MGM Mirage results have improved from the lows experienced in the three weeks that followed the Sept. 11 terror attacks on the World Trade Center and Pentagon.
But company executives don’t expect to see a return of international high-roller play to the MGM Grand, Bellagio and Mirage until the first quarter of next year.
The reason: Asian gamblers fear traveling to the United States as they read and hear numerous news stories of the latest anthrax find and terrorist alert.
Company executives attempted to spark international high-end play earlier this month with a pair of baccarat and golf tournaments. But the events were cancelled because MGM Mirage bosses decided the expected benefits didn’t warrant the cost.
High-end play generates less than 20 percent of the company’s business.
“The fear factor would be greater the greater the (distance) the person was from our properties,” said MGM Mirage Chairman and Chief Executive Officer Terry Lanni, who recently returned from a casino marketing trip to Asia. “You have the fear that people’s lives are in danger.”
The company’s top executive delivered his comments during a Tuesday morning conference call with investors, analysts and reporters to discuss MGM Mirage’s third-quarter results for the period ended Sept. 30.
The Strip casino giant reported earnings of 19 cents a share before one-time expenses, which was down from 45 cents a share in the third quarter of last year, with the results reflecting the substantial decline in domestic and international travel that followed the attacks.
The company was on pace for a strong quarter in the days leading to the Sept. 11 attacks. But the travel decline took an immediate toll as it “pretty much wiped out all the positive” numbers, said John Redmond, chief executive officer of MGM Mirage subsidiary MGM Grand Resorts.
After one-time charges, the company reported a third-quarter loss of 9 cents a share compared with post-charge earnings of 42 cents a share a year ago.
The company’s net revenue on Sg Online Casino was down 5.3 percent to $993 million and cash flow fell 30 percent to $236.5 million for the quarter as the company’s Las Vegas Boulevard megaresorts experienced an unprecedented low in room occupancy rate.
That figure is typically in the mid- to high-90 percent range for September but fell to 64 percent between Sept. 11 and Sept. 30.
Profits before one-time expenses were $30.1 million compared with $73.2 million a year ago.
In response, MGM Mirage executives implemented “cost-containment strategies,” including a significant reduction in payroll and a refocusing of several marketing programs.
The company laid off 6,400 of its 38,000 Las Vegas workers and recently returned to part-time status about 30 percent of the newly unemployed.
The job cuts led to an after-tax restructuring charge of $12.9 million, or 8 cents a share. The company also took a loss of $30.8 million, or 19 cents a share, for some of its assets.
MGM Mirage President and Chief Financial Officer Jim Murren said the company, which has 19 casinos on three continents, will turn a profit during the current quarter.
“We have confidence that we are going to make money. I don’t know how much,” Murren said, noting that financial analysts’ projections of 5 cents a share for fourth-quarter earnings are “pretty good.”
MGM Mirage shares were down 80 cents on the New York Stock Exchange Tuesday to close at $21.75.
Bear, Stearns & Co. financial analyst Jason Ader maintained Tuesday his “buy” rating on MGM Mirage shares. “We believe management will continue to look at various ways to improve cash flow and believe the company remains very healthy financially,” Ader wrote in a report.
Several of the company’s hotels have sold out during recent weekends, allowing executives to gradually raise the average nightly charge for the company’s 18,000 Las Vegas hotel rooms.
“We look at this as if we’re (opening) a new hotel project,” said Bobby Baldwin, president and chief executive officer of the company’s Mirage Resorts subsidiary.
That means first filling hotel rooms, then ensuring there’s a profitable mix of casino guests to trade show goers to tourists before attempting to raise average nightly room prices.
Meantime, MGM Mirage executives appeared to soften their commitment to a planned casino project for Atlantic City, just days after the New York Legislature paved the way for the opening of six casinos in the Empire State.
In August, MGM Grand Resorts’ Redmond said company officials would release details of a new casino project for the Jersey Shore city by early next year.
On Wednesday, he said the company “hasn’t made any final decisions” on its Atlantic City plans, while noting that he and his colleagues are monitoring the push for legalized gambling in New York as well as in Pennsylvania, Ohio and Massachusetts.