Here are the MGM notes from our meetings in Las Vegas last week
CityCenter slots:
- They are opening with baby steps on SBG. The service window, a portal for the customer at the slot machine, allows them to communicate players club info (points/free play), to educate the guest and advertise the hotel amenities, and to use it to market promotions. Over time, they will figure out how to better yield the floor/change demons/change min wagers
- There are certainly challenges with interoperability. IGT/WMS imbedded the window into the games. BYI/ALL/Konami separate the window from the games. So the iViewDM will facilitate the server based window software on all BYI/ALL/Konami devices. Takeaway ability to change the number of min lines that you can bet on
- Slot market shares: WMS - 22.5%, IGT - 50%, BYI - 20%, ALL - 5%, Konami - 2.5%
- Participation levels are at 8% - all the big players
- 800 slots on the floor now were ordered in May. 1,940 slots currently will be on the floor. Pricing is the first thing they look at. $17k is the average price - BYI - $10k for basic 3 reel standard. Barcrest - $30k bonus top products
- The company uses IGT for accounting and marketing. IGT had invested the most capital into SBG
Environment:
- In 3Q/4Q09, tons of meetings were cancelled so the company thinks that 2010 will be better
- Vegas is stealing a lot of business from other markets because it’s a lot cheaper there
- Excalibur is sold out the last four weekends at $79 per night. All of it is last minute or walk in business
- Harrah’s is sold out through October on weekends because they priced too low
- The mood is better but there is still a way to go
- It is difficult to push up rates, especially for leisure. They would be happy to get a few percentage points of increase in 2010 ADR
- MGM thinks 2010 will be better than 2009 for sure
CityCenter:
- Mandarin will price the highest. But their other rooms will likely price below or at Wynn’s level
- Harmon will be finished out at the end of 2010
- They will open the retail 50% full. The rest of the tenants will be in by April/May 2010. 90% of the space is contracted but the Tier I’s aren't complete. LVHM, Hermes, Tom Ford - anchors
Macau:
- They are doing $20mm of FCF
- A new team recently put in place down there that found a lot of issues - control related (Side betting)
- Property should be doing $250-300mm in EBITDA
Stock price:
- An equity/convert deal now would make sense but Kerkorian may not want to be diluted
- Shocked that their stock is getting bid up
Asset sales:
- Bid/ask has narrowed a lot now
- MGM thinks they can sell the Mirage for 10x
- They wouldn't sell any Vegas assets now
