sense that it was worth the money spent.

“There’s a direct correlation, a more tangible correlation, between what I’m willing to pay for, and what I need to get for it,” Vassiliadis says.

Listen closely to the language of Lisa Marchese, senior vice president of brand marketing of high-priced Cosmopolitan, who says customers will receive a “meaningful and distinctive experience that they value and want to share with others.”

Stanford’s Shiv says, “We’re seeing this with high-end retailers, where consumers are willing to splurge, but they want quality.”

Kathryn LaTour, a marketing professor at UNLV’s William F. Harrah College of Hotel Administration, says, “If we’re asking people to pay full price, we need to give them a full-price experience.”

Vassiliadis suggests these persuadable tourists have become more rigorous, more conscious, less emotional consumers.

This new consumer has been shaped by two trends that have walloped the marketplace: The first is the deep recession, which slashed demand, and thus prices, and gave willing consumers considerable leverage.

The second is the emergence of smartphones and other technology that give buyers real-time knowledge of pricing and quality measurements.

In Las Vegas, the consumer had still another advantage, a glut of some 16,000 new hotel rooms came on the scene during the recession, pushing down prices still further.

In short, consumers have become empowered, and with that empowerment, more demanding.

So, how do we attract these people and make them happy enough so they’ll keep coming back? In essence, now what?

Let’s boil it down, because it’s not that complicated: We have to make sure tourists have a great time.

Some of this is bread-and-butter customer service. Although the sheer volume of business on the Strip makes true customer service next to impossible for the average traveler, we can continue to ramp up technology so that check-in, show tickets, spa and meal reservations are effortless.

Similarly, we’re moving toward the European trip model, where the tourist can see options and plan and pay for an itinerary before the trip so that the focus is on enjoying the experience rather than dealing with annoying logistics.

The R&R research—backed by recent press reports—also shows customers don’t want infuriating hidden charges, which might remind consumers of insidious fees used by banks to pad their profits.

Indeed: Perhaps we shouldn’t model our customer service after institutions the public views with considerable contempt. (Related: Crack down on long-hauling among cabdrivers).

Another truth-in-marketing issue: If a restaurant is a globe-trotting celebrity chef establishment, it should approximate the quality of his restaurant in his home city—no phoning it in. Our famous Frenchmen seem to live up to this ideal, others, not as much.

But all that stuff is relatively easy. It’s simply a matter of recognizing consumers are more discriminating and won’t get hassled or hustled anymore, and that if we take a $100 from someone, we have to return $100 worth of experience, minus our reasonable cut.

What’s harder is giving the consumer something extra, a special experience, the one he won’t have in San Francisco or Miami or New York or wherever else adults go for fun.

Tiffany Barnett White, an expert in marketing and consumer psychology at the University of Illinois, puts it this way: “Their expectations have to be exceeded. You want them to be delighted.”

Despite all there is to do in Las Vegas, there needs to be more, and the offerings need to continue to evolve.

“There needs to be innovation,” Vassiliadis says. “A constant focus on offering new, one-time, exclusive experiences that can only be had here and really adds to my notion of getting my money’s worth.”

Hornbuckle says that during the past decade, with the evolution of resorts that added great restaurants and electric nightclub scenes and then pool debauchery, Las Vegas became the party capital of the world. But he acknowledged that there has to be something new.

“What’s the next thing? We don’t know the answer yet,” Hornbuckle says.

LaTour of UNLV sounds downcast about our prospects. She fears that the ongoing price war has had a damaging effect on consumers’ perceptions of their Vegas experience; evidence, including recent work by Stanford’s Shiv, suggests people derive more pleasure from an experience if it costs more, which, in their minds, convinces them it is worth more.

And there’s the rub for us: We have to offer value, without seeming cheap. Target, not Walmart.

LaTour invokes the unappealing image of the down-market young men dragging their beer coolers through high-end hotels. And, she fears we no longer have the ‘wow factor’ attraction, like what the volcano, the Eiffel Tower and glass pyramid were for us in the not so distant past.

