LAS VEGAS—MGM Resorts International’s wide-ranging portfolio refresh continued undeterred during the second quarter, buoyed by record earnings before taxes, interest, depreciation and amortization at both CityCenter and Macau.
The Las Vegas-based casino and hotel owner/operator spent $102 million in capital expenditures during the April-to-June period, including $18 million at MGM China. Further funds were used to continue the extensive rooms remodel at the 5,044-room MGM Grand. More than 3,000 rooms have been completed to date, with completion scheduled for this fall, according to Dan D’Arrigo, CFO and executive VP of the company.
“Our operating teams remained quite focused on maximizing our revenue and keeping cost in check to drive cash flows throughout our portfolio of properties. And at the same time, we continue to reinvest in our properties for the future and constantly introduce new and exciting offerings for the guests,” Jim Murren, chairman and CEO, said during an earnings call with analysts.
Next on the list is a room refresh at the 935-room Bellagio Spa Tower in Las Vegas. Set to begin in August, the project should be completed by the holidays at a cost of $40 million.
MGM expects to spend $350 million in CapEx for the full-year 2012.
The company also will renovate and reflag THEhotel at Mandalay Bay to Morgans Hotel Group’s signature Delano brand. The move, announced Monday, will see the opening of the Delano Las Vegas by late 2013.
Q2 performance
MGM’s wholly owned domestic resorts achieved a 4% EBITDA gain to $345 million during the quarter. MGM China reported record EBITDA of $187 million (+14% over the prior year quarter), while CityCenter reported record EBITDA for resort operations of $71 million (+11%).
CityCenter’s Aria hotel also reported record occupancy (92.7%) and revenue per available room ($187) during the quarter.
Room revenue on the Strip increased 3%, while RevPAR increased 5%. The company’s Las Vegas Strip hotels also reported occupancy of 94%.
The strong results come despite a noticeable, five-week slowdown in consumer spending, Murren said.
“During the quarter, we observed a pocket of softness in the U. S. consumer beginning in mid-May. This was reflected in spend particularly in domestic table games, entertainment and in retail,” he said.
MGM also saw a slowdown in in-the-year, for-the-year convention bookings, which will negatively impact RevPAR in the third quarter, Murren said.
“That has not had any impact on our longer-term bookings,” he said.
The company is seeing a double-digit increase in group rooms on the books for 2013, said COO Corey Sanders. The company has fulfilled more than 70% of its group goal for 2013. “We’re in a really good position. Now it’s just filling holes in tough periods.”
MGM expects mid-single-digit rate increases for group bookings next year, he added.
“Our biggest challenge is having the leisure and (free, independent traveler) rates keep up with the convention rates, which is not a bad challenge to have,” Sanders said. “But everything’s looking positive on the rate increases.”
Cotai update
MGM China Holdings Limited continues to wait for the green light from the Macau government before it can begin building its $2.5-billion project. The complicated, multistep process has been proceeding “at an encouraging pace,” said Grant Bowie, CEO and executive director for MGM China.
While the group awaits approval, they are busy getting a construction team in place and refining their design.
“(As) that process continues, we are making every effort to hit the ground running once the land (acquisition) is complete,” Bowie said. “We are preparing our general building plan for submission shortly, and we have submitted an application for our land prep work and working to have a general contract on board in the fourth quarter.”
