MGM makes headway on key projects
 
MGM makes headway on key projects
07 AUGUST 2013 8:27 AM

It was a busy quarter for MGM Resorts International officials, who are pursuing new projects in Japan, Korea, Cotai and the U.S.

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LAS VEGAS—With broad-based improvement on the Strip, executives at MGM Resorts International are focusing much of their energy outside of Las Vegas on new developments and opportunities.

“On the development front, our second property in Macau is well under way. A bunch of us were there just last week, and we came away very, very pleased with the progress,” said Jim Murren, MGM’s chairman and CEO, during a second quarter earnings call with analysts.

Excavation on the project is largely complete, and recently disclosed lead architect KPF is working with the company’s in-house architect and design team to finalize exteriors and interiors.

Elsewhere in Asia, MGM officials have been “very active” in Japan.

“There's a growing consensus there that gaming will be expanded, and we plan to participate in that process. I think our operating and development expertise as well as our ability to be good partners are great advantages for us,” Murren said.

And in Korea, the government is considering legislation to permit integrated resorts.

“The view is becoming more favorable (in Korea), so we'll have to see. But that is potentially, again, a very large opportunity,” he said.

Back in the United States, MGM has submitted a proposal for a destination resort at National Harbor in Prince George’s County, Maryland. The project’s location commission is in the midst of its review process and is expected to announce a date for public presentations in late September or early October, Murren said.  

“They've indicated a final decision is still expected by year end. We're extremely excited about this opportunity and feel like we have the winning proposal,” he said.

Company officials scored a big win in July in their pursuit of an $800-million resort casino complex in Springfield, Massachusetts, when voters approved a host community agreement.

“Now the company is finalizing the details of our (request-for-proposal) response, which is due by the end of this year,” Murren said. “We think we can play a major role in the revitalization of that city in Western Massachusetts, and we look forward to delivering a very comprehensive proposal to the state.”

Sizzling Strip
MGM’s wholly owned properties on the Las Vegas Strip saw a boost during the second quarter, thanks in part to newly remodeled rooms reentering the system as well as continued strengthening in conventions business.

“Clearly, we see here in Las Vegas a continuation of the recovery,” Murren said.

Revenue per available room on the Strip increased 2.5% during the quarter.

“We were able to drive our (average daily rate) up over 2% in the quarter and increase our occupancy despite having roughly over 70,000 more room nights available this quarter than last year as the room remodel at the MGM Grand was in full force in the second quarter last year,” said Dan D’Arrigo, CFO, executive VP and treasurer.

MGM spent $65 million in CapEx during the quarter. CapEx spending for the full-year is expected to be $350 million, which includes significant renovations at the Monte Carlo and New York-New York.

The company’s second-quarter convention mix increased slightly. Officials are seeing moderate growth in bookings for the third quarter.

“Based on that, along with some solid retail booking trends we're seeing, we expect RevPAR in the third quarter to be up 3%,” D’Arrigo said.

Asked how the company has realized growth in the group and convention business at a time when other U.S. hotel companies are reporting sluggishness, D’Arrigo said Las Vegas is somewhat of a different animal.

“The Las Vegas market, from a composition standpoint, is much different,” he said. “Coming in to any given year, we have roughly about 80% to 90% of our contracted room nights on the books and sold going into a given year. So we don't rely on as much in the year, for the year.”

Convention roomnights as a percentage of mix is pacing 15% ahead thus far in 2013, he said.

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