Mandalay Resort Group bullish on Las Vegas

By Liz Benston

Tuesday, Oct. 8, 2002 | 11:15 a.m.

Despite a proliferation of Indian casinos nationwide, tribal properties can't duplicate the impressive collection of tourist attractions in Las Vegas, a top casino executive assured investors during a conference call.

"The casino has become a commodity," Mandalay Resort Group Chief Financial Officer Glenn Schaeffer told investors last week. "The difference ... is in the resort business."

The conference call, hosted by investment banking firm Merrill Lynch & Co. for the firm's clients, focused on how companies create long-term value for shareholders.

Competition from tribal casinos is influencing companies to develop their resort and convention business, Schaeffer said.

Mandalay Resort Group, with its adjacent Excalibur, Luxor and Mandalay Bay casinos, is well-positioned because it is creating one of the largest collections of resort attractions on the Strip, he added.

"We are getting a customer to drive by or fly over a box of slot machines identical to what we offer downstairs," he said.

"What the Indians will never have is 1.5 million (square-foot) convention centers with ... 18,000 rooms feeding them. We have the biggest integrated resort complex on the planet and no one is going to have that, either."

Wall Street analysts have raised concerns about the amount of money the company has spent over the years on hotel rooms and other amenities. The company was one of the most aggressive builders of rooms in the 1990s on the Las Vegas Strip and is spending about $460 million on a convention center and luxury hotel tower that will open next year at the company's flagship Mandalay Bay Resort & Casino.

Both projects aim to create greater returns for the long haul and upgrade the company's brand, Schaeffer told investors. The convention center -- one of the largest in the nation -- will create demand for higher-priced rooms, which will displace the company's reliance on low-priced rooms marketed to wholesale customers midweek, he said.

"We're able to take the $79 to $89 rooms midweek and replace them with $150 rooms."

A tower of more than 1,100 suites, claiming to offer the largest average room size on the Strip, will feature plasma screen TVs and computers as well as a rooftop club and private pool area.

"Every year more customers come than the year before and they pay higher prices than they've ever paid before," Schaeffer said. "Not many businesses in America can say that."

The company also expects to begin construction this month on a roughly 100,000 square-foot mall linking its Mandalay Bay and Luxor resorts, though it hasn't disclosed the center's cost. Luxury retailers Louis Vuitton and Fendi are expected to lease space in the mall.