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Published Wednesday, Oct. 29, 2008 | 7:03 a.m.
Updated Wednesday, Oct. 29, 2008 | 1:12 p.m.
Beyond the Sun
As expected, MGM Mirage on Wednesday said the company has shelved future resorts in response to the economic downturn, including the proposed MGM Grand resort in Atlantic City and a similarly large, multi-tower resort planned with joint venture partners at the southwest corner of Sahara Avenue and Las Vegas Boulevard.
The company also has scaled back plans to spend close to a billion dollars next year on maintenance and upgrades to its casinos, and instead will spend about $200 million -- a figure they hope will rise again in 2010.
MGM Mirage President and Chief Operating Officer Jim Murren said that was still a lot of money given that the company’s resorts are in “excellent shape” and are “the best in class in every single market.”
During a conference call to discuss a 67 percent decline in third quarter profit from last year, executives at Nevada’s largest private employer said they are taking steps that will save the company roughly $1 billion in expenses and make the company stronger and more profitable in future years.
In recent months, MGM Mirage has laid off a few hundred managers in addition to the 400-plus managers who were let go in an April announcement. The company continues to reduce its rank-and-file workforce by an undisclosed number -- an effort that began at least a year ago in response to lower business volume.
The management layoffs aren’t affecting customer service and, in many cases, involve people who are no longer needed after the company’s cost structure was permanently reduced, Murren said. Hourly and other rank and file workers are expected to be rehired once business rebounds, he said.
Officials at MGM Mirage, which owns most of the Strip’s megaresorts, offered no predictions on when the economy would turn.
By next year, the company will operate at a cost that’s at least $450 million less than it was in 2007.
MGM Mirage has reduced duplicate management jobs, consolidated formerly incompatible systems involving purchasing, payroll and benefits, reduced inventory expenses, renegotiated vendor contracts, substituted broad marketing efforts for more focused ones and eliminated small, unnecessary departments.
The company has also cut spending on consultants and travel and expects to consolidate back-office functions like casino credit and collections. It’s also saving money from adopting environmentally friendly practices.
“We don’t think we can afford to do things just because that’s the way we did them before. That’s not a model for future success,” Murren said.
The company also has identified $400 million of cost savings at CityCenter, on track to open in late 2009. Construction and labor costs have fallen on declining local and global demand, executives said.
Excluding one-time events such as the write-down of the Primm Valley Golf Club and insurance proceeds related to Hurricane Katrina, companywide EBITDA, a measure of earnings, fell 14 percent in the third quarter from a year ago. Property-level EBIDTA fell 18 percent.
That was about as bad as analysts expected, though some weren’t surprised by the decline and took small comfort in the fact that Bellagio – the company’s most luxurious resort –- reported an all-time high in hotel revenue in the third quarter.
While earnings at other Strip properties were down from 15 to 32 percent in the third quarter, Bellagio’s EBITDA rose 8 percent and revenue increased 3 percent. Occupancy was flat at 96 percent and room rates rose a percentage point.
Overall, casino revenue fell 8 percent, mainly because of a decrease in table game play on the Strip. Slots revenue fell 6 percent and room revenue declined 10 percent. Food and beverage revenue was off 3 percent and entertainment was down 4 percent.
Executives said the company’s convention bookings are up in 2009 as customers who canceled events have re-booked.
Critics have focused on unfinished financing at CityCenter, which has secured $1.8 billion of about $3 billion needed to finish the project. Executives said they have $500 million in additional bank commitments. MGM Mirage and joint venture partner Dubai World have each pledged to fund $1.9 billion for CityCenter, minus any financing received.
Executives said they were confident in raising the funds while maintaining enough cash on hand to weather the economic storm.
“The company will not allow itself to be in any financial jeopardy,” Murren said. “We have too many options available to us and too many relationships with financial partners.”
Seems like the postponement of the Sahara/Strip project would not bode well for the Sahara Resort across the street, as I am sure they were counting on increased foot traffic to bounce their way.
I have a great idea. Let's raise their taxes and see how many more get laid off in this city.
Or we could drill for oil at the southwest corner of Sahara Avenue and Las Vegas Boulevard.
Sorry neiman... just thought I'd say it for you.
The state of Florida is really hurting Las Vegas at a bad time. Florida now has blackjack and slots and poker. Now the people in Florida don't have to travel to vegas anymore.
I isn't just Florida, it's all over the place. It's only going to get a lot worse.
"Let's raise their taxes and see how many more get laid off in this city."
Not everyone neiman, just you. Thanks for another lie.
Exceptionally good point made, diamondgirl and car_1.
