LAS VEGAS—MGM Resorts International expect a “robust” return on investment from the approximately US$275 million in capital expenditures the company will invest by year end in seven wholly owned properties, Chairman and CEO Jim Murren said Thursday during a quarterly earnings call.
The figure includes a US$70-million CapEx program at the Bellagio, which comprises renovation of all 2,568 standard guestrooms, and a US$160-million remodel of 4,300 rooms in the MGM Grand.
The Bellagio project, which is under way, has taken quite a few rooms out of service for the quarter, Murren said. At least US$1 million in cash flow has been impacted, not to mention lost revenue, because of the work.
But renovated rooms that have since been reintroduced are garnering average daily rates of US$30 more than the pre-remodel rates they were achieving, he said. If early indications are correct for the MGM Grand remodel, rooms will generate a US$10-US$20 premium in ADR on average.
ADR for MGM’s wholly owned domestic resorts was US$124 during the third quarter, up from US$111 during the same period last year.
Driving higher rates also will be achieved through reshuffling the business mix at the company’s casinos and resorts worldwide, Murren said.
“Right now (the free, independent travel segment) in particular is leading our (revenue-per-available-room) growth and in fact is doing far better than that overall average of RevPAR that I … gave you. Some of our best, more important properties are leading the way. Bellagio for example, is having a tremendous quarter in terms of RevPAR,” he said.
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2012 convention business for MGM is above where it was at this point last year. At the company’s Aria property, for example, 183,000 roomnights are booked for 2012, versus 133,000 last year.
“We’re up almost 40% in terms of 2012,” said Bobby Baldwin, president and CEO of MGM’s CityCenter complex. 2013 business is trending higher as well.
“In both cases the rates are higher,” he said.
Convention business contributed 12.5% of the MGM portfolio’s total roomnight demand during the third quarter. That number is projected to be higher during the fourth quarter, at 14%, Murren said. Year-end convention business is forecast at 14.5% of total business.
MGM is ready with shovel in hand to develop its new property in Cotai, Macau, Murren said.
“We could start doing site work immediately,” he said.
MGM is still waiting for approval from government officials.
“We’ve developed a design on the property that we’re all very proud of,” Murren said of the pending plans. “The resort and casino will have about 1,600 rooms and suites as well as a gaming area that will accommodate about 500 tables and 2,500 slot machines.”