MGM’s Jim Murren: ‘Recovery has finally arrived’

Last year, casino operators on the Strip cited a rebound in conventions as evidence of a broad business recovery in Las Vegas. They spoke too soon, as the most significant segment of the Las Vegas hospitality business -- mass market tourism -- was still in the dumps.

That is, until now, says Nevada's biggest employer and casino operator.

After years of pinching pennies, tourists -- not just expense account-wielding business travelers -- are starting to spend more money on dining, entertainment and hotel rooms, MGM Resorts International CEO Jim Murren said in an interview following his company's first quarter conference call today.

"The recovery that has been felt for well over a year in other leisure markets around the U.S. has finally arrived," Murren said. "We're seeing growth on the high end and the economy side, which indicates a sustainable recovery as opposed to ... a somewhat one-dimensional recovery."

Room revenue, a sign of tourism demand, rose 13 percent companywide in the first quarter as occupancy and room rates increased in Las Vegas, the company reported.

MGM-owned hotels that rely less on the convention trade and cater more to middle-class customers, including Monte Carlo, New York-New York and Excalibur, generated higher earnings than expected as a result of consumers spending more, Murren said.

"This bodes well for the future in Las Vegas," especially as the Strip enters the historically slow summer months, he said.

Earnings were highest at convention hotels including Mandalay Bay and Aria, which were able to focus more on attracting the more lucrative convention crowd. Convention-goers tend to spend a more on dining and entertainment than the typical tourist, he said.

The rebound in convention bookings is tied to improvement in the gross domestic product, while increasing consumer confidence is an indicator of improved spending by tourists and conventioneers, he said.

Rising gas prices and a lack of airline capacity haven't hurt business as much as expected, he added. Some airlines have increased flights to Las Vegas somewhat this year and auto traffic has improved despite high gas prices, he said.

To sustain improved earnings, Murren said MGM Resorts has increased its event schedule and is doing a better job packaging rooms with entertainment offers. Sales of the company's traditional summertime room and show packages that include Cirque du Soleil tickets are 20 percent ahead of this time last year, Murren said.

The company is chipping away at its massive debt load of $12.3 billion, a process helped by increased profits from MGM's lucrative Macau resort in China and the upcoming sale of its 50 percent stake in the Borgata resort in Atlantic City, which a bidder has offered to buy for $250 million.

The company's ability to borrow and refinance has improved significantly from the market crash in 2008, Murren said.

"The bank market was frozen in 2009, thawed in 2010 and is getting hungry in 2011," he said.

MGM Resorts has "more than enough" cash to pay interest on its debt and fund operations for at least the next couple of years, Murren said. By then it will have benefited from economic improvement here as well as its growing investment in China, he said.

"We've gone from surviving to starting to get into a mode where we can thrive," he said.