Aria: Nice rooms; anybody there?
First, the good news: A managerial shakeup at MGM Grand Macau yielded a $54 million swing in operating income, turning what had been a modest loss last year into a considerable profit in 1Q10. Also, MGM Mirage continues to pay down debt, aided by $24 million in deposits that would-be condo buyers forfeited. (Easy come, easy go.) MGM Grand Detroit was a tower of strength, only $47,000 off last year’s pace and, on the Strip, Bellagio‘s cash flow continued to lead all MGM properties by a extremely wide margin.
Now the not-so-good news. All Strip properties were down from last year, with Circus Circus‘ cash flow falling to $1.6 million. Some of this– not the problem at the clown house — can be attributed to CityCenter cannibalization … but with miserable 63% occupancy at Aria, that explanation only goes so far. (George Wallace‘s joke about what’s it like to be the only person at Aria is beginning to obtain the ring of truth.) Also, Grand Victoria in Elgin, Ill., looks like a money-loser. That may good news in disguise should Illinois regulators force MGM to sell its 50% share of the riverboat as a consequence of the company’s flirtations with Stanley Ho. Oh, and MGM’s white-on-black typeface is murder to read.
Casino play on the Strip continues to trace a bifurcated course. Baccarat just seems to go up and up (+17% volume) while everything (other tables -4%, slots -1%) remains in a shallow decline. High-end play is propping up the Strip while we wait for Middle America to return.
What’s really scary is they have $13 billion in debt and only $400 million in cash whereas as LVS has around $12 billion in debt and $5 billion in cash. Think MGM will have to have a firesale if its going to survive!
That’s a picture of a Vdara room, though.
That’s a Vdara room pictured.
I think air service cuts and (my anecdotial observation) high rental car rates have contributed to the decline in middle Americans coming to Las Vegas. Is there anything left of the old America West airline after a few years after US Airways gobbled it up? Also, for years it seems to me that marketing for Vegas has been directed at the pool party and nightclub bottle service crowd at the expense of Middle America and let’s face it, Middle America is broke and there are plenty of casinos at home.
It is astounding that MGM Grand Detroit is second only to Bellagio in EBITDA. Detroit is a great property which always performs well regardless of the economy. It attracts suburbanites and Detroiters alike. Since tomorrow is April 15, I remember when MGM opened its interim Detroit casino in the former IRS Service Center in 1999. The new permanent facility, a block away, offers a good combination of gaming and restaurants with excellent parking.
I thought Aria would do better than 63% occupancy but at least there is nowhere to go but up from here (hopefully for MGM Mirage’s sake). Maybe the nightclubs and restaurants are picking up the slack, I doubt the Crystals shopping center is.
Re the Vdara photos, my bad. I had them in an “Aria” file on my drive. D’oh!
As for MGM’s cash-raising prospects, there’s not been even a whiff of a rumor about Borgata (which might be lucky to bring MGM $300 million) and Grand Victoria could be an even tougher sell, given the depressed Illinois market, high tax rate and prospect of new competition. The “Mandalay mile” remains unencumbered, as best I know, but if Jim Murren puts MGM Grand Detroit on the block (again) … well, that’s just crazy.
Of course, the other problem with selling regional properties is that it further centralizes MGM on the Strip at a time when Vegas’ fortunes may well have peaked.
I thought Aria would do better than 63% occupancy but at least there is nowhere to go but up from here (hopefully for MGM Mirage’s sake). Maybe the nightclubs and restaurants are picking up the slack, I doubt the Crystals shopping center is.