Column: The new Las Vegas parking fee shows what happens when competition disappears
Free parking has been a signature feature of casino hotels on the Las Vegas Strip since (we’d guess) the days of Bugsy Siegel. Despite the gaming industry’s relentless search for new sources of income, it’s survived as an artifact of competition — no Strip property dared to start charging for parking for fear of losing customers to the casino next door.
You can kiss this tradition goodbye. MGM Resorts announced that it will be charging up to $10 to park at its premier Strip properties. It’s a safe bet that other Strip casinos will fall into line soon.
It could be an historic shift.
— David Schwartz of UNLV on the new parking fee on the Strip
MGM was awfully cute about the new fee. Its news release announcing the change was headlined, in bold print: “MGM Resorts International To Enhance Guest Parking Experience With New Parking Facility, New Technology Amenities And Upgrades To Existing Facilities.” A much smaller sub-head revealed, “New parking strategy introduces modest parking fee program.”
This is not a minor event. “It could be an historic shift,” David Schwartz, director of the Center for Gaming Research at UNLV, told the Las Vegas Review-Journal.
What happened? To put it simply, competition disappeared. MGM owns a dozen casino hotels on the Strip, clustered at the south end around Las Vegas Boulevard and Tropicana Avenue. Caesars Entertainment, the other mega-corporation on the Strip, owns nine, clustered around mid-Strip. Caesars has been coy about whether it will follow MGM on parking fees.
These assemblages are the result of a string of mergers: MGM acquired Mirage Resorts in 2000 and Mandalay Resort Group, which had evolved from Circus Circus Enterprises, in 2005. That year, Caesars merged with Harrah’s Entertainment.
It’s no secret that competition is what keeps prices low, and consolidation drives them up. For examples, one need look no further than the cable and airline industries. Cable operators nationwide typically have had monopoly franchises in their local communities, and mergers have given some big companies, such as Comcast, a larger footprint nationwide. The harvest has been an unrelenting rise in cable fees at more than four times the rate of inflation, as the Federal Communications Commission documented in 2014.
Meanwhile, a string of airline mergers has reduced the roster of nine major U.S. airlines to four (American, United, Delta and Southwest), choking off competition at dozens of airports around the country. According to a study by the Associated Press last year, 40 of the 100 largest U.S. airports are controlled by a single carrier.
As the number of airlines serving a city shrinks, fares typically rise. In Indianapolis, AP reported, domestic fares were 9% below the national average a decade ago, when the two largest airlines serving the community controlled 37% of the seats. After mergers, Southwest and Delta ended up with 56% of the seats, and fares are 6% above the national average.
The airline merger wave also has empowered the survivors to stick passengers with more fees, on the evident principle of “Where else you gonna go, buddy?” It’s now routine to pay for checked bags, food on board, early boarding and extra-legroom seats that, for a price, will give you almost as much legroom as you used to get for free.
On the Vegas Strip, there may still be just enough competition to make the MGM parking fee look experimental. Caesars’ decision not to jump in right away may reflect a wait-and-see strategy. But if it holds, the dominoes will fall, and another Vegas tradition, like 3-for-2 payouts for blackjack, will have bitten the dust.
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