Two Way Hard Three | Las Vegas Casino & Design Blog

Today, MGM Mirage pre-announced their first quarter earnings, two weeks early. These are subject to change but let's be honest, they probably won't.

Why would a company pre-announce? Typically they have some information that is out of alignment with what the market knows and wants to give it some time to absorb. Often it's bad news...

Let's look at MGM's announcement - keep in mind that MGM Mirage only owns half of the CityCenter joint venture (the good half?)

MGM has always been very helpful in breaking out their results by property. Unfortunately, it appears that they are reporting their 50% of CityCenter's results as a single blob - no way to know Aria vs. Mandarin vs. Vdara vs. Crystals. Hopefully we'll get more detailed info in the real quarterly filing.

Compared to the year ago quarter, this time they don't have the benefit of the TI sale nor the insurance income from the Monte Carlo fire. Also, they had to write down the residential inventory at CityCenter, all of which hurt them compared to 2009Q1.

What is interesting - the CCJV netted $24 million from poor saps that abandoned their deposits on residential units. Probably can't count on that cash for 2011Q1.

CityCenter is reporting an operating loss of $255MM in the first quarter, though $171MM of that is a charge related to the write down of the residential inventory. Aria's loss is pegged at $66MM, though most of that is depreciation expense.

Did you spend time at Aria and wonder why you didn't hear your neighbor in the room next door? Chances are, you didn't have one:

"Occupancy percentage at Aria was 63% with an average daily rate of $194."

Ouch. That figure, 63%, is pretty darn low. That said though, the $194 isn't too bad - you wonder if they had lowered rates more if they could have boosted the occupancy.

As a comparison, in the first full quarter Wynn Las Vegas was open, it had an ADR of $264 and 93% occupancy... Granted, 2005 was a very different time for Las Vegas so even mention that here is probably grossly unfair.

Their non-CityCenter results aren't great either - Adjusted Property EBITDA for the wholly owned stuff is down almost 20%. Table games hold was down (it was at the high end of the range in 2009), though volume was up compared to 2009. REVPAR took another hit, to under $100 at $94.

Because of the charges and the prior year having the TI sale, they swung from $355MM operating profit to an $11MM loss. MGM Mirage has worked hard to pay down its debt and that's starting to show in the results as interest expense decreases.

So - tough quarter for MGM but they have some cash and borrowing available so they'll probably ride it out just fine. Hopefully in Q2 we'll see Aria firing on a few more cylinders - hard not to think that if this bleeding continues that they'll shed some additional service folks and degrade the experience for the guests.

Complete Release:

In other news, the company announced a private placement:


Read archived comments (20 so far)
April 14, 2010 4:36 PM Posted by atdleft

Wow. Now I know why MGM Mirage's stock was tumbling in after hours trading this afternoon. I know Wall Street was looking for better numbers. Still, this was an improvement from Q4 2009 and the Q1 2009 numbers were pretty inflated from the TI sale. It certainly isn't disastrous, and I'm sure Wall Street will be more forgiving if the revised earnings report in May shows slightly better numbers.

April 14, 2010 5:06 PM Posted by atdleft

Uh oh...

Wall Street isn't happy with MGM Mirage over this, and it looks like LV Sands and Wynn might also be punished in tomorrow's trading. All three stocks closed lower in after hours trading tonight, with MGM falling about 5.6% (though off its lows set just over two hours ago).

April 14, 2010 5:21 PM Posted by Ted Newkirk

I would have expected better numbers just based on all the advertising they have splashed all over Southern California. Although maybe they are just gunning for people to at least visit it on their next trip and hoping that will convince them to stay in the future.

is it too late to theme up CityCenter? Call it Los Angeles Los Angeles or Houston Houston (Since New York New York is taken).

People have been talking about an Elvis themed joint for years. Maybe keep Cirque du Elvis and hire Dolly Parton a la Garth at Wynn. Go for a country music theme. Countryland USA, anyone?

April 14, 2010 5:42 PM Posted by atdleft

Ted N-

"I would have expected better numbers just based on all the advertising they have splashed all over Southern California."

I actually have the opposite take. I don't remember any SoCal advertising when I was visiting the family over Thanksgiving holiday. I think as the initial numbers were coming in, MGM realized they needed to beef up adverts to try to bring in more SoCal visitors.

"is it too late to theme up CityCenter?"

Yes. Themes are gone, and I doubt CityCenter changing what's it's all about will save it. MGM just needs to bring in more visitors and get more people gambling at Aria.

April 14, 2010 6:10 PM Posted by Brian Fey

Wow! Aria is sucking wind! I think someone is gonna owe me a drink! Chuckmonster and I made a little wager, I told him Bellagio would do more business than Aria one year in. Looks like I'm gonna be right, unless something really changes. It would appear just as I guess, that Bellagio is MGM's flagship property, not Aria.

April 14, 2010 6:51 PM Posted by howardpark

I think Las Vegas is a pretty good indicator of the larger American economy -- except for baccarat, and that appears to be the only thing that is booming. City Center would have been a smash in 2007 but that was then. I think Crystals is a big drain on the place. It is the front door or the complex and it needs excitement and to send a message that welcomes people who don't want to spend $4,000 on a purse.

