MGM Mirage and Other Casino News

"They are going to get crushed by the competition going forward."

Origanlly posted By BeeeJay 1/5/10 at 8:49 p.m.

I spent some time at the Bellagio with some of my Wall Street friends a while back. It was an eye-opening experience.

Finding a stock analyst with a "feel" for gaming is difficult. The personality attributes are mutually exclusive. What would really impress me is a stock analyst who say, "Oh I don't know, spend 3 months a year as an undercover guest in these properties..."

I can tell you no one who spends much "upper middle class" time in Vegas is buying any MGM-Mirage stock, unless they need some capital losses.

Let me tell you why. The most profitable cross-sections of business in Vegas are the highest end and the lowest end. Harrahs does well by getting mass numbers of low rollers into their grind joints while not spending a dime on upkeep. Throw a couple chicken wings on the buffet and Grandma Diamond is happy to drop her couple hundo every few weeks.

On the other end of the spectrum we have the bigger players who will normally go with a Wynn, Palazzo, Encore....etc. Of course Harrah's throws their Caesars and Paris at those people but only the old timers from the pre-Harrah's acquisition days put up with those crap properties and fossilized cocktail servers and dealers. Then you've got MGM-Mirage with Bellagio which they have done as well as could be expected maintaining a gradual decline as it got further from Wynn's influence and fell into the hands of a company without the expertise to run 5-star resorts. So I can see MGM-Mirage's theory in going all out with CityCenter to regain some of the market share stolen from Bellagio by Wynncore and VenPalazzo. But this is their biggest failure yet!

First, they went wrong on the concept. Its too modern and not luxurious enough. Second, they made every possible mistake imaginable in engineering the property for actual OPERATION. Yes it is visually stunning, but no one wants to sit on cold metal while waiting 2 1/2 hrs to check-in after waiting 45 minutes for Valet service, that after driving around 5 laps trying to figure out how to get in while bouncing their Mercedes off a couple walls. The casino is too dark. The spa is too basic. The restaurants serve uninspired food. But the worst sin of all? They interviewed over 100,000 applicants and THIS IS WHAT THEY HIRED??!?

With the CityCenter disaster in full bloom MGM-Mirage has stuck inself in a no-mans land of competing against both cheaper properties and more luxurious properties. They might have a chance to pull that off in a better economy OR if they had even reasonably decent service. But they don't, so they won't.

Vegas WILL DO JUST FINE, but the MGM-Mirage shoulda stuck with 3-star props like NYNY or MGM Grand which is what they do best. They are on life support now, and they are going to get crushed by the competition going forward.

Chuck Jaffe (MarketWatch - Sunday, January 03, 2010) - Regardless of whether the stock and bond markets can sustain their momentum in 2010, the mutual fund industry and fund investors like the T. Rowe Price Group, appear destined for a year of bad news.

Joseph Fath, portfolio manager for T. Rowe Price who bet big on the success of CityCenter last year by scooping up MGM stock (7% of the company and is its largest outside stakeholder) had said, "This is a consumption nation. As people's balance sheets get better, they will spend more."

In this economy?

Other MGM Mirage Posts

MGM MIRAGE (NYSE: MGM) - Living on a Prayer in 2010 (Despite "Upgrade")
http://tobuds.com/blogs/blog2.php/2010/01/13/mgm-mirage-nyse-mgm-living-on-a-prayer-i

Casinos Won't Recover - What it Means for MGM Mirage
http://tobuds.com/blogs/blog2.php/2010/01/11/casinos-won-t-recover-what-it-means-for

MGM Mirage on Life Support - 2010 Not a Happy New Year
http://tobuds.com/blogs/blog2.php/2010/01/07/mgm-mirage-on-life-support-2010-not-a-ha

MGM Mirage - City Center is Doomed in 2010 to Cannibalism
http://tobuds.com/blogs/blog2.php/2009/12/31/mgm-mirage-city-center-is-doomed-to-cann

James "Jimmy" Murren - CEO MGM Mirage, Has A Magic Dream
http://tobuds.com/blogs/blog2.php/2009/12/29/james-jimmy-murren-ceo-mgm-mirage-has-a

MGM's Kirk Kerkorian's CEO (Jim Murren) - A Con Artist?
http://tobuds.com/blogs/blog2.php/2009/12/21/james-j-murren-chairman-of-the-board-and

MGM's Mister Kerkorian is a Very Wise Man
http://tobuds.com/blogs/blog2.php/2009/12/21/mgm-s-mister-kerkorian-is-a-very-wise-ma

Also see > CityCenter, Infinity World Development, MGM Mirage, Tracinda, Kerkorian

http://m.lasvegassun.com/news/2010/jan/04/eastern-giant-has-faith-mgm-mirage/

Deutsche Bank analyst Andrew Zarnett estimates Las Vegas Strip's room supply to increase by approximately 15 percent (10,000 new rooms) over the next 12 months in 2010, which started with the opening of CityCenter (5,895 rooms) this month.

