VEGAS INC Coverage
How gasoline demand is faring
U.S. motorists have bought less gasoline every week for the past 48 weeks, according to a survey published Wednesday by MasterCard SpendingPulse. At the same time, prices have risen. Those trends should continue, say industry analysts.
DEMAND DOWN: The four-week average for gasoline demand dropped by 5.7 percent when compared with the same period last year, according to MasterCard SpendingPulse. Americans are driving less and car engines are slightly more efficient.
LONG-TERM DECLINE: The survey, based on credit card receipts from service stations around the country, showed average gasoline demand has dropped every week from March 25, 2011, to Feb. 17, 2012.
GAS PRICE PARADOX: A sustained drop in demand usually pushes prices lower. But gasoline is a little different. It is primarily influenced by the price of crude oil, which refineries use to make gasoline and other fuels. Oil prices have been climbing since last year thanks to rising demand from China and other emerging nations. Last year's Arab spring and growing tensions over Iran's nuclear program also raised concerns about the security of oil supplies. Gasoline prices now average $3.579 per gallon in the U.S., up 40.8 cents from the same time last year. Pump prices are expected to peak at about $4.25 a gallon this spring.
With apologies to the screenwriters of “The Godfather, Part III,” just when Las Vegas thought it was out of the recession, big oil has pulled us back in.
Las Vegas is finally hitting on all cylinders with tourists, conventioneers, international arrivals and special events contributing to a visitor volume projected to crack the 40 million barrier for the first time.
Then, just as we thought the sunny skies of a booming economy had arrived, the black cloud of $4-a-gallon gasoline hit the horizon.
We thought an economic spring had arrived, but Punxsutawny Phil punked us.
The last I checked, it was going to cost me $45 or $50 to fill my tank instead of $40.
Although our city’s tourism marketers tell us that gasoline would have to go up by a considerable amount before Southern Californians start canceling their trips to Las Vegas, most of us have to wonder what exactly “considerable” is. To most of us, the price of gas already has gotten “considerably” higher.
And it isn’t just about the cost of filling the car’s gas tank. The price of jet fuel also is soaring, leaving airlines little choice but to raise fares or take a financial hit.
Last year, airlines successfully raised fares nine times (they tried 22 times). It’s only February, and most airlines have already successfully increased fares twice this year.
Southwest Airlines’ cheapest fares from Las Vegas to Reno are $100 one way in the months ahead. That’s about twice what it was three years ago.
Earlier this month, Allegiant Air decided to scratch flights between Las Vegas and Knoxville, Tenn., Lexington, Ky., Redmond, Ore., and Pueblo, Colo., rather than raise fares, citing higher fuel costs.
Next month, the Las Vegas Convention and Visitors Authority board of directors will consider a recommendation from its audit committee to increase its budget by $18.8 million, thanks to greater room tax revenue. The board anticipates spending $5 million of that for advertising and nearly $1 million for additional marketing.
Unfortunately, some of that spending on ads and marketing may have to go toward convincing Southern Californians that they’re only going to have to pay about $20 more to make the road trip and, in the big picture, that’s not really a big deal.
But let’s face it, it’s a psychological thing. Are you more inclined to jump in the car when the signs at the gas station say fuel is $3.39 a gallon or when they say it’s $4.29 a gallon? It’s also true that the extra $20 to get here probably means there’s $20 less to buy something in Las Vegas — or to give a better tip to a local waiter or cocktail server.
The room and gaming taxes generated by visitors to Las Vegas are key to improving our quality of life here.
Jeremy Aguero of Applied Analysis has done a series of reports for the LVCVA on room taxes and their use.
Room tax receipts initially were specifically pumped back into marketing and advertising the destination, but over time, money has been diverted to other budget areas where shortfalls have occurred. Although most locals feel there is nothing wrong with room tax money going toward schools and roads, the initial intent of the tax was to increase visitor volume.
Among the highlights of some of Aguero’s reports:
• About 38 percent of room tax revenue collected goes to tourism promotion. In 2010, when Clark County room taxes generated $383 million, $133 million went to the LVCVA and $13 million went to the Nevada Commission on Tourism.
• Of the 62 percent of receipts that went to non-tourism functions, $88 million went to state school programs, $55 million to the Clark County School District, $54 million to local governments, $34 million to county transportation needs and $4 million went to the Nevada Department of Transportation.
• Of the LVCVA’s slice of the pie, 40 percent goes to advertising, 23 percent to operations, 13 percent to marketing, 8 percent to community support, 8 percent to interest payments on bonds, 5 percent to government expenditures and 3 percent to support special events.
• Since 1999, room taxes have funded the construction of 19 schools and 241 renovation projects. Room tax receipts account for about 15 percent of school district funding.