It's not really that people CAN'T come to Vegas, it's that they don't really NEED to anymore. A few years ago if you wanted to get away and gamble a few days, Las Vegas was THE destination. Vegas is used to being the biggest fish in a very small pond. It's totally not that way anymore. Plenty of people would still pay $500 airfare if they could stay in Vegas and play for a 4 day weekend at a reasonable rate. The truth is you almost can't anymore.
The giants down on the strip have no one to blame but themselves for the latest downturn. You can only stick it to people for so long before they stop playing your game.
it's bad.
i'm a realtor and i show a lot of rental properties. even as recently as may/june my phone would ring off the hook from people moving here and they needed a house to rent.
now...if i get one call a day i'm happy.
it's the ripple effect from all of this that is kind of hidden. we don't get the numbers for how many local restaurants closed or car repair places closed, etc.
I was buying my trip to Vegas for January-2009 and my total was $1300 for air fare and hotel nothing else for 3 days for me and my wife, so I said to myself "wait a second let me check Orlando FL", bingo! I got hotel and parks for me, wife and 2 daughter for $850 all 4 days. My daughter won, my wife and me lost our trip to vegas in January which is the month we want to go. I hope things get better soon, I want to go back and enjoy that beautiful city without thinking about money like I did before, from Miami FL, I thank you for let me share the reason I changed my little vacation, "Just money".
part of the reason my wife and i have stopped coming to vegas (and we used to go every year on our anniversary for a week ) ( And we have been married for 37 years )is .. because a room ( the same room) ,, the very same room is ,, lets say $50 a night ,mon-wed , the cost doubles on thurs - sun,,, same room, no changes.. people can not afford this for the same room,
All this being said, Vegas has seen year over year increases to gaming profits.
Remember when AC first opened, everyone predicted the demise of Vegas. We have grown exponentially every time there is gaming everywhere else.
The small casinos outside of LV just wet the whistle of people to go to the mecca of gaming...Vegas Baby.
Don't worry about FL, the people that we don't get from there were never going to come anyway. Besides, they don't toke.
If there is any doubt, read the article in the Sun about what the prestigious Brookings Institute wrote.
We have just spent two weeks in Las Vegas from Australia, loved the town have been there 5 times over the past 7 years, and have a timeshare on the Strip but we won't be rushing back for several reasons. The main one is economic, we saved for almost 18 months for the trip and the airfares were just under $2000 each for the 13 hour flight from Brisbane to LA, then they wanted another $150 each to fly from LA to Vegas. We were told Vegas was hurting and there would be lots of specials - well there weren't and we were hurting with the exchange rate - less than 70 cents US for 1 Australian dollar. Not so much as a free T shirt or a casino coffee mug. The fabled "comps" of Vegas were just that- a fable. The weekend room rates when we moved to a casino were prohibitive and with no in room refrigerators or microwaves the food and coffee bills killed us especially as the good cheap buffet seems to be a thing of the past. The strip looks like a construction zone, if we weren't being bothered by people handing out prostitute cards it was timeshare touts (even inside the casinos). The theming that made Vegas so different is being slowly eroded so that from inside the casinos we could be at our hometown casino (where the payouts are better by the way.) To top it all off I was one of what seemed to be a number of people who had their wallets stolen at the Excalibur. In case I sound too negative I have to say that once we worked out how badly the slots weren't paying, we used our slots money to do some great shopping at the outlet malls and that every Las Vegan we dealt with both on the strip and off was really great.
However for what we had to pay to get there and stay the casino managements are going to need to make us feel a lot more like they want our business to attract us back.
How many jobs must be lost before we realize raising taxes on companies and higher fuel costs from the democrats resistance on drilling are destroying this country? Elect Obama and lose your job.
Keep drinking the Kool-Aid, pitboss.
You typify the exact irrational sentiment that has helped cause the current economic state in Vegas.
The first step to fixing something is to understand and admit that there really is a problem. And if you're really going to hang your hat on the Brookings Institute, then good luck to you... because you'll need it. The power of positive thinking only goes so far.
harske "The power of positive thinking only goes so far."
Energy follows thought. Please think positively.
neiman1 We already lost our jobs! Your ranting is so far off base its laughable. What planet are you republicans from?
Not to mention people are afraid to rent a house (as opposed to an established apt. complex) because too many homeowners are pocketing the rent money instead of forking it over to make their house payment. One day you're paying rent and the next day you come home to find an eviction notice on the door due to foreclosure. As Heidi Klum would say (on Project Runway) "One day you're in" and the next day you're out".......
And pitboss is worried about his 'tokes'....