"Based on our analysis, we expect same-store Las Vegas revenues to decline by 10 percent and EBITDA to decline by approximately 20 percent as new capacity cannibalizes existing Strip operators."

EBITDA, a profitability measure, means earnings before interest, taxes, depreciation and amortization.

"Despite a bump in visitation to Las Vegas, gaming win fell 10.2 percent in October vs. October 2008 as statewide win of $800.3 million slumped 11.5 percent."

MGM Last 2 Years

In other words, CityCenter's problems may expand well beyond its own walls should the economy NOT improve.

(MGM shareholders should write to Jim Murren to express their gratitude, and the youngsters he hired should be happy they even have a job.)

MGM in 2009

Other MGM Mirage Posts

MGM MIRAGE (NYSE: MGM) - Living on a Prayer in 2010 (Despite "Upgrade")
http://tobuds.com/blogs/blog2.php/2010/01/13/mgm-mirage-nyse-mgm-living-on-a-prayer-i

Casinos Won't Recover - What it Means for MGM Mirage
http://tobuds.com/blogs/blog2.php/2010/01/11/casinos-won-t-recover-what-it-means-for

MGM Mirage on Life Support - 2010 Not a Happy New Year
http://tobuds.com/blogs/blog2.php/2010/01/07/mgm-mirage-on-life-support-2010-not-a-ha

MGM Mirage - City Center is Doomed in 2010 to Cannibalism
http://tobuds.com/blogs/blog2.php/2009/12/31/mgm-mirage-city-center-is-doomed-to-cann

James "Jimmy" Murren - CEO MGM Mirage, Has A Magic Dream
http://tobuds.com/blogs/blog2.php/2009/12/29/james-jimmy-murren-ceo-mgm-mirage-has-a

MGM's Kirk Kerkorian's CEO (Jim Murren) - A Con Artist?
http://tobuds.com/blogs/blog2.php/2009/12/21/james-j-murren-chairman-of-the-board-and

MGM's Mister Kerkorian is a Very Wise Man
http://tobuds.com/blogs/blog2.php/2009/12/21/mgm-s-mister-kerkorian-is-a-very-wise-ma

Also see > CityCenter, Infinity World Development, MGM Mirage, Tracinda, Kerkorian

Source:
http://www.gambling911.com/business/financial/las-vegas-gambling-disasters-2009-123009.html

...but not for baseball.

As MGM Mirage's CEO Jimmy Murren sat in his self-important, expensive, elegant, and grandiose private office (from where he governs the 20 properties that MGM Mirage manages), he pondered and ponificated...

Jimmy recently bragged to Business Week about how it was HIS idea to bring in six "celebrity architects" to design CityCenter, and that it was Jim Murren's huge blunder "brainchild" to build this Magic Kingdom. (Walt Disney would have been so proud!)

The 67-Acre Albatross of Heavy Debt in the Middle of a Deep Recession

The MGM's CityCenter's sleek and glistening buildings were supposed to entice the fat-cat big-spending "whales" necessary to save MGM Mirage from it's $13 billion of debt.

Evidently, like most MGM properties, the local population was not considered important enough to cater to, and were only necessary for the job pool...to clean the rooms, park the cars, mop the floors, and polish the door knobs. The younger and less experienced (but more hip and cool) among the local population were treated to the much better jobs, such as bartenders and cocktail waitresses. (MGM might have thought that the older people most likely weren't considered important enough to inhale CityCenter's "green" air.)

Jimmy Murren told Business Week how "big-name" architects figured into a city defined by fantasy and spectacle... and magic dreams.

"In 2004, we were looking at how to develop the 67 prime acres we had between the Bellagio and Monte Carlo resorts. We were seeing designs for one theme hotel after another."

Master Jim Murren (who himself once considered a career in architecture) insulted their designs, calling them "a big yawn". (Not near grand enough for the almighty Jimmy Murren, who had envisioned far much more for his personal dream...and by using Kirk Kerkorian and the stockholder's money to achieve this.)

Murren told Business Week that while attending Trinity College in the slummy "troubled and decaying" city of Hartford, Connecticut, he swooned over Rome during a college-sponsored sojourn.

And almost as Michael Jackson might haved explained it, Jim said, "That was a magical time."

