Monday, June 12, 2000 | 10:57 a.m.
Gaming analysts say MGM Grand, Inc.'s recent acquisition of Mirage Resorts, Inc. will reduce competition for high-end casino players on the Las Vegas Strip.
Analysts say MGM will now have the corner on the market, with the most high-end facilities, led by the mansion at MGM Grand and the villas at Bellagio.
Park Place Entertainment's purchase of Caesars World locked up another resort that has dominated the high-end market.
"MGM Grand will have a distinct advantage at the top end," predicted Joseph Coccimiglio, gaming analyst for Prudential Securities. "MGM Grand now has the top places to stay - the MGM Grand's mansions and Bellagio's villas - as well as the top places to eat and the best entertainment. If you're a high-roller, it's difficult to see why you'd play anywhere else."
Brian Egger, gaming analyst for Donaldson, Lufkin & Jenrette, said the consolidation will help all casinos competing for premium players.
"The acquisition will make the high-roller market more rational," Egger said. "To the degree MGM Grand increasingly controls the market, the overall effect should be to reduce aggressive competition for such players, making it more profitable."
The consolidation will not only boost bottom lines by reducing competition, but will allow significant cost savings, the analysts believe.
Paine Webber's Robin Farley said the three largest Strip players, MGM Grand-Mirage, Park Place and Mandalay Resort Group, will all take the opportunity to eliminate expenses.
"You can grow profits in another way besides building new projects," Farley said. She noted that, in the last two years, returns on acquisition and consolidation have been better than returns on new properties.
Farley said new properties have historically returned 15 percent to 20 percent on invested capital in their first year of operation, but the most recent four properties to open on the Strip have averaged only a 13 percent return.
Merrill Lynch's David Anders believes consolidation in Las Vegas will also help casino operators keep room rates high. The three largest operators on the Strip now control 67.1 percent of the hotel rooms on the famous boulevard. MGM Grand-Mirage have 15,992 rooms, Mandalay has 15,856 and Park Place has 14,754.
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