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Gaming Guru

Arnold M. Knightly
 

MGM Mirage continuing global reach

17 June 2009

LAS VEGAS, Nevada –- MGM Mirage likes to think big.

It is building the largest privately funded project in U.S. history on the Strip, but the company isn't stopping there.

The gaming giant on Tuesday announced its latest push to spread its name around the world, this time through a partnership to build an MGM Grand nongaming luxury hotel near Cairo, Egypt.

MGM Grand New Giza will be a 550-room hotel that will be part of a 1,500-acre master-planned community. The community will include homes, three hotels, restaurants, shopping malls, golf courses and other sports facilities.

Construction of the project, which is expected to open in 2013, will be financed by New Giza for Real Estate Development Co. Cost of the project was not available.

MGM Mirage will provide management services and license the MGM Grand name to the hotel through its subsidiary MGM Mirage Hospitality.

"It's a great opportunity for the company to leverage our brands and reach out to our guests who have come to know and love our brands in their own countries and in their own cities," Gamal Aziz, MGM Mirage Hospitality chief executive officer and president, said.

MGM Mirage Hospitality has signed similar deals to develop and manage nongaming hotels in China, Dubai and Abu Dhabi. The subsidiary also has a deal to develop and manage an MGM Grand-branded hotel-casino in Vietnam.

MGM Mirage Hospitality was formed in 2007 to leverage the MGM Mirage name through mostly international partnerships.

These partnerships allow MGM Mirage to expand into new markets at very little cost for the gaming company, which is struggling with nearly $14.4 billion in debt.

"In all the deals we've done, the developer provides the funding and we provide the management," Aziz said. "None of these deals we've signed so far involves significant investments by MGM Mirage."

MGM Mirage will receive revenues through what Aziz described as "typical hotel management contracts," with the casino company earning a percentage of sales and profits, and licensing and marketing fees.

The agreements also help MGM Mirage build its international luxury hotel presence quickly with little cost to the company, according to David Schwartz, director of the University of Nevada, Las Vegas' Gaming Research Center.

"It gets their name out there to people in the luxury market," Schwartz said. "If they want to be in that field I don't know that you can say you're a great hospitality provider with one or two MGM Grands. You need to have several of them, and this seems to be a cost-effective way to do it."

The Egyptian property will be the 10th MGM Grand-branded property in the company's portfolio.

The company owns the MGM Grand on Las Vegas Boulevard and MGM Grand Detroit. It also has a licensing agreement with the Mashantucket Pequot Tribal Nation, which owns and operates the MGM Grand at Foxwoods in Connecticut.

The company also owns and operates the MGM Grand Macau in a 50-50 partnership.

MGM Grand properties are in various stages of development in Vietnam, Dubai, Abu Dhabi and China, where the company has agreements to build two. "If you look at the evolution of brand, if they're going to be building up MGM Grand independent of the one they operate on Las Vegas Boulevard, it is a relatively young brand compared to other hotel brands already out there by Hilton, Marriott or Mandarin Oriental," Schwartz said. Aziz said that the fact that his company has been able to sign so many licensing deals so quickly is a testament to the MGM Grand brand. MGM Grand, however, is not the only luxury brand being pushed by the company. Tuesday's announcement comes less than four weeks after MGM Mirage Hospitality announced a similar deal to manage and brand three nongaming hotels in Dubai. The hotels will be part of the $4 billion Dubai Pearl project. Pearl Dubai FZ will build, finance and own a 250-room Bellagio hotel, a 350-room MGM Grand hotel and a 30-suite Skylofts hotel as part of the Dubai Pearl mixed-use development in the United Arab Emirates. The Abu Dhabi nongaming resort on Abu Dhabi Island in the Persian Gulf will also use all three brands. The project is being developed in partnership with Mubadala Development Co., the investment arm of the Abu Dhabi government. MGM Mirage and Mubadala signed an agreement in early 2007 to develop other nongaming hotels throughout the world. "What we're seeing is the brand is gaining tremendous acceptance around the world as witnessed by the number of developments we've signed in a very short time," Aziz said. "Hopefully, there's more to come." Aziz said the company will be announcing a second branding and management partnership in Egypt in the next few weeks. MGM Mirage shares rose 12 cents, or 1.84 percent, to close at $6.65 Tuesday on the New York Stock Exchange.

MGM Mirage continuing global reach is republished from Online.CasinoCity.com.