Invoking the Heart-breaking Memories of 911?

Mister Murren said he drew inspiration from the design competitions for the World Trade Center. The area devastated on 9/11 was known to Jim Murren because he briefly worked on Wall Street - he had once held the title of director of research and managing director at Deutsche Bank before joining MGM Mirage in 1998. (And while this blogger lived in NYC, he once had cocktails at The Top of the World in 1980. And he too, was greatly inspired!)

Jim Murren also took personal credit for generously adding $40 million in art. "I overlaid a significant public-art program to appeal both to tourists and [wealthy] people who live here," he said.

Sir Murren also demanded "green" design and management techniques. Referring to the large international architecture and consulting firm he hired to deal with all the inflated egos involved: "They all took us to places we couldn't imagine."

Wow! A magical time!

How does Jim Murren hope CityCenter will survive in this lousy Las Vegas economy where unemployment is around 14%? "It's been a really rugged year, but 35 million tourists will still come. CityCenter will act as a catalyst. Visitation has grown 10 to 20 percent after a significant project opens up. International tourists are coming because America is on sale. We have a larger share of the Asian market in our portfolio."

Yes! A very magical time!

Asked about the future for Las Vegas, Murren says, "There's unlikely to be any major new development in the next five years. Everyone needs to lick their wounds, heal, and reduce leverage."

In other words (without the BULL)...cut expenses, hunker down, lay low, tighten the slots, and pray like hell!

Good luck pal!

The Magic Kingdom:

"You can get things done here at a speed that other places can't imagine. Eight years after 9/11, New York hasn't got the 11 million square feet of Ground Zero rebuilding done. Here we proposed 18 million square feet in 2004 and we opened it in 2009."

A very magical time indeed, Jimmy my boy! Now tell us again about how you once played baseball!

Other MGM Mirage Posts

MGM MIrage - Illegal Hiring Practices?
http://tobuds.com/blogs/blog2.php/2010/03/12/mgm-mirage-illegal-hiring-practices

MGM MIRAGE (NYSE: MGM) - Living on a Prayer in 2010 (Despite "Upgrade")
http://tobuds.com/blogs/blog2.php/2010/01/13/mgm-mirage-nyse-mgm-living-on-a-prayer-i

Casinos Won't Recover - What it Means for MGM Mirage
http://tobuds.com/blogs/blog2.php/2010/01/11/casinos-won-t-recover-what-it-means-for

MGM Mirage on Life Support - 2010 Not a Happy New Year
http://tobuds.com/blogs/blog2.php/2010/01/07/mgm-mirage-on-life-support-2010-not-a-ha

MGM Mirage - City Center is Doomed in 2010 to Cannibalism
http://tobuds.com/blogs/blog2.php/2009/12/31/mgm-mirage-city-center-is-doomed-to-cann

James "Jimmy" Murren - CEO MGM Mirage, Has A Magic Dream
http://tobuds.com/blogs/blog2.php/2009/12/29/james-jimmy-murren-ceo-mgm-mirage-has-a

MGM's Kirk Kerkorian's CEO (Jim Murren) - A Con Artist?
http://tobuds.com/blogs/blog2.php/2009/12/21/james-j-murren-chairman-of-the-board-and

MGM's Mister Kerkorian is a Very Wise Man
http://tobuds.com/blogs/blog2.php/2009/12/21/mgm-s-mister-kerkorian-is-a-very-wise-ma

Also see > CityCenter, Infinity World Development, MGM Mirage, Tracinda, Kerkorian

James J. Murren - Chairman of the Board and Chief Executive Officer MGM MIRAGE

Did you read John L. Smith's piece in the Las Vegas Review~Journal about MGM Mirage Chairman and CEO Jim Murren? About how for the last 20 years he allowed his wife, his employer & employees, and the general public to believe he had played for the Philadelphia Phillies' minor league baseball team?

(I lived in Philadelphia for 10 years before moving to Las Vegas in 1989.)

It's all about image...being "hip" and "cool"

If Jim Murren could allow Heather, the mother of his children (and his own children) to believe that lie, I wonder what else he lied about...did he also fake his education like Terry Lanni?

Maybe I should have "embellished" my resume and lied about my age. I'd have been using the same tactics as my potential bosses...and I would now have a very good job - enjoying a great career.

I suppose I never truly understood or learned the lessons of ambition and success...and what one needs to do to achieve their goals in life (to obtain a lovely spouse and a high-paying job like Jim).

My father raised me to believe that if I worked hard, was respectful of others, told the truth, and lived a honorable life...I could achieve life's rewards.

