Numbers from MGM Resorts International today confirmed leisure and business visitors to the Las Vegas Strip are willing to pay more for hotel rooms.
MGM Resorts, in reporting first quarter earnings, said hotel room occupancy at its Las Vegas Strip resorts increased from 85 percent last year to 87 percent and the average daily rate increased 13 percent to $130.
CEO Jim Murren said bookings by higher-spending convention customers accounted for 20 percent of the Las Vegas Strip rooms booked – excluding rooms at CityCenter -- during the quarter, up 5 percentage points from a year earlier and the best performance since the winter of 2007.
At the same time, consumers are spending more on entertainment, retail and food and beverage.
The better hotel numbers confirmed reports earlier for the first quarter from Las Vegas Sands Corp., which said that in Las Vegas the average daily room rate increased 2.4 percent to $212; while Wynn Resorts Ltd. said that in Las Vegas, the average daily rate was up 18.2 percent to $240.
“Our belief that the Las Vegas recovery is under way is supported by our first quarter operating results and our positive early second quarter trends,” Murren said.
MGM Resorts said that companywide, net revenue was $1.5 billion, up 3 percent. That figure reflected a decline of 5 percent in casino revenue as gamblers played lucky at Bellagio and some of the company’s other casinos.
The company lost $90 million, or 18 cents per share, about steady with a loss in the year-ago quarter of $97 million or 22 cents per share.
The company had been expected by analysts to lose 19 cents a share, according to Thomson Reuters I/B/E/S.
Investors cheered the news, pushing MGM Resorts stock up 9 percent in midday trading to $14.09.
MGM Resorts said its share of operating income from MGM Macau increased from $23 million to $62 million.
MGM Resorts’ share of operating losses at CityCenter on the Las Vegas Strip totaled $6 million, an improvement from $125 million a year earlier.
MGM Resorts said CityCenter posted its best quarter since opening in December 2009, with the complex generating net revenue from resort operations of $262 million, up 46 percent.
Aria at CityCenter’s occupancy percentage was 86 percent and its average daily rate was $201, resulting in revenue per available room of $172, up 41 percent from the year-ago quarter.
Crystals, the shopping mall at CityCenter, generated $6 million in adjusted property EBITDA compared to $1 million in the year-ago quarter.
EBITDA is a profitability measure meaning earnings before interest, taxes, depreciation and amortization.
Crystals is 82 percent leased with a Jimmy Choo store preparing to open and the company in negotiations for Dolce & Gabbana to open men’s and women’s stores that would open in January.
After a slow start for CityCenter as it opened in the worst recession in memory, Murren said MGM Resorts is "very happy" with progress at CityCenter "and the continued brand awareness and market share we clearly received in the first quarter."
"We expect more great things to come for that venture," he said.
Murren, during a conference call with analysts, reiterated that the company is seeing the economic turnaround take hold.
"Consumer spending is strengthening and we will take advantage of this through a very strong event calendar we have through the summer and into the second half (of 2011)," he said. "We see evidence consumer spend is increasing. One metric, which had been slow to recover, has been revenue per occupied room excluding hotel and casino. In other words retail, entertainment and other type of revenue. That was up 3 percent in the first quarter."
"The retail customer is healthy and improving," he said.
Rated domestic play – an important segment involving gamblers eligible for comps – increased 4 percent in the quarter, he said.
He also commented on several developments and initiatives:
-- M Life, the revamped customer loyalty program, has resulted in the enrollment of more than 1 million new customers. With better marketing data available to target promotions, the company reduced promotional spending at the lower end yet increased slot machine revenue, he said.
-- M Life’s latest marketing alliances are with car rental giant Avis Budget Group, casino operator Rank Group in the United Kingdom and Delaware casino operator Dover Downs.
-- M Life is expanding to MGM Grand in Macau and to the nongaming property the company is preparing to open in Sanya, China.
-- Hermes and Louis Vuitton are preparing to open stores at Bellagio.
-- A replacement will be announced soon for the closed Rumjungle restaurant and nightclub at Mandalay Bay.
-- New restaurants are being developed at Luxor, Excalibur and the Mirage.
-- Ten thousand tickets have been presold for the Michael Jackson Immortal World Tour, a touring production visiting Mandalay Bay in December. It will also open in 2013 as a permanent show at Mandalay Bay as a joint venture with Cirque du Soleil.
-- The company is making progress on its planned IPO in China and restructuring its relationship with its current partner in the MGM Grand in Macau, Pansy Ho.
"It will result in us controlling one of the finest – and certainly the fastest-growing assets – in our portfolio post-IPO when we own 51 percent of MGM China. It also strengthens our bond with Pansy Ho, which we like, and we’re doing more with her in China and as part of this deal she’s investing a significant amount of her money into MGM Resorts," Murren said, adding MGM Resorts is addressing questions about the proposed IPO presented by Hong Kong securities regulators.