Las Vegas properties lift MGM MIRAGE performance

By Liz Benston (contact)

Wednesday, Jan. 28, 2004 | 11:10 a.m.

Profit more than doubled at MGM MIRAGE in the fourth quarter of last year as gamblers and other customers rode an economic rebound, driving more visits to company resorts and higher spending on hotel rooms and other non-gaming amenities.

The company today reported earnings of $91.7 million or 62 cents per share compared to $39 million or 25 cents per share for the same quarter a year ago.

"We saw excellent gaming and non-gaming trends across our Strip properties and strong national and international high-end business," Chief Executive Officer Terry Lanni said.

Officials said the company is expected to perform in line with analysts' expectations of 43 cents per share in the first quarter of this year.

Revenue per available room -- a key performance indicator in the hotel industry -- should be up about 5 percent companywide and up by at least 7 percent on the Strip, officials said.

Analysts said the trends bode well for some other Strip operators.

"This is a positive sign for the industry, as it provides further evidence that Las Vegas trends have improved and that leisure and business travel continue to rebound," Steven Kent, a stock analyst with Goldman, Sachs & Co., wrote in a research note to investors today.

During a conference call today, Lanni declined to reveal whether the company's next major resort would be built in Atlantic City -- where the company owns land for one and perhaps two resorts -- or Las Vegas.

Lanni said the company was "doing some preliminary work" to evaluate a site now occupied by the aging Boardwalk casino on the Las Vegas Strip -- a property that observers have long speculated will be torn down to make way for a megaresort.

A nearby road realignment over the next couple of months will benefit the property, he said.

New amenities at several resorts -- such as the Cirque du Soleil's Zumanity show at New York-New York and the "Sirens of TI" spectacle in front of Treasure Island -- are boosting spending on the Strip, he said. The timing of New Year's Eve on a Wednesday also favored business by creating "a second weekend" for travelers to Las Vegas, he added.

About 7,000 people per day are taking in the outdoor "Sirens" show, which has helped boost slot revenue by 11 percent and retail revenue by 6 percent at Treasure Island since the show's debut, officials said.

MGM Grand reported its best fourth quarter cash flow since 1997 and its highest-ever revenue in the food and beverage arena, they said.

The resort expects to begin construction on three new restaurants and a lounge in time for the opening of the property's upcoming Cirque du Soleil show, said John Redmond, president and chief executive of MGM Grand Resorts. MGM MIRAGE has so far received 400 deposits from buyers in condo tower that will begin construction around August behind the resort for an expected opening in spring 2006. The 570 or so units will become part of a series of planned towers called "The Residences" built by Turnberry Associates at the site of the former MGM Grand theme park.

Bellagio expects to complete a room renovation next month and is on schedule to open its second room tower at the resort in December. New York-New York -- reporting its best ever cash flow for the fourth quarter, began its first room remodeling project this month and will be complete in August, Redmond said.

Excluding certain items, the company reported earnings of $55.4 million or 38 cents per share compared to $42.5 million or 27 cents per share a year ago. The improving economy helped the company collect more debts from high-rollers, boosting fourth quarter earnings by about 5 cents per share.

Analysts expected the company to earn an average of 29 cents per share.

Revenue rose 6 percent to $973.6 million. Casino revenue was up 7 percent on a 4 percent increase in volume of table game play. Non-casino revenue rose 4 percent. The company's 50 percent ownership in the Borgata resort in Atlantic City generated about $125 million in quarterly revenue.

Effective marketing programs and continued economic improvement drove increases in table play, while the introduction of "cashless" slot machines and the rollout of a companywide customer loyalty program helped slot business, officials said.

Cash flow across all properties jumped 18 percent to $301 million.

Bellagio reported $68.1 million in cash flow, up slightly from a year ago. MGM Grand reported $57.4 million in cash flow, up 13.4 percent. Cash flow at The Mirage was up 32.5 percent to $42.3 million. Cash flow was up 10.1 percent Treasure Island to $22 million. At New York-New York, cash flow climbed 23 percent to $21 million.

Shares were up about 9 cents to $40.54 per share in early trading this morning.