No one knows how to squeeze every penny out of customers quite like casinos. And the latest place they're looking to get a little extra is in the parking lot.
MGM Resorts (NYSE:MGM) was the first to bring parking fees to The Strip last year, and when they did, it was obvious this was just a first step. Caesars Entertainment (NASDAQ:CZR) and others would follow and eventually everyone would raise prices from their initial fees. On Wednesday, parking fees went up at MGM, just the latest way the company is looking to grow revenue off the casino floor.
Parking just got a lot more expensive
MGM is adding tiers to parking pricing, increasing fees at MGM Grand, Mandalay Bay, The Mirage, Delano, and New York, New York to $10 for two to four hours and $12 for four to 24 hours, an increase of $3 and $2, respectively. At Bellagio, Aria, and Vdara valet parking was increased from $18 per day to $25. You can see the full schedule here, but in general prices are up 20%-40% for stays over an hour (which are still free).
Hotel guests won't even get around the fees, although they do get in-and-out usage. But this is another way to increase prices without raising room rates. And with MGM's increased fees, we can expect that Caesars Entertainment will follow close behind.
Looking for growth wherever you can find it
The truth is that Las Vegas gaming revenue has been flat for the last five years, so there's not much growth at the gaming tables. Gaming companies clearly need to look for growth elsewhere.
The last time we saw casinos looking for more revenue, they added resort fees. The fee for simply staying in a hotel quickly spread across Las Vegas, and now it's a standard at nearly every resort. Parking fees look like they'll be similar.
The potential is enormous for parking revenue. MGM doesn't break out parking as a line item on the income statement, but revenue per available room was $140 and total room revenue was $2.02 billion in 2016. Assuming that on average the number of full-day self-serve parking customers equals the number hotel guests, a fee of $12 per guest would be about $173 million. This is the ballpark of parking revenue and Caesars could expect to be in a similar range.
The future of Las Vegas is off the gaming floor
This is just the latest move in Las Vegas to generate revenue off the gaming floor. Las Vegas has become more of an entertainment destination for concerts, live shows, nightclubs, restaurants, and shopping. And with that economic reality in mind, it makes sense for resorts to squeeze customers in areas like hotel rooms and parking. If Las Vegas itself is the destination, and not the gaming table, parking fees are like a fee for entry, just like at a high-end nightclub.