“We need an over-the-top, you’ve got-to-come-here-to-see-this attraction,” she says. She seems to be only half-joking when she says CityCenter should have been built with an indoor ski hill ala Dubai.

Caesars Entertainment will spend several hundred million dollars on what it internally calls “Project Linq,” a walkable outdoor area of bars, shops and restaurants between Flamingo and O’Sheas. That would give the Strip a dense party zone, akin to what’s found in New Orleans and countless college towns but is mostly lacking on the Strip because our first priority is ushering tourists into the casinos.

The plaza will end at a giant Ferris wheel. And another developer plans yet another giant Ferris wheel a bit farther south.

Humans are simple, and who knows? Perhaps giant, slowly moving wheels will captivate them.

Aside from the Caesars project, there’s a glut of rooms and not much capital for more building, so we shouldn’t expect expensive indoor ski hills or rivers of tiger blood that might bring the gawking hordes of Des Moines or Little Rock.

So where does that leave us? How do we create special experiences people won’t forget so that they’ll come again and be our advocates with family, friends and co-workers?

Clearly it wouldn’t be accurate to call Las Vegas boring. But we seem to have been sapped of some of our creativity by corporate consolidation on the Strip, combined with the money train that ran through here for so long and suggested a proven formula.

It’s akin to what comic books did to Hollywood—delivered a proven winner and a flashiness that, over time, became oddly dull and ignored large demographic groups that love movies but don’t like comic book movies.

A not uncommon sentiment among tourists: These places, with their gaming floors and restaurants and bars and clubs and pools, they’re all sort of the same. One could argue how, exactly, is Wynn different from the Venetian?

This might explain the early extraordinary popularity of Cosmopolitan, with its funkier crowd, unconventional layout and odd attractions such as the pool tables and delicious, hidden pizza shop.

Then there are the big events.

Our model here should be the rodeo, when the whole city becomes a country and western theme park, and we draw business in the otherwise slow month of December.

We should do the same, integrating the events through the entire city, with NASCAR, the Super Bowl and March Madness. How about a parade of NASCAR drivers down the Strip? Or the chance to experience what a real NFL concussion feels like? You get the idea.

Other events need to be supported and amplified, including the PGA tournament, the rugby tournament, Vegas UnCorked, the marathon and the upcoming Celtic Festival. This year, for the first time, we’ll host the Electric Daisy Carnival, a huge electronic music festival that will draw tens of thousdands. The synergy with Las Vegas is, in a word, perfect. But, why don’t we have a massive foodie festival? Why shouldn’t we have the X Games or something like it every year?

Note the common thread of these events: They’re for subcultures. America is a country of subcultures: People with an obsessive devotion to this or that obscure hobby or interest or activity or sport. And most of these subcultures have celebratory events and competitions and the like, and they should all happen here. Seriously.

Aren’t we also missing opportunities on some big holidays that we should own?

Halloween should be a weekend long party here, and Las Vegas should be the West Coast’s go-to place for Mardi Gras, Spring Break, St. Patrick’s Day, Cinco de Mayo and Mexican Independence Day.

Once it’s legal to bet on the Oscars, the Strip should throw its own massive Academy Awards party, replete with red carpets and tuxedos, faux paparazzi, C-list celebrities. All of it.

Finally, Las Vegas has become, somewhat unwittingly, the capital of bachelor and bachelorette parties. How about a summer festival to bring these people all here on one long weekend. Call it, “Last Chance Weekend.” It would be at once terrific and terrible. It would be classic Vegas.

Maybe these ideas are duds. So be it. More important than any individual idea is that we constantly brainstorm, and then collaborate on making the best ideas happen.

The bottom line is that if consumers are more value conscious, and we’ve just built luxury hotels that are affordable, aren’t we well positioned as the recession comes to a merciful close? Seems so.

But only if we work together, embrace change and learn to evolve. It’s time to reinvent your image, Las Vegas. Again.