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Best of Liz Benston

Gaming Guru

Liz Benston
 

Visitors Unlikely to Notice Changes

7 June 2004

MGM MIRAGE's pending offer for Mandalay Resort Group would create a gaming behemoth with the kind of power to control prices for rooms and other amenities, some customers and analysts say. But others say the deal would have little to no effect on the way the casinos are run and would be imperceptible to consumers.

If MGM MIRAGE didn't sell off any properties in the deal, the percentage of rooms under one company's control would rival the percentage that reclusive investor Howard Hughes aimed to control on the Strip when federal regulators intervened and Nevada adopted antitrust regulations for casinos in the 1960s, said Bill Thompson, a professor of public administration at the University of Nevada, Las Vegas.

"This will invite the federal government to (once again) give greater scrutiny to our business practices and historically we don't like this," he said.

Competitors could potentially be hurt if MGM MIRAGE used its market clout to undersell other hotels and negotiate exclusive deals with airlines, suppliers and others, he added.

"It's OK to be big as long as you're not engaging in predatory practices," Thompson said.

The deal also could mean yet another shift in control from some longtime Las Vegans to relative outsiders -- in this case, from Mandalay Resort Group Chief Executive Officer Michael Ensign and Vice Chairman William Richardson to MGM MIRAGE's controlling shareholder Kirk Kerkorian, he said.

But Jim Kilby, Boyd Professor of Gaming at the William F. Harrah College of Hotel Administration at UNLV, said MGM MIRAGE would be a good partner for Mandalay because MGM MIRAGE would be unlikely to change Mandalay's management or culture and therefore would encourage product diversification.

Similarly, MGM Grand Inc. kept several top executives under a separate Mirage Resorts Inc. business unit after it bought Mirage in 2000, he said.

Harrah's Entertainment, on the other hand, has a reputation of changing acquired properties to fit its corporate culture, he said.

Anthony Curtis, publisher of the Las Vegas Advisor consumer newsletter, said he didn't think a MGM-Mandalay combination would hurt customers.

"Super-consolidation is never great but when like companies hook up, it's just not a big deal. They tend to be close in pricing even as competitors," Curtis said. "Prices are kept low by the smaller companies competing with bargains and that will continue. It would be much worse if MGM was acquiring Station (Casinos)," for example, he said.

The companies might even lower costs by creating economies of scale, such as having one slot club loyalty program covering all the properties, he added.

Over the weekend, some employees at Mandalay Bay who had digested the news had mixed feelings. Some welcomed the soaring Mandalay stock price, especially those with Mandalay stock in their retirement plans.

Others said they didn't welcome the prospect of a takeover.

A dealer who declined to be named said she was concerned about what the offer would mean for jobs at the resort. Employees have been telling each other that the deal isn't likely to happen because regulators wouldn't allow it, however, she said.

Having that many properties under one roof would create too much competition between sister casinos for customers, retail employee Porshaey Victorian said.

"It's like we're Coke and they want us to sell Pepsi," she said. "We like the way we do things around here."

Dan Desilva, another retail worker, said MGM MIRAGE has a reputation of being a more corporate, heavy-handed employer than Mandalay Resort Group.

"We like our environment," he said. "We're a family."

Several customers at Mandalay Bay and Luxor said an acquisition by MGM MIRAGE would have little effect on their experience in Las Vegas.

Tito Garcia, from Florida, said the deal would make no difference to the "middle class customer."

"Who cares if MGM takes over? The bill isn't going to change regardless of who owns who," he said.

Others said any potential change in prices, especially for hotel rooms and restaurants, wouldn't make a difference in any case because their companies were paying for them to attend conventions at Mandalay Bay.

"We wouldn't be here if the company wasn't paying for it," said one woman who declined to give her name.

"It sounds like a monopoly to me," said New Yorker Prateek Kumar, who was also attending a convention at the property. "But I don't think it will make much of a difference" in prices, he said.

Svein Sedeniussen, from Pearl River, N.Y., said the acquisition would give too much control to a few.

"That's a very dangerous thing. You need competition," said Sedeniussen, who was attending a wedding at Mandalay Bay.

Staten Island resident and travel agent Inger Vidringstad, also attending the wedding, said the buyout would mean less character at each casino.

"You would lost some individuality," she said. Room rates also could be pushed higher, she said.

Tom Jasick, from Delaware, Ohio, said the deal could be a good thing for tourists if it meant the companies could extend a monorail line down the West side of the Strip.

"That would make it a lot easier" to navigate the Strip in the stifling heat, said Jasick, who was attending a convention at Mandalay Bay with his wife, Elizabeth.