Airlines, Hotels Clash Over Vegas Airport

Las Vegas, a city built for visitors, is ground zero in the airline industry's effort to cut back on marginally profitable flights.

But the city's powerful hoteliers are none too happy about the cutbacks. They still want the carriers to finance a new airport terminal, which is needed to support 32,000 additional hotel rooms slated to open by 2012.

The timing is unfortunate. Traffic at McCarran International Airport fell 8.6% in July, compared with the same month a year earlier. In fact, traffic has fallen every month this year, except for February, which had the benefit of leap day in 2008. And the airlines aren't finished cutting.

In July, each of the top four carriers at McCarran showed passenger count declines. At Southwest(LUV Quote), the leading carrier with a 42% share, passenger counts fell 5.6%. US Airways(LCC Quote) passenger totals dropped 17.3%. The decline at UAL's(UAUA Quote) United was 8.9%, while traffic on Delta(DAL Quote) slid 12.7%.

"We have a great potential to be impacted [by airline cutbacks] because we have more visitors per capita than any other major city, and 50% of our visitors come by air," says Jeremy Aguero, principal analyst at Las Vegas economics research firm Applied Analysis.

"Las Vegas was uniquely positioned to take advantage of exuberant consumer spending between 2004 and 2007," Aguero says. "And now, we are uniquely positioned to be impacted by the slowing of that consumer spending, particularly in tourist activity."

In June, the number of visitors to Las Vegas fell by 3.1%, and the average daily room rate sank 16%, according to the Las Vegas Convention and Visitors Authority. Meanwhile, the number of rooms increased 2.5%.