MGM Mirage: What economic downturn?

By Liz Benston

Thursday, Feb. 21, 2008 | 12:31 p.m.

After warning of slower business at its lower-end properties and higher costs at its $8 billion-plus CityCenter, MGM Mirage today reported a big profit on the $2.5 billion sale of its half-interest in CityCenter to Dubai investors, as well as improved room rates, hotel revenue, gaming revenue and food and beverage revenue on the Strip in the fourth quarter of 2007.

So what gives with the economic downturn?

Executives reiterated it will be short-term – at least for MGM Mirage.

Mid-tier properties including Circus Circus, Luxor, Excalibur and Monte Carlo have been hurt because there's evidence that customers are spending less, though higher end properties like Mirage and Bellagio, less affected by the downturn, are going strong, Chief Executive Terry Lanni said.

The company expects slower convention business in the first and second quarters of this year as groups delay or cancel meetings in Las Vegas. But the third and fourth quarters appear to be picking up convention business, Lanni said. Hotel revenue is expected to be lower in the first quarter as well.

The company is offsetting convention cancellations by booking rooms to tourists but at lower rates, Lanni said.

Also, this month's Chinese New Year will be weaker than last year because many high-rollers from Asia traveled to Las Vegas for the western New Year but did not return for Chinese New Year, which was several days closer to the western New Year than it was a year ago, executives said. (Next year Chinese New Year will fall in January, even closer to the beginning of the western calendar.)

As the company's shares rose this morning, Lanni said in an interview that he expects the homebuilding industry to revive in 2009 and that any business lost for MGM Mirage won't be dramatic.

"Certain industries in the U.S., like housing, are clearly in a recession

and we are very much affected by that, at the mid-level of our business," he said. "People believe a lot of their net worth is tied up in the worth of their home and that affects what people do."