Conventions and group meetings comprise approximately 30% of all occupied room nights at full service hotels in the United States. MAR generates 40% of its US business from the same segment yet the company maintains no presence in the largest convention market in the world. With its database of 30 million Marriott Rewards members, MAR is clearly missing out on some huge cross-marketing opportunities.
Luckily for MAR, MGM MIRAGE is selling assets. One of the crown jewels in the MGM portfolio is Mandalay Bay which just happens to operate a 1.7 million square foot convention center and 4,300 hotel rooms. Could there be a better time to buy? Maybe, but I would think MAR buying at close to trough EBITDA from a forced seller should result in a pretty attractive price. Given the likely $1 billion+ price tag, I doubt there will be many other bidders.
The near and intermediate term outlook for Las Vegas is pretty dour. We can argue about the timing of the turn, far off in our opinion, but what is fairly certain is the favorable long-term outlook of the convention business. The following chart shows the tremendous growth in annual convention attendance over the last 15 years. Almost 6 million people attended Las Vegas conventions in 2008, a fairly steady climb from the 2.6 million conventioneers in 1994. The affordability and value of conventions and hotel rooms in Las Vegas will not be matched in my opinion. The casino acts as a subsidy leaving Vegas with the highest quality rooms and convention facilities in the country. The value proposition vis-à-vis other convention markets will always be there.
Of course, MAR is not a casino company so they would need an operator. I’m sure ASCA, BYD, PENN, PNK, and maybe Crown would all be interested in a management contract and an equity slice. PNK could be the best fit given its corporate presence in the city and CEO Dan Lee’s Mirage experience. In any case, Las Vegas is definitely a good fit for MAR and the timing looks right.