MGM Resorts International Chairman and CEO Jim Murren was in a pretty good mood Thursday, even after his company reported a $31.9 million third-quarter loss.
The reason: The company’s finances are headed in the right direction, with a 22 percent increase in revenue in Macau, a new resort planned there for 2016, improving trends on the Strip and a 2014 convention calendar that already is 88 percent full.
Murren even extended an offer to the Boston Red Sox, winners of the World Series, to come to the Bellagio to lose a little — facial hair, that is.
“It pains me to say this, but congratulations to the Red Sox,” Murren said Thursday. “I think the least we could do is to invite the entire team to Bellagio to spend a couple of days here and meet Johnny the Barber and get rid of the horrendous beards. Dustin Pedroia looked like an evil elf.”
Also on Murren's mind: MGM Resorts' plans in Macau, rebound on the Strip, gaming in Massachusetts and online poker.
Macau was the star again this quarter.
Macau had a great quarter. We picked up some strong business and are off to a great start in the fourth quarter.
We’re right on schedule for MGM Cotai. We’ll be done with the pilings by the end of the year, and we’ll start working on the basement and the tower infrastructure.
The big news there is that we added (French architect) Jacques Garcia to the team. He’s done many beautiful European hotels.
What’s the resort's theme?
It’ll have a Portuguese flair to it, given the heritage of Macau.
How much will it cost?
With land costs, design and building, financing and other costs, it’s about a $3 billion project. It will have 1,600 guest rooms and be called MGM Cotai. We’ll open in early ’16. We can’t wait.
Las Vegas numbers also looked pretty good.
We’ve got 88 percent of the convention space booked for next year. Usually by the end of the year, you’re at about 80 percent, so we’re ahead of where we typically are. We’ll be sold out by early ’14. It’s great for us, and it’s great for Las Vegas.
The first quarter is going to be extremely strong because there are a number of citywide conventions coming back and there’s new business, both corporate and trade, coming into the market. That will bode well for all properties in Las Vegas, not just ours.
MGM also booked several special events, right?
The Pac-12 basketball tournament, which we did for the first time last year, was so successful that it's coming back. That also stimulated interest from other basketball and hockey events.
I think you’re going to see Las Vegas become a larger participant in college sports. It’s great for the fans, the alumni and the coaches, as well as MGM.
There also are a number of concert tours that are going to kick off here and some major acts that we haven’t announced yet. I think we get every rocker over 50, and several of them are going on tour next year.
There are going to be one or two major fights next year. Floyd Mayweather is on quite a roll, and if you want to see him fight, you have to see him at MGM because he hasn’t ever fought anywhere else, and I don’t think he ever will.
The I Heart Music Festival is getting bigger every year. Music festivals in general are going to be more frequent, and we opened that new festival lot across the street from Luxor. We were pleasantly surprised by the amount of volume we saw.
What about construction on the site between Monte Carlo and New York-New York?
We’re developing a park between those two resorts that will be a host for outdoor events, concerts and festivals. It will lead into a plaza anchored by a gorgeous arena we’re developing with AEG. That opens in 2016.
What about your competition, the Linq?
(Caesars Entertainment’s) Linq project is terrific. I think it will be a big success for Caesars and Las Vegas. It all points to more visitors in ’14 than this year. I’m thinking more than 41 million people, which would be a record.
Where will all those tourists stay? Your occupancy rates already top 90 percent.
This is one of the reasons most people root for companies like MGM, Wynn Resorts and Las Vegas Sands. If we’re able to raise room rates and improve room quality, there’s a drafting effect that everyone benefits from.
We have a proven ability to almost fully occupy these buildings. If we are able to increase our mix of convention and retail customers, that means we’ll have fewer rooms for the leisure customers. That’s still an important market for us and always will be, but it means those customers are going to be more likely to shop around and may find lower prices at other properties.
The average customer visits five or six properties on each trip, so it’s not as important to them where they stay. You could argue that mid-priced properties could benefit even more because of the convention spillover effect.
Should developers consider adding capacity?
I think we’re in a good place from the supply-and-demand perspective because we haven’t recovered to pre-recession levels of room rates. In fact, we’re only about halfway there. If we get higher visitation in ’14, that should result in higher margins and cash flow for all the existing properties. I expect that to be the trend over the next few years.
It won’t be until three or four years from now that we see a small increase in supply. As large as Resorts World Las Vegas will be, it’s a small number of rooms relative to the number of rooms we have in the market.
At MGM, we have no plans to add any rooms to the market. We already own 42,000. I don’t think Wynn, Sands or Caesars will be adding rooms, so there’s a fairly limited amount of supply that will come into this market in the next few years — SLS at the old Sahara site and Resorts World at Boyd’s Echelon site. That’s about it.
You’ve got new social media games rolling out next week. What’s planned?
(Former Wynn Resorts executive) Andrew Pascal is our partner, and he’s a technological genius. He, MGM and some other investors formed MyVegas. The Facebook site has been very successful. It has been growing in usage and is a great acquisition tool for us as people redeem virtual values for real bricks-and-mortar value here.
The big excitement for us and for him is the mobile app that is being launched next week. That’s the present and the future of these kinds of games.
What about online gaming?
We have not launched because we have taken the view that poker-only here is not a profitable enterprise. There’s not enough liquidity in our state. Our company has always preferred and have been staunch supporters of a federal effort on poker. But I think our optimism on that has waned dramatically. It looks to us that that’s all but a lost opportunity for the federal government and that we will be where we are today in a state-by-state environment.
New Jersey is leading the charge for full-on games. That leads us to conclude that the best solution for our state is for Nevada to exert its rightful leadership as a regulatory jurisdiction, that it needs to have a full complement of games and be able to compact with other states to increase liquidity pools and increase overall visitation to all of the sites. I think that will happen.
We’re partners with Boyd Gaming and bwin Party Poker in a company that will be exploring all those jurisdictions. Boyd and bwin have been working in New Jersey. Because of our current situation in New Jersey, our interest is in a trust and we have no ability to discuss that strategically with them, but we’ll be a beneficiary when it does launch.
What is the situation in New Jersey?
We believe that we’ll be relicensed in New Jersey. We never had our license revoked there, and we were never found unsuitable. Our license expired because we entered into a settlement there with the Division of Gaming Enforcement.
The state of Maryland unanimously found us suitable. We’ll see how Massachusetts deals with the same set of facts that other states have opined on.
What’s happening in Massachusetts? It seems MGM is taking a different tack than its competitors.
One of the things I learned from the recession is that you can control only what you can control, and you can’t control a lot of things. I’m proud of our effort in Massachusetts. We went in and worked as hard as anybody to get to know the market.
We won over the hearts and minds of the people of Springfield. We won over the city. We won the referendum. We spent a lot of time in Boston and have presented that jurisdiction with a tremendous amount of information. At the end of the day, it’s completely up to them.
I don’t have the desire to have any emotion in this process because I don’t think it’s productive. The last couple of weeks have been surprising. We’ve learned to roll with punches in this industry. I feel very strongly that there’s absolutely no reason why we will not be found suitable in Massachusetts as we have been found suitable everywhere else. I fully expect we’ll have a property in Springfield, and when we do, we’ll have 3,000 employees and help that city recover from the wrenching half-century.