You have a job, you get a paycheck to do your job and you should get TOKES? on top of it! This town is ridiculous with the amount of people who think they need to get a tip just for showing up. I don't mind tippings waite staff but for everyone else - forget it - you're getting a paycheck just the same as I and no one tips me for showing up for work - and trust me I am involved in a whole lot of customer service. I don't expect to get tipped just for doing my job and neither should you.
Azsk8fan.. tokes is what Las Vegas was built upon. You are exactly the kind of player that we're getting too much of over here nowadays. Cheapskates who can't even tip a buck on a blackjack table after a winning streak. Keep the buck, buddy.. you probably need it anyway. And you better not end up on my table if you wanna keep what's left of your money. You probably throw the valet guy a dollar and ask for change, don't you. And as far as waitresses, I can see you giving her a buck for every three drinks she gives you. I see you for who you are... stay out of the casinos. We don't want you there.
bernie, you're an idiot.
TOKES is what vegas was built on? people coming to vegas to give someone money...just for doing their job?
haha! ok.
see, when we LOSE...the company keeps that money and pays you with it. when we win, we pay OUR bills with it.
"better not end up at MY table." hahaha!
oh, so somehow YOU can control how much money someone can win or lose? haha!
see, a tip is a bonus. you should be happy to get one at all, not be jerk and complain how much it was.
Oh Bernie. I understand sort of where you're coming from, but lashing out at a typical casino-goer isn't going to do any good. In alot of ways, what you said is exactly what's wrong with Vegas nowadays. All throughout the valley everyone is stunned and incredulous that the spiggot has been turned off. The money that you got used to from tokes is unsustainable. Spending is down everywhere around town, and tips are no exception. But do you really believe that people in the service industry are entitled to tips regardless? Sorry man... I disagree. Tips aren't mandatory. Expected, sure. But we don't "owe" you anything.
You're semi correct in that gratuities were, and still are, a huge part of standard operating procedure in Vegas. But that's really just a holdover from the good 'ol days when servers and dealers had no trouble remembering your name. The quality of service that we (the customers) get has steadily declined while the expectations of you (the service professionals) has increased. I wish you good luck with that, but don't get mad at us if we don't see things the same way. And it's our disposable income that pays not just your tips and tokes, but you're salary too. I say if people want bigger tips, they should do something beyond what's expected. Put some service back in the service positions, and people will gladly shell out a few extra bucks for the effort.
As long as gratuities are expected and underappreciated, our willingness to give them unconditionally will continue to dwindle.
First of all, stevem, if you're going to a blackjack table with the expectation of paying bills, good luck. Once again, keep every dollar you can get get because you will need it, but don't expect any extra ounce of customer service from dealers. And no, I don't control how much you win or lose, but if you stay long enough you WILL LOSE.
Harske, granted the economy has affected everyone. No, I don't expect anyone losing to tip me. No, I don't expect anyone to tip me if i'm being less than hospitable. But when I've done everything to help people out including double or triple their money, and I get no appreciation, a slap in the face is a slap in the face. This is entertainment... if you have disposable money to gamble with, how much will it hurt to tip someone if you're doing well?
Oh, and STEVEM, you don't have to answer that last question. I know you're busy gambling to pay your bills so don't worry about tipping. I know what poker fleas go through, grinding away everday, so I know how cheap you guys are. Or are you just a blackjack grinder? Let me know if I'm close, idiot.
well, actually bernie i just said "pay our bills" to show the give/take yin/yang of how it works.
i lose = the casino has money to pay YOUR salary.
i win = i have the casino's money i can use to pay for drinks, food, etc.
just like when i go into starbucks and i see that little tip jar there. ummm...i am in that store, paying for coffee...you taking my order and filling my drink is part of the cost of that transaction. you get NO "tip" for doing your job.
now, if i'm with a client or a date and they want some super picky drink, ok...you get a little bit extra, but not just for making me an iced coffee.
a 7th grader with down's syndrome can be a blackjack dealer.
i've tipped dealers when i've lost and i've tipped dealers when i've won.
Stevem, you are the typical cheapskate. Someone with down's syndrome maybe able to deal cards, but tell me if they can tolerate some of the obnoxious behavior we come across everyday and not wanna crawl across the table drooling and slap someone with his deformed knuckles. "now, if i'm with a client or a date and they want some super picky drink, ok" Just because you buy one of your Johns an expensive drink, doesn't make you a generous guy. You do that solely to close the deal on your trick. It doesn't make you any less selfish then dealers who live on tips. Except when you come to our table and act like an idiot, all we can do is smile, deal, and wait for you to get the #$%^ out. On the other hand, if you run into a customer you dislike, you have the choice to walk to the other end of the Gypsy's bar to avoid him.