April 14, 2010 6:54 PM Posted by howardpark

It looks like baccarat is the only thing doing well -- that says something about the American economy vs. Asia. C

April 14, 2010 7:13 PM Posted by jsmeeker

The 63% occupancy number. Is that 63% of the 4004 total physical rooms or is it 63% of the rooms that are actually "on-line" and available?

April 14, 2010 7:29 PM Posted by detroit1051

Just amazing. Bellagio is the only property with higher EBITDA than MGM Grand Detroit. The Detroit property is a great place with limited comptetition, but it left MGM Grand Las Vegas, The Mirage and all other Strip properties in the dust? As I said, Amazing!

April 14, 2010 7:40 PM Posted by Hunter

My understanding is that all rooms were online as of mid-January.

I'm sure that it reflects rooms available and not offline.

April 15, 2010 9:28 AM Posted by jay

I still say MGM is gonna go under. Sure it may take a very long time but this City Center was a huge gamble and mistake. It was gonna make or break them and lets face it, its eating away at them and Vegas. Its a huge mess thats very empty. It has ZERO place in Vegas. The modern theme should be kept to citys such as NY or LA, Vegas was special. Instead now its got a big goofy fixture to screw up the sky line. And MGM's balance sheet will Pay the price. MGM and LVS have enjoyed the fact that TRADERS (NOT INVESTORS like Brian Fey) have PUMPED the stocks to levels that they have NO business being. I hope u guys know when to fold and exit out of these positions. Wynn is the only one that will survive, Strong balance sheet and good management.

April 15, 2010 11:01 AM Posted by atdleft


One rough quarter won't do a company in, especially a big company like MGM Mirage. And Q1 wasn't particularly horrifying, as revenue numbers actually beat Wall Street estimates. As I said earlier, they just need to keep working on getting more tourists to spend at Aria. And with Macau & Detroit doing so well (and them getting out of AC before NJ gets any worse), they should be able to weather the rest of Vegas' storm.

April 15, 2010 11:17 AM Posted by Dave

For what it's worth, the 63% occupancy rate just about squares with what I've been hearing anecdotally for months.

The big question is whether the fundamental premise of CityCenter--luxury condo and hotel offerings--is going to pull in enough income in the near future to keep the company above water.

If the answer is no, then the question becomes, can the company reposition CityCenter in a way that makes it a bigger money-maker?

The low rate of closings to date would seem to indicate that demand for Strip residences, even at a reduced rate, is not overwhelming. With the company once hoping to make $2.5 billion from selling residences, there had better be a plan B.

April 15, 2010 11:17 AM Posted by Kagehitokiri

what are they doing to do about circus circus? better off shutting it down...?

April 15, 2010 11:18 AM Posted by socalduck

63% occupancy is disappointing, no matter how you look at it. I finally had my first visit to CC a few weeks ago, and from my experience, I think howardpark makes a good point above about Crystals. Of course, back when CC was designed, I don't think drawing Ma and Pa Kettle off the Strip was a high priority. But I agree that there is a real lack of energy in the place, particularly mid-week. No doubt this will get better over time as the mix of retailers and restaurants changes to better suit current market realities.

While I stayed at MO, I spent a fair amount of time in the casino at Aria, and I think they will do just fine. The entire complex really is stunning, with some of the best meeting and convention space I have ever seen. Once corporations and other large groups start opening their wallets for meetings, I think Aria stands to win a lot business.

April 15, 2010 11:20 AM Posted by parchedearth

Recent articles on Veer and MO's condo sales paint an apocalyptic picture. The residential parts of CC are turning out to be an even greater disaster than I thought. I wonder what a 75% writeoff of the residential units would do to MGM's balance sheet?

Also, MGM Detroit's numbers are suspiciously similar.

April 15, 2010 11:46 AM Posted by LeoNYC

Compare these numbers to Encore numbers (if available). When WYNN released their 2009Q1 report, they added WLV and ELV together. And even doing that, the numbers were pretty low and Encore was a big disappointment and showed a very weak performance. So weak that they still trying to make it work by adding/removing new things to the casino. I'm not criticizing them for doing it, since time has changed and they now have to find ways of making these huge properties a little profitable. I think given the bad economy and the low numbers in the American gambling industry, Aria did an okay job. Times are different nowadays and it will be a loooooong way till Vegas reinvent itself and reaches the numbers of 2006-2007. The folks at MGM have to come up with something really original to make this $8bi project work.

April 15, 2010 11:53 AM Posted by detroit1051

Socalduck's comment made me revisit Aria's site on Meetings. Strong convention/meeting enironment may propel CityCenter to success, but when will that happen? 300,000 sq ft of good looking space in the photos.

April 15, 2010 12:23 PM Posted by ken

I think that $24 million comment about surrendered deposits is highly in doubt. There are simply too many pending class action suits from depositors to be able to state a definitive revenue source. There is going to be some money coming back to depositors in a mediation/arbitration. There is simply too many things wrong with the completed CC to find the buyers in complete default, in my opinion.

April 19, 2010 11:15 AM Posted by Jinx

I do think MGM Detroit is going to take a bit of a hit when and if casinos get up in Cleveland and Toledo. I'm more confident of the Cleveland one getting off the ground, but overall, MGM Detroit is easily the class in the area, and with Mountaineer and Erie PA being about the same drive, my guess is NE Ohio does a fair number of road trips up there. The other places in Detroit definitely don't compare and Windsor it hurt terribly by the passport rules.