he Las Vegas-based company said earnings dropped to us$ 118.3 million, compared with us$ 168.2 million in the same quarter a year ago. "They're not what they were last year and they're not what they will be next year, but they are what they are now and we're dealing with it," MGM Mirage CEO Terry Lanni told The Associated Press.
Revenue for the world's second-largest casino company slipped 3 percent, to us$ 1.88 billion from us$ 1.93 billion in the same period in 2007, and fell short of expectations of analysts surveyed by Thomson Financial. They forecast net income of 43 cents per share on revenue of us$ 1.9 billion, with several lowering expectations after Wynn Resorts Ltd. and Las Vegas Sands Corp. reported disappointing first-quarter results and dwindling tourists last week.
Also weighing on profit were resort opening costs and the Monte Carlo's temporary closure after a fire that resulted in 17 minor injuries. The Las Vegas resort did not reopen until mid-February, and the company said one in five rooms and suites remained out of service at the end of the quarter. Many suites won't be available this year, said Bobby Baldwin, MGM Mirage's chief design and construction officer.
MGM Mirage officials said they are pushing ahead with the us$ 8.1 billion complex on the Las Vegas Strip expected to open in November 2009. The CityCenter project - with six high-rise towers and 6,300 rooms - is a partnership with Dubai's government investment fund, Dubai World. "If you don't move ahead with these projects you will end up being in a very difficult position when the economy does turn around," Lanni said.
The us$ 800 million MGM Grand Detroit also opened in October. MGM officials told investors that costs to run casinos spike when they open, as the company adds extra staffing and other things to make sure things start smoothly.
MGM Mirage, whose properties include the Bellagio, The Mirage and Mandalay Bay on the Las Vegas Strip, opened a joint venture, the MGM Grand Macau, in December in the Chinese gambling enclave. With consumer spending down, the company reported single-digit decreases in gambling, room, and food and drink revenue for the quarter ended March 31.
Table games volume decreased 4 percent and slot machine revenue decreased 1 percent, the company said. Room revenues decreased 6 percent, with average room rates down 2 percent at the company's Las Vegas Strip resorts. Occupancy was at 93 percent for the first three months of 2008, compared with 96 percent a year ago.
Analyst Robert LaFleur of Susquehanna Financial Group said he was surprised by weakness in higher-end MGM Mirage casinos. "The majority of the properties underperformed," LaFleur said. "The company has become more dependent on non-gaming amenities, which are not as resistant to recession as casino revenue." Those amenities include hotel rooms, food and beverages.
Robin Farley of UBS Investment Research said Las Vegas tourists are spending less per visit. "Las Vegas trends were weak, but not as weak as we think the market may have been anticipating," Farley said, putting the results in line with the first-quarter loss for Sands and the 20 percent profit drop for Wynn.
Lanni said MGM Mirage might consider splitting its hotel and gambling operations down the road to boost the value of shares. Shareholders in non-gambling hotel companies pay less per dollar of earnings, Lanni said. "If that rose to a sufficient level, if that continued to be the factor we could certainly split the companies.”
Lanni also said MGM planned to increase revenue through marketing and would try to manage costs better. The company laid off more than 400 midlevel employees in April. MGM has said no more cuts were planned unless the economy worsened.
On Monday, the company that owns Tropicana casinos in Atlantic City and Las Vegas filed for Chapter 11 bankruptcy protection. MGM shares rose 6.6 percent, or us$ 3.23, to us$ 51.85 in trading Tuesday.
The company owns and operates 17 properties in Nevada, Mississippi and Michigan, and is a partner in four other properties in Nevada, New Jersey, Illinois and Macau.