MGM Mirage chief upbeat amid drumbeat of downturn

By Liz Benston

Thursday, July 24, 2008 | 2 a.m.

MGM Mirage executives seem willing of late to go out on a limb, what with the company’s chief executive proposing a controversial increase in the business payroll tax to shore up the state budget.

So it wasn’t a complete surprise that MGM Mirage President and Chief Operating Officer Jim Murren, in a recent interview on the state of the economy, predicted a “modest recovery” by early next year.

Murren doesn’t have some crystal ball issued only to high-ranking casino bosses. But he knows that his company’s hotel rooms are, with the help of discounts, at least 90 percent filled — a sign that demand hasn’t fallen off a cliff even if travel budgets have. And he knows that his convention business in 2009 looks stronger than it does today.

He sounds most excited, however, discussing the recent trend at Bellagio, where more than 30 percent of hotel guests over the past couple of months have been foreign visitors. Typically, about 10 percent of customers are foreigners.

Las Vegas tourism officials are trying to market the town more aggressively abroad, urging foreigners to capitalize on the weak dollar. Whether these foreigners are bigger spenders than Americans, who are cutting back on trips here, has yet to be determined.

“If you were to walk through the Bellagio today it feels like the United Nations,” Murren said.

With high-limit poker, poolside cocktail service and flying acrobats, that is.

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Harrah’s Entertainment, meanwhile, isn’t making many predictions.

But the company’s seemingly contradictory actions are speaking louder than words. Even as Harrah’s delays construction on its $700 million Margaritaville-branded resort in Biloxi, Miss., the company is plowing ahead on its new hotel tower at Caesars Palace and on other projects, including a $565 million phased expansion at Harrah’s Atlantic City that wraps up this quarter, and more than $500 million in expansions and marketing efforts to launch the rebranded Horseshoe Indiana, Caesars Windsor (in Ontario) and Harrah’s Tunica (in Robinsonville, Miss.) properties.

Harrah’s decided to delay construction at the Margaritaville property because the casino business there has been weak and because credit markets nationwide are tight, spokesman Gary Thompson said. The company might not delay the opening of the casino in 2010 but will likely open the property in phases instead of all at once, he said.

That will allow the company to spend, and therefore finance, less money upfront.

“Nobody knows when the economy is going to turn around, which is why it’s prudent to be cautious at this time,” Thompson said.

But what of prudence in Las Vegas?

“Current business levels support moving ahead full steam on the Caesars project,” he said. “We wouldn’t be building a billion-dollar expansion at Caesars if we didn’t have confidence in the economy longer term.”

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Las Vegas casinos have all but abandoned subsidized bus charters as a way of ferrying gamblers here on the cheap. Only Boyd Gaming operates subsidized charter flights for midrollers, and Harrah’s Entertainment subsidizes charters for gamblers flying to other casino markets such as Reno, Laughlin, Biloxi and Atlantic City, which aren’t well-served by traditional airlines.

Harrah’s subsidizes more than 2,000 charter flights a year to these other markets. Yet despite recent plans by some airlines to reduce air service to Las Vegas, not to mention the threat of rising air fares in the wake of high fuel prices and fewer routes, Harrah’s says it has no immediate plans to increase its charter business or expand it to include Las Vegas.

Harrah’s customers haven’t been much affected by the route cutbacks to Las Vegas because those routes were primarily cheaper overnight or connecting flights, Harrah’s spokesman Thompson said.

Nor does MGM Mirage plan to initiate any subsidized charters to Las Vegas, officials say.