owever, Bellagio reported a 3 % increase in net revenue, with the average room rate having increased 1 % to us$ 247 and occupancy was 96 %, leading to an all-time high in terms of third quarter hotel revenues.
"We continue to manage our resorts to achieve maximum performance across all our businesses, and achieved occupancy of 95% at our Las Vegas Strip resorts for the third quarter," said Terry Lanni, Chairman and CEO of MGM Mirage in a press release. "Our performance was impacted by the global economic environment, a trend that is not unique to our industry, but we continue to generate strong cash flows. Bellagio, our flagship resort, continues to outperform the market as evidenced by its third quarter performance."
But for the company, rooms revenue decreased 10 %. Average room rates were down 9 % at their Las Vegas Strip resorts, with Las Vegas Strip occupancy at 95 % compared to 97 % in the prior year quarter. Casino revenue decreased 8 %, as table games volume decreased of 13 % at their Las Vegas Strip resorts.
The table games hold percentage was within their normal 18 % to 22 % range in the current quarter and slightly higher than in the 2007 quarter. Slots revenue decreased 6 % in the quarter, with their Las Vegas Strip resorts reporting a 13 % decrease, partially offset by double digit increases at Gold Strike Tunica and MGM Grand Detroit.
Their Cirque du Soleil production shows continue to attract large audiences, with revenues consistent with the prior year quarter.
Las Vegas-based MGM Mirage is the world’s second largest gambling company by revenue, with success tied to developing and operating casino resorts. It owns 17 casinos and has 50 % shares in four other resorts. Like other casino companies, it has taken big hits as people traveled and gambled less this year. A decline in air travel and driving traffic to Las Vegas especially affects MGM Mirage, which owns 10 casinos on the Las Vegas Strip, more than any other casino company.
Through August, room rates for the year were down 7.7 % in Las Vegas compared to the first eight months of 2007, and gambling revenue was down 6.7 % on the Strip. At the same time, air traffic has dropped 5.7 % in 2008 compared to the first nine months of 2007, according to airport figures released this week.
The company is also working on a us$ 9.2 billion casino, retail, hotel and residential complex scheduled to open in late 2009. It is said to be the most expensive private commercial development in US history. The project has taken longer to finance than the company originally wanted, but MGM Mirage has insisted that it will conclude on schedule.
The firm reported profits of us$ 113 million in the second quarter this year, nearly 69 % below its income in the same period last year. Analysts polled by Thomson Reuters expect MGM Mirage to earn 31 cents per share on us$ 1.82 billion in revenues, a 50 % decrease from last year.
MGM Mirage’s stock has declined as part of the general industry decline and as investors worry about CityCenter financing and the Las Vegas tourism market, but there may be more to come. According to Deutsche Bank analyst Bill Lerner, guests are continuing to visit casinos but aren’t spending as much. But KDP Investment Advisors analyst Barbara Cappaert said MGM Mirage is one of the stronger companies in the sector because of its management.
Investors will be looking for bottom-line effects from revenue dips in Las Vegas and Macau, the Chinese gambling enclave. China recently tightened restrictions on its residents’ travel to the island, and Chinese nationals make up more than half the patrons of its casinos. Investors will want new details on CityCenter, including condominium sales and financing for the project.
Lerner said risks for MGM Mirage are continued economic weakness, increased competition for high-end customers, high exposure to the Las Vegas Strip and weakness in the Asian economy affecting traffic to Macau.
"MGM is subject to development and execution risk with CityCenter under way, as well as a risk of higher cost of capital to move forward with existing or future projects," Lerner said. MGM Mirage’s stock price has fallen dramatically from its 52-week high of us$ 95.66. The dip sharpened after September 19, when it was at us$ 34.98. Shares fell as low as us$ 8.91 during trading on Tuesday before closing up 28 cents, or 2.8 %, at us$ 10.33.