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Best of Howard Stutz
Howard Stutz
 

Shiny new fixture for the future

2 October 2007

LAS VEGAS, Nevada -- After operating the MGM Grand Detroit for several years in a refurbished downtown building that once housed the Internal Revenue Service, MGM Mirage executives tired of calling the casino a temporary property.

"We started referring to it as our 'interim facility,' " MGM Mirage President Jim Murren said Monday. "That seemed to be a little more fitting."

Eight years after opening its initial Detroit venture, MGM Mirage pulls the wraps off its $800 million MGM Grand Detroit this morning, doubling its casino size, adding hotel rooms and offering amenities the company hadn't been able to provide.

Murren is unabashed in his praise for the resort, one of three casinos operating in Detroit.

"In Atlantic City, this facility would give the Borgata a run for its money. On the Strip, it would be a very relevant property," Murren said. "In Detroit, it's in another galaxy in terms of the competition."

Even with an interim facility, MGM Mirage has fared well in Detroit.

According to the Michigan Gaming Control Board, through August the MGM Grand Detroit reported total adjusted revenues of $329.8 million, ahead of both the MotorCity and Greektown casinos. Through the first six months of 2007, MGM Mirage said the casino represents roughly 5 percent of the company's overall financial picture.

Murren said the company doesn't give investors projections, but it was safe to say MGM Grand Detroit will be a much larger slice of the MGM Mirage pie.

The casino will grow to 100,000 square feet with 98 table games (up from 72) and 4,500 slot machines (as opposed to 2,840 at the interim casino). The 18-story hotel tower will feature 400 guest rooms. The previous casino did not have a hotel. The new property will have a variety of dining options, including two restaurants operated by celebrity chef Michael Mina and one by Wolfgang Puck. The MGM Grand Detroit will also offer several entertainment options, lounges and a 20,000-square-foot spa.

Also, the MGM Mirage's gaming tax rate will drop from 26 percent to 21 percent because of the casino's size.

"Our interim property had several limitations," Murren said. "While we had good revenues and cash flows, I would think we'll do materially better because of all the options we can offer. We're taking all our property presidents through our rooms because we're proud of what we've done with them."

The property is the first new resort the gaming company has built from the ground up in almost a decade. MGM Mirage has grown through acquisition in the past few years, notably the company's $6.4 billion buyout of Mirage Resorts in 2000 and the $7.9 billion purchase of the Mandalay Resort Group in 2005.

Also, MGM Grand is a brand the company plans to use in other ventures worldwide, both gaming and nongaming. MGM Mirage licensed the brand to the Mashantucket Pequot Tribal Nation in Connecticut, which is building the MGM Grand Foxwoods as an addition to the Foxwoods Resort.

MGM Mirage is expected to open the $1.1 billion MGM Grand Macau in December.

"It's a brand that translates well into many languages and it's a brand we intend to aggressively market globally," Murren said.

MGM Mirage announced the Detroit resort's opening date in August but almost had its plans derailed by a Michigan budget crisis. On Friday, a judge ruled Detroit's three casinos would remain open, even if a state government shutdown were to take place and remove government-paid gaming inspectors who monitor casino operations. A year ago, a New Jersey budget agreement impasse shut down Atlantic City's casinos for several days.

"When Atlantic City casinos were forced to shut down, the effects were felt both before and after the actual closure, as customers were unsure of the timing," Deutsche Bank gaming analyst Bill Lerner said Monday.

Gaming analysts have been bullish on MGM Mirage's prospects for several months, notably because of the company's two joint venture deals with Dubai World, the holding company for the Persian Gulf state. The deals have brought an influx of new capital into the casino operator.

Bear Stearns gaming analyst Joe Greff established a $109 per share price on MGM Mirage stock Monday, 22 percent above last week's closing price.

The old MGM Grand closed Sunday to allow employees and operations to be transferred to the new facility. MGM Mirage increased the casino's work force to 3,000, making the company one of the top 15 employers in Detroit.

Shiny new fixture for the future is republished from Online.CasinoCity.com.