A pity my father passed away almost 3 years ago, and I can no longer debate him and his theories about life.

Source:
http://www.lvrj.com/news/casino-executive-fouls-one-off-boasting-of-baseball-prowess-79750337.html

Jim with wife Heather

1998 - Jim Murren joined MGM MIRAGE as Executive Vice President and Chief Financial Officer.
1999 - Jim was named President and Chief Financial Officer.
2007 - Jim was named President and Chief Operating Officer
2008 - Jim was named Chairman of the Board and Chief Executive Officer

MGM Mirage stock for the last 2 years while Jim was in charge

http://www.google.com/finance?q=MGM

Jim's Bio: (Needs updating!)
http://en.wikipedia.org/wiki/James_Murren

Maybe Kirk should have hired me!

Get to know the casino bosses - who they are and what they do.

Other MGM Mirage Posts

MGM MIRAGE (NYSE: MGM) - Living on a Prayer in 2010 (Despite "Upgrade")
http://tobuds.com/blogs/blog2.php/2010/01/13/mgm-mirage-nyse-mgm-living-on-a-prayer-i

Casinos Won't Recover - What it Means for MGM Mirage
http://tobuds.com/blogs/blog2.php/2010/01/11/casinos-won-t-recover-what-it-means-for

MGM Mirage on Life Support - 2010 Not a Happy New Year
http://tobuds.com/blogs/blog2.php/2010/01/07/mgm-mirage-on-life-support-2010-not-a-ha

MGM Mirage - City Center is Doomed in 2010 to Cannibalism
http://tobuds.com/blogs/blog2.php/2009/12/31/mgm-mirage-city-center-is-doomed-to-cann

James "Jimmy" Murren - CEO MGM Mirage, Has A Magic Dream
http://tobuds.com/blogs/blog2.php/2009/12/29/james-jimmy-murren-ceo-mgm-mirage-has-a

MGM's Kirk Kerkorian's CEO (Jim Murren) - A Con Artist?
http://tobuds.com/blogs/blog2.php/2009/12/21/james-j-murren-chairman-of-the-board-and

MGM's Mister Kerkorian is a Very Wise Man
http://tobuds.com/blogs/blog2.php/2009/12/21/mgm-s-mister-kerkorian-is-a-very-wise-ma

Also see > CityCenter, Infinity World Development, MGM Mirage, Tracinda, Kerkorian

Update June 21, 2010 - Unemployment in Las Vegas is still going UP! It came in at 14.1 percent - surpassing Michigan.

Now Las Vegas, besides having the highest homeless rate and foreclosure rate in the nation, it can now proudly boast of having the highest unemployment rate as well.

Las Vegas depends entirely on discretionary spending, and it will be the LAST to recover in this economy...maybe years from now.

And MGM Mirage/CityCenter has how many billions of dollars in debt?

Source:
http://www.lvrj.com/business/nevada-_x92-s-unemployment-rate-tops-in-nation-96647594.html

The foundation of Kirk Kerkorian, the billionaire businessman and philanthropist who is the largest shareholder of MGM Mirage, once made a $14 million gift to UNLV in honor of Senate Majority Leader Harry Reid (D-Nev), his friend of 40 years. But why?

And why in honor of Harry Reid? Maybe so that the MGM could eventually rid itself of the costly burden of providing healthcare to it's employees through the Culinary Union by instead, opting for the government's "public option". Does anyone still remember Kerkorian's huge efforts to keep out the Union when he first opened his flagship property, the MGM Grand? And was Kirk also trying to "butter-up" his "friend" Harry Reid to fight any future attempts to raise the casino's gaming taxes to help offset delining tax revenues? (Las Vegas casinos pay the lowest gaming tax in this country, maybe the world.) We will never know what goes on behind closed doors unless we're a fly on the wall (or a well-hidden FBI microphone).

Senate Majority Leader Sen. Harry Reid, D-Nev (left) and Kirk Kerkorian (right) attend the Oscar De La Hoya and Floyd Mayweather Jr. boxing match at the MGM Grand Garden Arena in Las Vegas (Rare photo of Harry smiling).

Never under-estimate Kirk Kerkorian...he is a very shrewd business man, and though some of his efforts appear philanthropist on the outside, I believe them to be more self-serving in the longer term. The man plans ahead and tries to anticipate the changing political and financial environment well in advance...using the same strategies that a sly and well-practiced chess player might.

You might also be asking yourself about his friendship to Harry Reid, an extreme liberal tax-and-spend Democrat that is anti-capitalist and anti-business. Why does Kirk keep rolling over for the government and kissing up to radical politicians with left-wing ideologues? After all, Kirk's a businessman, right? Maybe it's because Kirk uses the old mantra, "Keep your friends close, but keep your enemies closer."

