News for the Hospitality Executive
|By Rod Smith, Las Vegas Review-Journal
April 13, 2004 - The Bellagio, the flagship of the MGM Mirage chain, was closed and completely powered down Monday as workers continued efforts to repair systems damaged by an "unknown" electrical trauma early Easter Sunday, company spokesman Alan Feldman said.
The power problems, which started about 2 a.m. Easter morning, led Bellagio officials to begin closing the property Sunday, forcing the resort to begin moving guests to other properties and sending many of its 8,000 employees home because its backup power system had to be shut down.
The guests still registered in 800 rooms Monday morning were checked out of the hotel during the day, after which all electrical systems were shut down except for minimal emergency power. The hotel will be closed for at least 24 hours.
By late Monday, MGM Mirage and Nevada Power officials still had not determined precisely what caused the power outage, which analysts estimate is costing the MGM Mirage at least $3 million per day in lost revenues. The officials did not know how soon full power would be restored to the five-star resort.
Feldman said MGM Mirage hopes to begin restoring power to the hotel-casino today and that the hotel may reopen late today.
However, as a newly built resort, the Bellagio relies on many complex technological systems which will require rebooting and testing before they are again operational, and the reopening might have to be delayed, Feldman said.
"It's not as simple as throwing a switch. It's going to take time," he said during a Monday morning news conference.
However, Feldman said whatever caused the initial power failure was not the responsibility of Nevada Power.
"The lines that failed are between the power management system and the Bellagio. This is not Nevada Power's thing. They are out lines. We owned them, they were planned according to our specifications and we installed them," Feldman said.
An investigation will be started as soon as power is restored, including the possibility that sabotage caused the initial blackout although there was no indication that had been the cause of the problems, Feldman said. The MGM Mirage spokesman, however, noted that all efforts at this time are focusing on restoring power to the megaresort.
Feldman said Monday that Sunday morning's "unknown event compromised" the main power line leading into the 3,000-room Strip megaresort, damaging thousands of feet of cable beyond repair.
Because Nevada Power does not maintain a sufficient inventory of replacement cable in Las Vegas, wiring for the massive replacement project had to be shipped in from Los Angeles and was arriving Monday morning.
Backup power at the megaresort was brought online briefly after the initial blackout Sunday, but had to be turned off almost immediately so engineers could assess and begin repairs to correct the problems.
During the news conference, Feldman suggested a possible design flaw in the development of the $1.6 billion resort may be responsible for the problem with the backup power system.
Transmission cables for both primary and backup power run parallel to one another through the same duct work, which made it impossible to run the backup system while the primary power failure was being assessed and repaired.
An industry insider and engineers who asked not to be named said running cables from the primary power source and the backup power source through one power duct rather than two eliminated a necessary redundancy in the system.
The Bellagio, which opened in 1998, was originally designed and developed by Mirage Resorts which was headed by Las Vegas developer Steve Wynn who was not available for comment.
The megaresort, which had been fully booked for Easter and Monday, generally accounts for $3 million a day, or $1 billion a year, out of MGM Mirage's total revenues, estimated to reach $4.1 billion this year, said Deutsche Bank analyst Marc Falcone.
He said by the best estimates available, the closure will likely cost the company just under $1 billion in cash flow, a key measure of profitability.
In addition, sources said the MGM Grand Conference Center computers, which normally run from the Bellagio, were shut down cutting off its booking and reservations systems.
However, company spokesman Yvette Monet said a manual booking system has been instituted and such systems have encountered no problems in the past.
"If this persists, the financial impact becomes greater than a couple of days, of course. If that's all it is, it's not material since business has been strong and it is early in the quarter. Otherwise, it'll add up quickly," Falcone said.
Guests in about 2,000 rooms were relocated to other hotels Sunday. All of the guests in the remaining 800 rooms, as well as guests with reservations for another 1,100 rooms, were being referred to sister MGM properties -- MGM Grand, Treasure Island, New York-New York and the Mirage -- to Caesars Entertainment hotels, and to the Monte Carlo, which is owned in partnership by MGM Mirage and Mandalay Resort Group.
Feldman said it was not clear how many guests had been referred to MGM properties and how many had been referred elsewhere, but Caesars Entertainment spokeswoman Stacy Solovey said her company had been able to provide more than 600 rooms at Caesars Palace, Bally's and Paris-Las Vegas to visitors who been forced to vacate the Bellagio.
"As always, we're willing to help out our friends on the street and we're doing everything we can to help," she said.
Feldman said the conservatory will not be damaged while the hotel is shut. Workers have been hand-watering the plants.
Furthermore, enough air is circulated by the minimal emergency power that the art work hanging in the hotel and in the Bellagio Gallery of Fine Art should not be damaged, Feldman said.
The Clark County Fire Department sent inspectors to Bellagio to ensure that fire safety features remained operational from emergency power.
"A number of safety features have to have electricity to function, such as emergency lighting and pumps for sprinklers," Fire Department spokesman Bob Leinbach said. "We've been in touch with them and we're monitoring it closely. If there is a need for (fire) surveillance, we will ask them to do that."
Meanwhile, guests with reservations who have questions about accommodations are being asked to call 693-7223 for information or assistance in finding alternative accommodations.
No performances were scheduled for Cirque du Soleil's "O" show Monday or today, Feldman said.
Refunds will be given to guests with tickets to any shows, and guests with room reservations who need other accommodations are being handled on a case-by-case basis.
MGM Mirage closed Monday at $46.25, down 18 cents on 328,700 shares traded, just over half the normal trading volume.
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