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August 24, 2019

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Mandalay building all-suite tower

Filling what the company called a gap in its portfolio of non-gaming attractions, Mandalay Resort Group announced Thursday that it will build a 1,122-room, 41-story all-suite tower connected to the Mandalay Bay Resort & Casino to primarily serve attendees to the company's convention center on the Las Vegas Strip.

The project will cost between $200 and $225 million.

"This project will further enhance the power of our Mandalay Mile as the most integrated resort complex in the world," Mandalay President and Chief Operating Officer Glenn Schaeffer said. "It is yet another asset that will drive our long term performance by further segmenting our room offerings and driving (revenue per available room) gains."

The tower will break ground in September, with an expected debut in October 2003. The average room size of 750-square-feet suites would make them the largest of any all-suite project on the Strip, the company said, edging out The Venetian and The Rio.

The Rio advertises suites from 600 to 1,600 square feet, along with high-roller "mini-mansions" at around 20,000 square feet. The Venetian offers an average suite size of 700 square feet, with high-end suites of 5,500 square feet.

The new competitor to The Rio, the first all-suite hotel in Las Vegas, is not a concern, Harrah's Entertainment Inc. spokesman Gary Thompson said today. Harrah's owns The Rio.

A spa, fitness center, business center, restaurant and lounge also are planned in the new Mandalay tower.

"It's a smart strategic move, with the amount of convention space they are building," said Andrew Zarnett, a gaming analyst with Deutsche Bank. "They will have strong demand for rooms."

Rooms catering to convention-goers are typically larger and have more amenities, he said.

The Mandalay Convention Center opens in January. Mandalay also expects to build a retail mall linking the company's Mandalay and Luxor properties.

Mandalay appears to be using a strategy that has worked well for Sheldon Adelson's Venetian resort further north on the Strip. The Venetian fetches high prices for its large suites by catering to conventioneers in town for meetings at Adelson's adjacent Sands Expo Center and the nearby Las Vegas Convention Center. The Venetian is moving ahead with a $200 million hotel tower expansion of its own.

Mandalay Resort Group -- which owns the flagship Mandalay Bay and the Luxor and Excalibur properties at the southern end of the Strip -- also said Thursday it earned $48.9 million, or 68 cents per share in its first quarter ending April 30, compared to $47.4 million, or 62 cents, for the same period last year.

The number of shares outstanding fell 8 percent.

Operating earnings were 71 cents per share, in line with analysts' estimates. Operating cash flow dipped to $188 million from $195 million a year ago.

The company's revenue per available room on the Las Vegas Strip fell for the quarter compared to a strong showing last year, as room rates continued to lag in the wake of Sept. 11.

Room rates are a key indicator of tourist demand for major gaming companies and are closely watched by investors. Rates have picked up significantly since Sept. 11, though they are still slightly off last year's levels, Zarnett said.

Overall room revenues are outpacing competitors, while revenues per available room -- a factor of rates and occupancy levels -- are looking up this month, Mandalay reported.

While Las Vegas has suffered, other locations were mixed. In Detroit, the company's majority ownership in MotorCity Casino yielded $36.3 million in operating cash flow for the quarter, compared to $26.7 million a year ago. In Elgin, Ill., the 50 percent-owned Grand Victoria generated $32.2 million in operating cash flow versus $33.4 million.

In Tunica, Miss., Mandalay's Gold Strike casino made $7.1 million compared to $6.9 million. Properties in Reno fell from $12.2 million to $9.2 million, and properties in Laughlin rose from $9 million to $10 million for the period.

Analysts expect Mandalay to earn $2.02 per share in 2002, though the company called estimates above $2 a "stretch."

Separately, Mandalay and MGM MIRAGE are jointly negotiating with members of the Culinary Union to fend off a potential strike June 1. Observers say a strike is less likely now given a tentative deal struck between competitor Park Place Entertainment Corp. and the union Thursday. Mandalay and MGM executives are expected to meet with union representatives over the weekend to hammer out a contract.

Major gaming stocks rose in active trading Thursday. Mandalay stock rose 64 points to $33.99. The stock was up again this morning, trading at $34.40.

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