Bellagio expansion plan may be revived

Friday, June 7, 2002 | 11:14 a.m.

MGM MIRAGE is considering a $275 million expansion of its Bellagio resort on the Las Vegas Strip, a company spokesman said today.

The property -- MGM MIRAGE'S most profitable -- has rebounded strongly since Sept. 11 and this is prompting consideration of a new hotel tower as well as the possibility of also adding convention space and new restaurants, spokesman Alan Feldman said.

"Demand returned just about as fast, if not faster, than any of our properties."

Before September, the property was a "success of unparalleled dimensions in this market, with occupancy levels, hotel rates, food and beverage revenues that no one in Las Vegas had dreamed possible."

In fact, prior to the economic slowdown and the September terrorism, Bellagio was shattering casino industry profit records in 2001. In the three months ended March 31, 2001, Bellagio produced $93.5 million in cash flow -- a number believed to be a worldwide casino profit record.

A decision on whether to build the tower is expected before the end of the summer, Feldman said.

Land for new Strip development, combined with a better-than-expected rebound since Sept. 11, has prompted many casinos to look at expanding existing assets, said Marc Falcone, a gaming analyst with Deutsche Bank.

Mandalay Resort Group's Mandalay Bay and Las Vegas Sands' Venetian property -- two megaresorts that have announced new hotel tower projects -- are among the busiest properties year-round, he said.

"Bellagio runs at a very high occupancy and they get a very premium rate," Falcone said. "I think they see a need for some more convention space there and a need for more restaurant facilities." Bellagio runs at about 98 percent occupancy, likely the first or second-highest rate on the Strip, he added.

Analysts who have talked to MGM MIRAGE officials said the Bellagio expansion could include 1,000 hotel rooms and conference space, Bloomberg News reported.

The Bellagio, opened in 1998 for $1.6 billion not counting an elaborate art collection, now has 3,000 rooms and 125,000 square feet in meeting space.

The company's Bellagio expansion plan surfaced the same week it dropped a bid to buy a Chicago casino for $615 million.

MGM MIRAGE is resurrecting Bellagio creator Steve Wynn's plan to expand the megaresort. That plan was put on hold in March 2000 because of MGM Grand Inc.'s plan to buy Wynn's Mirage Resorts Inc., which was announced in February 2000. Wynn disclosed in January 2000 a $250 million plan to expand Bellagio by 1,300 rooms. That expansion would have included extra meeting and convention space and a new restaurant.

MGM MIRAGE would be making the investment as gamblers are returning to Las Vegas, the largest U.S. casino market. The Bellagio generated the most revenue of any MGM MIRAGE casino in the first quarter.

"Of all their Las Vegas assets, Bellagio is the one that's performing the best right now," Joe Greff, an analyst at Fulcrum Global Partners LLC, told Bloomberg News. "These guys are bullish on Las Vegas."

MGM MIRAGE's other Las Vegas casinos include the MGM Grand, New York-New York, Mirage, Treasure Island and the Golden Nugget. The company is also building the $1 billion Borgata casino in Atlantic City with partner Boyd Gaming Corp. of Las Vegas.

MGM MIRAGE's rivals also are building in Las Vegas. Mandalay Resort Group will add a hotel tower and convention center to its Mandalay Bay casino for $435 million. Venetian Casino Resort LLC is adding 1,000 rooms to its Venetian casino. Wynn, former Mirage chief executive, is raising money to redevelop the former Desert Inn into a $1.6 billion resort.