Just one of many examples of his exceptional prowess: The smoking restrictions and bans imposed on casinos through (Constitutionally illegal?) State and local government regulations.

Even though recent studies indicate that second-hand smoke is less harmful than previously exaggerated, and that smokers spend much more on gaming than non-smokers, Kerkorian has brilliantly balanced this precarious tight-wire act by attempting to appease both sides of these issues (rather than confront and isolate either group) - - - by installing expensive (yet, unproven) cutting-edge technology filter air systems to minimize second-hand smoke in CityCenter (thereby making it "Obama Green"); but when allowed to by law, increasing the smoker-friendly gaming areas in his casinos to increase revenues. Brilliant!

As an aside: Why do casinos settle lawsuits with dealers who clearly accept the terms and conditions of employment on their job applications (regarding smoke in the casino area), rather than taking them head-on for breaking their contract with the casino? These dealers (and others) deny employment to others that would be more appreciative of their jobs.

But despite this, Mister Kerkorian is a very wise man indeed - you have to admire him. Now, if only he would hire me instead of telling his Human Resource people to only hire "young and attractive people" for frontline positions such as bartenders, dealers, and cocktail servers. Why can't "older people" like himself (meaning me) have the means to make a living as well? (continued below)

Get to know the casino bosses - who they are and what they do.

Also, a lawsuit has commenced in District Court in Nevada on behalf of purchasers of MGM Mirage stock during the period between August 2, 2007 and March 5, 2009 (MGM traded at $75.81 a share on August 3rd 2007 and by March 5th 2009, it was trading at the all-time low of $1.89 a share - currently MGM is billions in debt while trying to open CityCenter).

The complaint alleges that during that period MGM made materially false and misleading statements concerning MGM's financial strength, liquidity and the prospects for the development of MGM's CityCenter. This caused MGM's common stock price to be artificially inflated, allowing MGM insiders to sell close to $90 million worth of MGM stock at higher prices than they would otherwise have obtained. As the true facts about MGM's deteriorating financial condition and the company's inability to fund the CityCenter project leaked into the market, the inflation in the price of MGM stock was removed, causing damages to common stockholders. (Say it ain't so Kirk!)

I didn't mention the share dilution in May 2009, which MGM used to raise additional capital that devalued MGM share price from $13.10 to $7.67 a share. A private offering of $1.5 billion total: Senior secured notes and an underwritten public offering of more than $1 billion of common stock. Kerkorian bought $100 million worth of MGM stock at $7 a share. Today MGM is trading at $8.58 a share.

Mister Kerkorian is a very wise man indeed.

Other MGM Mirage Posts

MGM MIrage - Illegal Hiring Practices?
http://tobuds.com/blogs/blog2.php/2010/03/12/mgm-mirage-illegal-hiring-practices

MGM MIRAGE (NYSE: MGM) - Living on a Prayer in 2010 (Despite "Upgrade")
http://tobuds.com/blogs/blog2.php/2010/01/13/mgm-mirage-nyse-mgm-living-on-a-prayer-i

Casinos Won't Recover - What it Means for MGM Mirage
http://tobuds.com/blogs/blog2.php/2010/01/11/casinos-won-t-recover-what-it-means-for

MGM Mirage on Life Support - 2010 Not a Happy New Year
http://tobuds.com/blogs/blog2.php/2010/01/07/mgm-mirage-on-life-support-2010-not-a-ha

MGM Mirage - City Center is Doomed in 2010 to Cannibalism
http://tobuds.com/blogs/blog2.php/2009/12/31/mgm-mirage-city-center-is-doomed-to-cann

James "Jimmy" Murren - CEO MGM Mirage, Has A Magic Dream
http://tobuds.com/blogs/blog2.php/2009/12/29/james-jimmy-murren-ceo-mgm-mirage-has-a

MGM's Kirk Kerkorian's CEO (Jim Murren) - A Con Artist?
http://tobuds.com/blogs/blog2.php/2009/12/21/james-j-murren-chairman-of-the-board-and

MGM's Mister Kerkorian is a Very Wise Man
http://tobuds.com/blogs/blog2.php/2009/12/21/mgm-s-mister-kerkorian-is-a-very-wise-ma

Also see > CityCenter, Infinity World Development, MGM Mirage, Tracinda, Kerkorian

Smoking Bans in Casinos

http://tobuds.com/blogs/blog2.php/2009/12/21/regarding-smoking-bans-in-casinos