Slot machines and gambling tables used to the cash cow of casino resorts in Las Vegas, but the recent numbers from MGM Resorts (NYSE:MGM), Caesars Entertainment (NASDAQ:CZR), Wynn Resorts (NASDAQ:WYNN), and Las Vegas Sands (NYSE:LVS) show that's no longer the case. Non-gambling revenue from hotel rooms, retail shops, restaurants, and nightclubs now account for over half of the revenue on the Las Vegas Strip. And MGM Resorts would like to add another revenue stream to its business.
MGM's new parking fee
MGM Resorts recently announced that it will start charging for parking, which will cost customers as much as $10 per day for self-parking and an unannounced amount more for valet. There are ways around the fee, such as being a member of M Life loyalty program, but the idea of charging for parking is a huge change in Las Vegas.
Parking ramps have long been built next to casinos to make it easy for customers to visit the casino, where the money was made. MGM is now arguing that it's more of a tourist and convention city like New York, Los Angeles, or Orlando, where parking fees are much higher. And with the new 20,000-seat T-Mobile Arena and a 5,000 seat theater at Monte Carlo being added to the Strip, parking will be in high demand for customers who may never set foot in a casino.
The impact on MGM, Caesars, Wynn Resorts, and Las Vegas Sands could be huge. Forty-two million people visited Las Vegas in the past year, and thousands park on the Strip every day. MGM alone has 37,000 parking spots on the Strip, and if we project that half of them will be used every day and generate $10 in revenue, the impact could be $67.5 million in annual revenue, which will almost all go to the bottom line.
The question is whether this is a fee that will anger customers and cause more problems than the revenue benefit is worth.
The new resort fee?
Caesars, Wynn, and Las Vegas Sands haven't said they will follow MGM in charging for parking, but don't be surprised if they do. Resort fees are the analogous fee that was added just a few years ago. These fees used to be a rarity on the Strip, but once companies saw what a great revenue generator it was, they almost all followed suit. Now resort fees are standard in Las Vegas.
Parking fees could take a similar path, becoming a standard fee for visitors to Las Vegas. Given that resorts are getting less of their revenue from the casino, implying that the draw is no longer gambling, asking customers to pay for parking may not be a bad idea. And given the potential as a revenue source, it might be worth the gamble for resorts.
There's sure to be outrage by Las Vegas regulars the first time they have to pay for parking. But like other fees and expenses in Las Vegas, it may become something we get used to paying for over time. And that's why MGM sees it as a risk worth taking.