MGM Mirage Places Odds on Uptick, But Investors Don't Ante Up

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Las Vegas has been mired in declines for three years, but MGM Mirage (MGM) executives say the worst of the downturn may be over. The company's fourth-quarter report shows profits still falling, but positive signs include higher convention bookings, a 44% jump in baccarat action, and higher occupancy for this month's Super Bowl than the big game in 2009. Investors, though, remain skeptical: share prices this afternoon were down nearly 6.88%, to $10.83.The environment remains challenging, but CEO Jim Murren said he saw light at the end of the tunnel -- though how far away is unclear. For the fourth quarter, MGM Mirage reported a diluted loss per share of 98 cents -- down from a loss of $4.15 the previous year. Net revenue decreased 6% to $1.5 billion, compared to a 9% year-over-year decrease in the third quarter. Occupancy for the fourth quarter held steady year-over-year, but average daily room rates decreased to $111 from $135.

With the opening of MGM Mirage's CityCenter (pictured), its "city within a city" boasting a new hotel-casino, Aria, came concerns that the operation will cannibalize MGM's upscale Bellagio next door. Murren countered that worry: "Bellagio is up in every metric since the opening of Aria," he said, adding that 10,000 visitors per day stop at the Bellagio from the people-mover operating between the two properties.

Better News from Macau, and Detroit

Aria has significant convention facilities, and there and at other MGM Mirage casinos along the Strip, convention business is trending positively. Montly convention revenues are expected to be higher than last year, starting in April, Murren said. (2009 was particularly disastrous for conventions in Vegas.) Murren said convention revenues in 2011 will be close to those in 2008, which exceeded last year's dismal numbers, and that room-rates for convention customers outdo those of leisure customers by $60 per night.

MGM Mirage had better news from outside Vegas. MGM Macau "made a lot of money in January," Murren said. "Our volumes are improving, our market share is improving, and we'd like to go public [with Macau] by midyear." Its lesser-known U.S. outposts -- in Detroit and in Biloxi and Tunica, Miss. -- have succeeded in creating synergy for customers, he said, and Vegas properties will follow suit this year with an enhanced players program. "We will relaunch the program to make it more effective," Murren said. "Driving business through our portfolio is something that we have not yet done."

With operating expenses reduced and signs pointing to a financial uptick (in the vaguely distant future), Murren is more optimistic than MGM's investors. "It is still very rough our there, but we see great progression on the revenue side. On the cost side, our company has never been in better shape."
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