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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Cost cuts narrow MGM Mirage loss

19 February 2010

LAS VEGAS, Nevada -- CityCenter's much-anticipated opening in December gave MGM Mirage an end-of-the-year lift, but the $8.5 billion Strip development is still a work in progress.

MGM Mirage said Thursday the company narrowed a fourth-quarter net loss from a year ago thanks to cost-cutting efforts.

Although company executives said they were seeing a spike in future convention business and are focused on restoring the company's liquidity and balance sheet, CityCenter remains the centerpiece of those efforts.

The 67-acre multifaceted project is a 50-50 joint venture between MGM Mirage and Dubai World, the investment arm of the Persian Gulf emirate.

Aria, CityCenter's 4,004-room hotel-casino, earned operating income of $7 million during the 15 days it was open in December, the company said. Last week, Las Vegas-based advisory and research firm Union Gaming said Aria collected $56 million in gaming revenues during that time frame.

MGM Mirage Chairman and Chief Executive Officer Jim Murren told analysts and investors that Aria, and all of CityCenter, is growing the Las Vegas market.

President Barack Obama will speak to business leaders at CityCenter's convention center today , putting the project in the spotlight.

"As a marketing tool for Las Vegas, what's better than CityCenter?" Murren said on a conference call with analysts to discuss MGM Mirage's quarterly earnings. "We've had more than a billion media impressions worldwide and it's gained tremendous awareness."

One analyst thought CityCenter came with a cost to other Strip resorts, including properties operated by MGM Mirage.

"Although Aria generated a modest operating profit in the quarter, CityCenter appears to be impacting several of the wholly owned core properties, particularly Mandalay Bay," Oppenheimer analyst David Katz said in a research note.

Murren said Mandalay Bay suffered because of declines in convention business last year. Worries by Wall Street that Aria would hurt results at Bellagio were unfounded, he said.

Bellagio, CityCenter's neighboring resort, experienced a boost in business and foot traffic from CityCenter. More than 10,000 people a day rode the elevated people mover that connects the development with Bellagio and Monte Carlo.

"Our foot traffic through Bellagio is up, our slot handle is up and our food covers in Bellagio's high-volume restaurants are also up year over year," Murren said following the conference call.

But CityCenter still has some holes.

Residential sales closings began last month for the 227 condominiums inside the Mandarin Oriental. As of this week, six units had closed with final sales prices ranging between $1.05 million and $3.07 million .

CityCenter President Bobby Baldwin said Crystals, the project's 500,000-square-foot retail, dining and entertainment center, opened in December with 41 percent of its tenants. The location expects to be 56 percent occupied by the end of March, and expects occupancy rates of 73 percent by the end of September and 85 percent by the end of the year.

Murren said some job reductions had taken place because of operating adjustments that were made at Aria and the other CityCenter developments in January.

MGM Mirage lost $433.9 million, or 98 cents a share, in the 2009 fourth quarter that ended Dec. 31. A year ago, the company lost $1.15 billion, or $4.15 a share.

The casino operator said its quarterly loss included a $548 million noncash write-down of undeveloped land in Atlantic City, where the company has begun plans to divest itself from the East Coast casino market.

The charge for its Atlantic City holdings was 73 cents a share. Without the Atlantic City charge, MGM Mirage would have lost 25 cents a share. Analysts polled by Thomson Reuters predicted a loss of 13 cents per share.

Revenue fell 6 percent to $1.5 billion. MGM Mirage said its revenue-per-available room, a nontraditional figure Wall Street uses to gauge profitability, was down 16 percent.

Gaming revenues declined 7 percent. However, the decline was partially offset by strong baccarat results during the quarter, with baccarat volume up 44 percent.

Cost cuts narrow MGM Mirage loss is republished from Online.CasinoCity.com.