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Home Front: Chips Are Down for Vegas Tourism

Editor's note: This is the sixth installment in's Home Front series, a collection of twice-weekly features examining how American business, society and investing have changed in the post-Sept. 11 landscape.

Bill Gates, Larry Ellison and John Chambers will be partying in Las Vegas next week, but 50,000 of their biggest fans won't be along for the ride.

In the past, Comdex has been a hot ticket in the popular technology industry, but the show arrives in Sin City on Monday with thinned ranks and reduced prices. Corporate spending budgets circa 2001 aren't what they used to be; then again, neither is the Las Vegas economy in the economic aftermath of the Sept. 11 terrorist attacks. Both industries will be getting down to business with a new backdrop of financial instability setting the tone.

Key3Media (KME), Comdex's parent company, was braced for a 20% to 25% drop in Comdex attendance before Sept. 11, based on the flagging tech economy. According to Key3Media's head of communications, Rick Moore, the decline will now be more like 25% to 30% as corporate belts tighten one more notch and business travelers rethink their plans. In 2000, Comdex ballooned to more than 200,000 attendees and 1 million square feet of show floor exhibits. In 2001, that will contract to 125,000 to 150,000 attendees and a 20% cut in exhibit space.

Pilgrims intrepid enough to visit the valley of the geeks will find travel arrangements much easier to come by, with dramatic discounts. Kristin Koca, spokeswoman for MGM Mirage (MGG) -- owners of the MGM Grand (where Bill Gates will deliver a keynote speech), the Mirage, the Bellagio, Treasure Island and the Gold Nugget -- reports that standard room rates at the MGM Grand have decreased 20% to 50% from last year's prices in the $219 and $349 range. Prices on the Comdex Web site offered rooms at the MGM Grand for as low as $59 this week.

Similarly, in the past, flights to Las Vegas during Comdex had to be booked months in advance. This year, flights are still available at attractive times.

Whitney Brewer, a representative for Southwest Airlines (LUV - Get Report), says fares for its 170 daily flights to and from Las Vegas are cheaper this year compared with last, though specifics are hard to pinpoint because of the numerous specials airlines are offering after the Sept. 11 terrorism.

For example, Southwest is running an Internet special on Las Vegas fares this week, with one-way trips ranging from $30 to $94. Brewer added that Southwest's nationwide flights were 63.7% full in October 2001, compared with 70% full in October 2000.

According to the Las Vegas Convention and Visitors Authority, the number of visitors fell 14.1% in September 2001 compared with the same month a year ago, while hotel and motel occupancy levels were down 14.2% year over year, to 73.7% in September 2001. Immediately after Sept. 11, occupancy dropped to 67% and improved during the rest of the month.

The city got a boost last week when it hosted the Specialty Equipment Market Association conference and its 70,000 visitors. "We're a one-pony town, tourism is it," says Curtis Love, an assistant professor in the Tourism and Convention Department at the University of Nevada-Las Vegas's Harrah College of Hotel Administration. "Right now we're keyed into conventions, because the tourist does not have to make that trip to Las Vegas. Conventions are really helping us, because those people need to be here. If you sell computer chips and this is one of two shows you go to a year, you'll be here."

PDA maker Handspring (HAND) agrees. The company is tiny when compared with stalwarts Hewlett-Packard (HWP) and Microsoft (MSFT). Nevertheless, Handspring will have a booth and an increased marketing presence at the show.

A company representative will even give a keynote speech. "Treo is an important product for us, and we're going to show it for the first time for public consumption," Brian Jaquet, Handspring spokesman, says of the company's upcoming wireless phone/PDA combination device. "This is a very important show for us."

In order to attract more conferences to boost business, the Las Vegas Convention Center recently added 1 million square feet of exhibition space and the Mandalay Bay (MBG) hotel is building a 1.8 million-square-foot convention center in its own complex, to be completed in 2003.

Fewer attendants this year might result in at least one upside for the technology companies. In the past, the burgeoning Comdex crowd led to complaints that the show was overrun by technology hangers-on who hindered companies from making deals. Key3Media's Moore predicts that reduced participation will give corporate representatives more chance to conduct business.

Tech workers already know what it's like to face a dramatic market downturn, but Las Vegas' hospitality industry is just now confronting it. For the next week, the two can console each other and hope for recovery soon.

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