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MGM Resorts Executive Dan D'Arrigo Describes Broad-Based Recovery
Continuing in Las Vegas Hotel and Casino Market

2011 LV Visitation Numbers Expected to Reach 39 Million, Last Reached in 2007

By Steve Green, Las Vegas SunMcClatchy-Tribune Regional News

Nov. 03, 2011--MGM Resorts International executives today said a broad-based recovery is continuing in the Las Vegas hotel-casino market despite national economic worries.

In reporting third quarter results and offering a forecast for the fourth quarter now under way, the company said consumers are paying more for MGM Resorts' Las Vegas hotel rooms and spending more at its restaurants, nightclubs and retail outlets.

U.S. consumers are feeling more confident, businesses are participating in more conventions and Las Vegas is benefiting from more international flights to the city, Dan D'Arrigo, MGM Resorts International executive vice president and chief financial officer, said in an interview.

With visitation to the city this year expected to reach 39 million people, a number last achieved during the boom year of 2007, Las Vegas is maintaining its position as a top U.S. destination and MGM Resorts is well positioned to benefit with its resorts on the Strip at all price points, he said.

"It gets to the allure and attractions of Las Vegas as a market," D'Arrigo said.

Through August, 26.2 million people had visited the city this year, up 4.7 percent from the same period in 2010, Las Vegas Convention and Visitors Authority statistics show.

In 2010, 37.3 million people visited the city, up 2.7 percent from the recession-weakened year before.

MGM Resorts today said that in the third quarter, it benefited from stronger demand for travel to Las Vegas by tourist and business travelers with its wholly-owned properties on the Las Vegas Strip generating an 11 percent increase in room revenue and a 13 percent increase in revenue per available room.

Rooms at the company's flagship Bellagio resort, for instance, sold on average for $230 per night during the quarter, up from $198 in the year-ago quarter. Occupancy at the resort improved from 94.8 percent to 96.8 percent, MGM Resorts said.

CEO Jim Murren told analysts on a conference call that the company had a strong October and that its revenue per available room should be up again in the fourth quarter by 10 percent on a year-over-year basis.

"We continue to see consistency in this recovery," Murren said. "We see that in the improving citywide trends when you look at Las Vegas."

"The third quarter represents the third consecutive year-over-year quarter of increased revenue, EBITDA and cash-flow margin growth for our wholly-owned properties," he said.

EBITDA is a profitability measure meaning earnings before interest, taxes, depreciation and amortization.

Overall, MGM Resorts posted a fourth quarter loss of $123.8 million, or 25 cents per share, an improvement from the loss of $318 million or 72 cents per share in the year-ago quarter.

Both quarters were affected by one-time accounting charges. In last year's quarter, MGM Resorts took impairment charges totaling $357 million related to its half-owned CityCenter and Borgata projects. This year, it took an $80 million impairment charge against the value of its Circus Circus property in Reno.

Quarterly net revenue of $2.2 billion was up from $1.6 billion, mainly because MGM China and its Macau casino are now included in the calculation after MGM China's $1.4 billion initial public stock offering this summer in which MGM Resorts became the controlling shareholder.

Excluding the Macau operation, net revenue increased 3 percent.

Bloomberg reported that excluding some of the special items, MGM Resorts' quarterly loss came in at 14 cents per share, less than the 15 cent loss on average of 23 analysts' estimates compiled by Bloomberg.

Despite the improvements in Las Vegas room rates and spending by consumers, some of the company's casinos played unlucky in the quarter, causing cash flow to miss some analyst estimates, and MGM Resorts' stock fell on the news.

EBITDA of $444 million in the 2011 quarter was up from $280 million in the year-ago quarter -- but the unlucky play affected cash flow at the company's wholly-owned resorts to the tune of a negative $16 million, D'Arrigo said.

In mid-afternoon trading on the New York Stock Exchange, MGM Resorts' stock traded at $10.75, down 64 cents or 5.6 percent.

MGM Resorts also said:

--Business boomed in the third quarter at MGM China, owner of the MGM Macau resort, where EBITDA of $139 million was up from $84 million in the year-ago quarter and planning is advancing for a second resort in the Cotai district of Macau.

--The half-owned CityCenter resort on the Las Vegas Strip contributed EBITDA of $50 million, up 26 percent. Net revenue there of $255 million was up from $248 million with the Aria resort's revenue per available room coming in at $173, up 22 percent. Also, the Crystals shopping center produced $6 million in EBITDA, up from $2.4 million. Same-store sales there increased 27 percent and it's 86 percent leased, MGM Resorts reported.

--The company's revamped M Life loyalty program gained traction in the quarter, with a 12 percent increase in the third quarter in the number of active members -- those who have spent money at the company's properties in the past 18 months -- in its database, Murren said.

The company has some 31 million marketable names in the database.

MGM Resorts uses M Life to drive business to its Las Vegas resorts from its regional resorts including those in Detroit and Mississippi, and plans to continue to do so with its recently-announced deal with Creative Casinos LLC.

Under the deal, MGM Resorts plans to invest $30 million in exchange for a long-term management contract and a minority equity interest in Creative Casinos' 400-room Mojito Pointe casino resort under development in Lake Charles, La.

"This will provide us with great exposure to Southwest Louisiana and the Texas market including the important Houston area," Murren said.

--Murren commented on the company's deal with digital entertainment plc and Boyd Gaming Corp. to jointly participate in the Internet poker industry, should Congress legalize that activity and set up a regulatory mechanism.

"We support this effort as clearly it would safeguard consumers," Murren said. "We feel the technology has matured to a point where Internet poker can be appropriately regulated.

"This business is going to be about scale and the global brand names," Murren said.


(c)2011 the Las Vegas Sun (Las Vegas, Nev.)

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