MGM, Ritz team up

Gary Thompson

Wednesday, Aug. 28, 1996 | 11:59 a.m.

MGM Grand Inc. is reportedly negotiating with Marriott International Inc. and its Ritz Carlton affiliate to build a luxury hotel next to MGM's Las Vegas resort.

The new hotel would complete the transformation of MGM's under-used theme park into a high-end hotel with a world-recognized name, an upscale retail shopping area and a convention center -- a combination that could enhance MGM's nongaming revenues.

Although the new hotel wouldn't offer gambling, its proximity to the MGM could boost the host company's gaming business as well, or at least help it avoid losing ground in the highly competitive race for high-rolling customers.

MGM has aggressively targeted the world's wealthiest gamblers since controlling shareholder Kirk Kerkorian tabbed Terry Lanni and Alex Yemenidjian to run the company. It is battling established names such as Caesars Palace and The Mirage for the high-roller business and faces additional competition from a handful of newcomers.

While it isn't certain what brand name the new hotel would carry, a Ritz Carlton with average daily room rates above $290 would be the latest in a string of high-end resorts planned for Las Vegas.

They include Mirage Resorts Inc.'s Bellagio, under construction at Flamingo Boulevard and the Strip, and Four Seasons Resorts' planned nongaming hotel next to a new Circus Circus Enterprises Inc. project south of the Luxor.

Circus itself has said the anchor resort it will build next to Four Seasons will be the equal of any luxury hotel in Las Vegas. And Bally Entertainment Corp., which is merging into Hilton Hotels Corp., has announced plans for its high-end Paris project just north of MGM.

Other upscale projects under construction or on the drawing boards include Seven Circle Resorts' golf-and-gaming complex in Summerlin and Jack Sommers' Mountain Spa resort north of Las Vegas.

Marriott, the lodging-manage ment company spun off from Marriott Corp. two years ago, owns 49 percent of Ritz Carlton and is expected to acquire the other 51 percent eventually.

The third-largest U.S.-based lodging company, Marriott trails only Hilton and ITT Corp., owner of Caesars World, the Desert Inn and the Sheraton brand name, in the number of rooms managed. Marriott expects to add 120,000 rooms to its current inventory of 220,500 by the year 2000.

An MGM spokesman declined to confirm or deny the talks, saying only, "We haven't gone beyond the original announcement of our master plan."

That $250 million "City of Entertainment" revamping calls for extensive changes to the MGM's casino and entrance areas and construction of a 300,000-square-foot convention center, retail shops and other facilities on the east side of the 112-acre property, where the theme park now stands.

Terry Sowers, Marriott's vice president of corporation information, said he couldn't comment specifically on the reported talks.

"The problem with any kind of hotel-development deal is that there's always the chance it might not pan out," he said. "As a company, Marriott International continues to actively look for management participation in quality lodging projects.

"We want to manage hotels. The one thing we have no intention of doing is getting into the gaming business. We have a few casinos in hotels scattered around the world, but we don't manage them."

Marriott International has concentrated on hotel management since Marriott Corp. split into two companies. The other spinoff, Host Marriott Corp., owns real estate and hotels, some of which Marriott International manages.

"There are times when we'd put what we call 'slivers' of capital into a project, but as far as having large equity interests, we just don't do that anymore," Sowers said.

The Ritz Carlton hotels, however, are owned by wealthy individuals, partnerships or corporations and managed by the Ritz Carlton Hotel Co.

Thus, Ritz Carlton could manage an MGM-Ritz Carlton, which in turn could be built and owned by MGM solely or in concert with other investors.