$300k dinner bill ‘sign people are ready to spend again,’ MGM chairman says
One anecdote Murren cited was a $300,000 dinner bill during the Consumer Electronics Show in January for a party of more a dozen at the upscale Prime Steakhouse inside Bellagio, which included wine with a price tag upward of $15,000 per bottle.
Murren said he hadn’t seen a check like that since 2007.
“It tells you there is a release valve that has opened,” Murren said following MGM’s fourth quarter and year-end conference call. “That isn’t a trend, but it’s a sign people are ready to spend money again.”
In the fourth quarter that ended Dec. 31, MGM Resorts reported a net loss of $342.3 million, compared with a loss of $56.8 million in the same quarter a year ago. The result translated into a loss per share of 70 cents, compared to a loss of 12 cents per share last year.
Economic troubles that have besieged Macau caused the company’s single Macau casino to suffer a 22.4 percent revenue decline during the quarter. A large income tax provision during the quarter also attributed to MGM’s net loss. Analysts polled by Thomson Reuters expected MGM Resorts to report a profit of 6 cents per share.
Still, Murren was upbeat during the conference call. He teased analysts about the MGM Grand Las Vegas hosting a much-anticipated championship fight between Manny Pacquiao and Floyd Mayweather Jr.
Murren said the resort is holding out May 2 for a boxing match featuring Mayweather.
“We hope it’s a big fight, and it’s the big fight we’re hoping for,” Murren said. If Pacquiao-Mayweather happens, he said the resort “would break every record for (revenue).”
During the quarter, MGM said nongaming spending grew at a faster pace than casino revenue.
Revenue per available room, a nontraditional measuring unit, increased 7 percent at the company’s Strip resorts. Meanwhile, corporate bookings for MGM’s convention and meeting space are also on the rise.
Morgan Stanley gaming analyst Thomas Allen noted cash flow at the company’s “core” properties was up 17 percent year-over-year in the quarter and cash flow from the luxury resorts, such as Bellagio, increased 3 percent.
“MGM Resorts International reported its best fourth quarter (cash flow) since the peak in 2007 and its best full year in six years at its wholly owned domestic resorts,” Murren said.
Total revenue for MGM during the quarter was $2.38 billion, a decline of 5.1 percent. However, the company’s Strip resorts increased revenue 5.5 percent during the quarter.
For all of 2014, MGM Resorts said its total revenue increased 3 percent to $10.1 billion, which included a 5 percent increase from its Las Vegas and regional properties.
Murren said he expects Macau to be challenged operating environment through the first half of this year. The market has suffered eight straight months of declining revenue.
Still, MGM Resorts is on track to open the $2.9 billion MGM Cotai in late 2016. The property will quadruple the number of hotel rooms MGM operates in Macau and increase its casino space three-fold.
But the U.S. market remains MGM’s focus. The company expects to spend $500 million on development projects, including new Strip-front attractions, a 20,000-seat sports arena behind New York-New York Hotel & Casino, and festival grounds on the North Strip. The company is building new resorts in Springfield, Mass., and National Harbor, Md.
“We’re much less susceptible to to market volatility in Macau,” Murren said.
Still the Macau property funds expansion in the U.S. MGM Resorts will receive $61 million from a final 2014 dividend of $120 million from MGM China, based on its 51 percent ownership stake. In addition, the company will receive $204 million or a special dividend of $400 million in March.
MGM Resorts gave a little more information about the settlement last year of the Harmon construction defect lawsuit with Perini Building Company.
MGM said its proceeds from the settlement agreement, combined with prior Harmon-related insurance settlement proceeds, will result in $160 million for CityCenter that will be paid before March.
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