By Kyle Peterson
LOS ANGELES (Reuters) - Casino companies with expensive properties in Las Vegas are considering following some major hotel operators in shedding their real estate to focus solely on operating the properties, industry leaders said.
The so-called "asset-light" model has become increasingly popular among hotel companies, but casino owners are approaching the concept cautiously.
"Maybe for us it wouldn't be as meaningful because we have more high-end properties," Terrence Lanni, chief executive of MGM Mirage Inc. (MGM.N: Quote, Profile, Research, Stock Buzz), said on Tuesday at the 2007 Reuters Hotels and Casinos Summit in Los Angeles.
When a company adopts an asset-light model, it typically sells its property and retains the right to manage it. For Las Vegas casinos, in particular, the model could be lucrative as real estate prices in gambling meccas have skyrocketed in recent years, quintupling in some cases.
"It has increased the efficiency of the hotel industry," said Matthew Jacob, an analyst at Majestic Research, noting that casinos face a different set of risks.
The topic gained prominence last week when Harrah's Entertainment Inc. HET.N said it plans to divide its real-estate assets into separate subsidiaries as part of its acquisition by two private equity firms.
Lanni said an asset-light model makes sense for some casinos. But he said it may be especially risky to split ownership and operation for high-end properties like the Mirage or the MGM Grand because owners and managers may disagree on the investments needed to keep particular operations up to the standards demanded by guests.
The model is popular among companies like Hilton Hotels Corp. HLT.N, which derives less than 40 percent of its income from the hotels it owns, down from 90 percent 10 years ago. The company now owns about 60 hotels, but would like to shed most of them.
"We'd be comfortable owning 10 to 12 hotels," Hilton Chief Operating Office Matthew Hart said at the Reuters Summit on Tuesday. He said the 10-12 properties, however, must be integral in representing the Hilton brand.
© Thomson Reuters 2008. All rights reserved.
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