Seasonal layoffs called typical, not a bellwether

By Liz Benston (contact)

Saturday, Feb. 23, 2008 | 2 a.m.

Because of the souring economy, the media seem to be latching on as never before to reports of layoffs, including along the Strip.

Case in point: When MGM Mirage spokesman Alan Feldman recently acknowledged layoffs at Circus Circus, the Las Vegas Review-Journal used the information to bolster a Page 1 story under the headline “Slowdown lands on gaming.”

Well, yes and no.

Feldman said the Circus Circus layoffs were triggered by seasonal slowdowns at the casino. Such staff reductions have occurred in the past and might have occurred this year even in a robust economy.

“Frankly, (layoffs) just weren’t getting reported in years past,” he said. “There’s historically been some seasonality in Las Vegas, going back decades.”

It’s a nuance that is being missed now, especially since MGM Mirage already reported its lowest-end properties were being hurt most by the economic slowdown as budget-conscious tourists spend less money than before.

Circus Circus has laid off about 150 people in Las Vegas and 12 people at its sister property in Reno.

These seasonal dips in business, the company said, typically occur after the Super Bowl and the Chinese New Year in February, during the hottest summer months, and in December.

With executives predicting a slowdown in business over the next six months or so, other jobs might be lost or part-time hours reduced during what would normally be a busy time of year.

All MGM Mirage properties are considering cutting back hours for part-time workers should the slowdown continue, Feldman said. The company’s part-time employees work on call, so they don’t have regular schedules but often have fairly predictable ones.

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The difficulty of financing resorts amid the crumbling mortgage market isn’t expected to be painful for MGM Mirage’s CityCenter, executives say.

The company has sold about $1.7 billion of an expected total of $2.7 billion in CityCenter condominiums.

“No one’s backing out of those deals” as they are at some other condo projects around town, Chief Executive Terry Lanni said. In May the company is opening its condo sales office in Dubai, where it hopes to sell CityCenter units to wealthy Arabs and investors from India, Russia and other parts of the world, “more than offsetting” the condo slowdown in Las Vegas, he said.

The troubled financial markets mean the company will likely have to fork over more equity, however, into the CityCenter joint venture with Dubai to ultimately finance the project than the company originally envisioned, he said. Bank financing from blended sources will make up the rest, he added.

“We’re getting very strong interest from banks in the U.S. as well as the Middle East, Europe and the Far East.”

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Is being a public company better than being private?

Lanni, somewhat self-servingly, seems to think so.

Whether MGM Mirage ultimately remains a public company is up to Kirk Kerkorian, the nonagenarian majority investor.

But Lanni says the public markets have been good for business — at least so far.

As a public company, MGM Mirage has a balance sheet healthier than those of “highly leveraged private companies” that will allow it to spend $1.1 billion on property improvements this year on top of the money it will spend on new projects, he said.

Lanni is no doubt referring to competitor Harrah’s Entertainment, which is among a handful of gaming companies that have been taken private by private equity companies.

Also, the company’s stock and options for executives are a superior retention tool for top managers, he said.

Executives can exercise and sell their shares as soon as they vest, monetizing their interest over the short term rather than getting a small percentage interest in a company managed by private equity companies, he said.