CHEAP BUFFETS AND FOOD COURTS

As anyone who has visited Las Vegas over the past few years can attest, Vegas is damn expensive, especially the restaurants. I've written extensively on the vulnerable margin situation in Las Vegas (see 2 separate margin posts on 6/22/08). Food and beverage (F&B) operations are an important contributor to profits and profit margin. The problem is that Las Vegas needs to continue to attract visitors to capture the casino business. As consumer spending slows (contracts?) hotel rates and F&B menu pricing will retrench toward loss leader status. Contrast Las Vegas to the rest of the country where hotels and restaurants maintain pricing as long as possible to protect margins, even as occupancy and covers decline. Las Vegas doesn't have that option.
  • The chart to the right shows the estimated average check per meal in Las Vegas using data from the Las Vegas Convention Authority. Note that the significant increase in check has corresponded to rapidly expanding casino hotel EBITDA margins. I don't know about you but $20 per meal (including breakfast!) sounds like a lot of money to me and hardly sustainable. Look for a resurgence of the cheap buffet and the food court.

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