Friday, Nov. 6, 2009 | 2 a.m.
Beyond the Sun
In its last earnings report before the company opens its $8.5 billion CityCenter complex next month, MGM Mirage on Thursday projected an improvement in business next year.
It based that prediction on having more rooms booked for convention groups and the expectation that CityCenter will boost Strip tourism.
Part of this optimism is based on a new sales strategy for filling its hotels.
Until recently, each of the company’s empire of iconic resorts along the Strip was operated like a self-contained kingdom, with a sales staff trained to sell the virtues of a single property over its neighbors. That policy continued when MGM Mirage acquired Mandalay Resort Group in 2005, creating the Strip’s largest casino operator, the largest operator of high-end properties and Nevada’s largest private employer. Forcing the company’s properties to compete against one another for business kept employees on their toes and better positioned the company against outsiders — or so the thinking went.
That strategy changed under Jim Murren, who was promoted to CEO a year ago.
The company’s convention sales staffs have combined their efforts and are now pitching the company’s entire array of resort offerings — which includes nine of the Strip’s 24 megaresorts — versus the one hotel they previously had promoted.
This means group sales agents no longer tell potential customers that one resort is superior to other MGM Mirage-owned hotels — or tell potential customers they are free to comparison-shop on their own. Now, the sales team at Luxor might sell the virtues of restaurants and shows at the more-expensive Mandalay Bay next door. Conventiongoers who want to save money are likely offered rooms at various prices, including the more budget-oriented Excalibur, paired with some evening entertainment at, say, the Mirage.
MGM Mirage executives think the failure to cross-sell their properties, a leftover piece of Las Vegas culture from the days when more resorts were controlled by single owners, has put the company at a competitive disadvantage.
Doing it Harrah’s way
By contrast, cross-selling is a cornerstone business strategy for Harrah’s Entertainment, MGM Mirage’s biggest competitor in Las Vegas.
For years Harrah’s has used a consolidated sales team to sell rooms. Customers who call for reservations at one hotel can also hear about deals and goings-on at other Harrah’s-owned properties. All of them are consolidated on the room reservation section of the company’s Web site.
MGM Mirage began a similar transition by promoting Mandalay Bay’s convention sales manager to oversee sales and marketing for all MGM-owned properties in Las Vegas and by hosting companywide sales calls with meeting planners and travel agents across the country.MGM Mirage’s new centralized strategy comes as the company aggressively attempts to win back business from companies that canceled or scaled back trips in the recession, executives say. More recently, the company has won new business from convention cities such as San Francisco, Chicago and New York as well as Las Vegas competitors, they say.
MGM Mirage’s new strategy has swayed the major jewelry industry trade show JCK to shift to Mandalay Bay starting in 2011 after 19 years at the Sands Expo Center.
The ability to house the show’s 35,000 attendees at variously priced hotels with different attractions factored into the move, said Dave Bonaparte, group vice president of JCK Events. The event, after all, will show off everything from digital Casio watches to bejeweled timepieces from Bulgari.
Filling rooms with conventiongoers is not merely a niche business strategy but rather the basis for MGM Mirage’s recovery strategy and those of its competitors.
Although conventiongoers make up less than a third of Las Vegas customers, they have a disproportionate effect on profits, as people on business trips typically spend more for rooms and other amenities.
Conventiongoers pay more
MGM Mirage’s weekend business is running at or near capacity, but convention business has fallen short in the economy, forcing the company to fill weekday rooms with tourists at discounted rates. Though inflated rates helped boost profit during the boom days, discounted rates are having the equally significant effect of depressing earnings.
That trend is changing, executives said Thursday, as the company books more group business each successsive quarter into 2010 and beyond. And the 550,000 room nights the company booked for conventiongoers in the third quarter is similar to booking levels before the market crashed and are at “vastly higher” rates than tourists would pay, Murren said Thursday. His remarks came during a conference call to discuss the company’s poor quarterly results, which were expected, including net losses of $750.4 million. CityCenter will drive an expected 7 percent increase in visitation citywide, to 38 million people in 2010 — roughly the same as four years ago — against a 5 percent increase in room inventory, he said.
The new sales strategy coincides with the company’s boldest sales pitch to date: “We have the most desirable assets, we think we have the best management and we have the most significant development in this city’s history about to open,” he said.