MGM Resorts narrows loss in fourth quarter to $139 million

By Steve Green

Published Monday, Feb. 14, 2011 | 6:50 a.m.

Updated Monday, Feb. 14, 2011 | 10:06 a.m.

MGM Resorts International on Monday reported a fourth quarter loss as the oversupply of hotel rooms on the Las Vegas Strip caused a drop in occupancy and its CityCenter joint venture posted a big loss.

MGM Resorts, the biggest operator of Strip hotel rooms and casinos, said it lost $139 million, or 29 cents per share in the quarter, an improvement from the loss of $434 million, or 98 cents per share in the prior-year quarter.

The 2009 quarter included impairment charges of $548 million, or 73 cents per share, related to MGM Resorts' undeveloped land in Atlantic City.

MGM Resorts' share of quarterly losses from CityCenter increased by $37 million in 2010's fourth quarter, partially offset by its share of profits from the MGM Macau joint venture increasing by $49 million.

For the 2010 fourth quarter, the half-owned CityCenter lost $169 million, including a $27 million impairment charge for the Veer tower residential inventory.

MGM Resorts said overall room revenue decreased 5 percent from the prior-year quarter, not including resort fees. Las Vegas Strip occupancy decreased from 86 percent to 84 percent, the average daily rate of $110 was steady from the prior-year quarter and revenue per available room fell 2 percent.

The U.S. results were somewhat offset by strong results in Macau, which reported operating income of $119 million.

Overall, fourth quarter net revenue of $1.5 billion was down 1 percent from the fourth quarter of 2009.

CityCenter's net revenue was $257 million, including $26 million from condominium sales and leases -- $8 million of which was from forfeited deposits.

Net revenue at Aria at CityCenter came in at $198 million. Aria’s occupancy percentage was 80 percent and its average daily rate was $190, resulting in revenue per available room of $152, a 7 percent improvement compared to the third quarter.

Despite the loss, MGM Resorts CEO Jim Murren said the company is positioned to benefit from the economic recovery.

"2010 has been a transformational year for MGM Resorts International from a balance sheet and liquidity perspective. We have built the foundation needed to benefit from an economic recovery and are highly focused on initiatives such as M Life, our new customer loyalty program, to improve our business," Murren said in a statement. "We are encouraged in early 2011 by the level of business activity we are seeing. Our forward booking pace is currently ahead of last year led by a stronger convention mix which we believe will position our company to have a better year than last."

CityCenter in the quarter generated adjusted EBITDA -- earnings before interest, taxes, depreciation and amortization -- of $16.3 million.

Its net loss of $169 million included a $31 million expense for property transactions, noncash accounting expenses for depreciation and amortization of $89.2 million and interest expenses totaling $73.4 million.

During a conference call this morning, Murren said the December opening of the Cosmopolitan of Las Vegas resort by a competitor has boosted business at nearby CityCenter by increasing foot traffic into the complex. CityCenter recently improved signage to draw more traffic off the Strip.

Executives said the company's revenue per available room, or REVPAR, is expected to rise 10 percent in the first quarter compared with a year ago and be up in the double digits for 2011. They attributed part of the increase to the spread of resort fees, bundled charges that are mandatory for hotel guests and were implemented at several MGM properties starting in 2009.

Murren said he expects higher room revenue and hotel rates this year from increased convention business, a segment that is recovering faster than business from tourists.

The company has booked about 1.6 million room nights to convention-goers, a double-digit increase over the same period a year ago and ahead of expectations, Murren said.

About 700,000 customers have enrolled in the company's revamped loyalty program, M Life. About 150,000 of those customers returned to the company's casinos to receive a new M Life card after a year of not using the previous loyalty card, Murren said. Gaming revenue at the company's Detroit and Biloxi, Miss. Resorts has improved as a result of people using the new M Life card, a trend the company expects will boost results in Las Vegas as the company allows gamblers from its regional casinos to spend rewards at its Strip properties.

"We're playing more offense now than we were able to play in 2008 and '09 and most of last year," Murren said.

MGM Resorts' results on the Las Vegas Strip seemed to confirm what Wynn Resorts CEO Steve Wynn last week called lackluster business conditions in Las Vegas.

For Wynn Las Vegas and Encore, hotel room occupancy during the fourth quarter was 81.8 percent, up just slightly from 81 percent during the fourth quarter of 2009.

For the Venetian and the Palazzo, Las Vegas Sands Corp. reported occupancy during the fourth quarter of 80.7 percent and 79.3 percent, respectively.

All of these occupancy percentages remain down substantially from the pre-recession days of 2007, when they ran at better than 90 percent citywide.

Sun reporter Liz Benston contributed to this report.