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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.
In other words hotel presidents no longer have the green light from upstairs to go out and outspend each other within the same company on expensive new revenue agents without regard for the fact some of those high end agents have short life spans dependent on a hot economy of (1) convention guests and (2) young people from Socal willing to come party harty every other weekend.
This is because the money is no longer there in company revenues and retained earnings to do so.
The unspoken is the money is also no longer there right now to re-invest in a rational-normal industry way into recreating and marketing existing room inventory and property modifications- to change the guest experience and create new excitement.
Preventative property maintenance is another matter.
Streamlined marketing of all properties to save money and promote company-wide QUANTITY of offerings is a no brainer, not something from the Land of Oz, behind the mythical green curtain.
There's that word derived from INDUSTRY BUNDLING again, QUANTITY, as in a FEW corporate executives are able to effectively run MANY properties, something unheard of a couple of decades ago in an industry where the lobby and floor need to be within earshot.
Hospitality is not delegated at any level of a property doing a good job.
With regards to the article, more cutting edge journalism on the hometown industry from the LVRJ.
It may be time for John Ensign to push another bill for a 100 percent deduction of corporate meals expense, to go along with the hundreds of millions in tax abatements for green construction afforded the gaming industry by the State of Nevada.
Not too many years ago (early 80s to mid 80s) the former MGM Company had regional sales offices in cities like Washington, New York, and Chicago (where the majority of meeting planners are located)in an effort to book conventions and trade shows for their properties. At the same time these offices could also deal with casino customers. Group business has always been important for major casino hotels with significant meeting and banquet spaces. They did not wait for the Convention Authority to do their sales. Good move on the part of MGM, but it is marketing and sales 101...a function of the top executives not having the correct experience and resume for what these jobs really require.
The comment not stated is Harrahs ability to use Hilton National Sales leads, which provides them a resource that MGM does not have. When the Cosmo (oops) Hilton opens up - bye bye leads and we will see things even out. Mandalay did this type of bundling of their products before when they opened their convention center. The problem was that they did not have the talent to actually get the job done. MGM brought in better leadership and look what is happening.
The interesting by stander in all of this convention talk is the Venetian. The talent that has left this facility over the years is spread out inside of Harrahs, Mandalay and other hotels. JCK leaving is a massive blow, this is on the heels of other shows moving on down to Mandalay in the past 12 months from the Venetian. Something is wrong at Sheldon's place and as quiet as they are being now, you have to wonder if anyone is noticing or caring about how they are getting clobbered by Mandalay taking their shows. They talk about cost structures, I would like to hear about how their convention calendar is looking and how they plan on replacing shows of 30,000 - 50,000 attendees when they have their quarterly calls. Mandalay is finally grabbing events away and you have to ask why the Venetian could no longer hang on to them?
LVCVA - where are you on bringing new conventions to town? Is MGM's move just another sign that the LVCVA is not bringing in these large events that can be placed any where other than the LVCC? They too look to be not adding anything new and are just trying to hang on to what they have in their building.