February 22, 2012 / 2:10 PM / 7 years ago

UPDATE 3-MGM Resorts bets on banner 2012 as costs rise

* Vegas recovering, Macau strong -CEO

* First out the gate with online poker -CEO

* Street nervous about costs, shares slip

By Chris Peters

Feb 22 (Reuters) - MGM Resorts International hopes to ride a bounceback in leisure and gambling in 2012, despite posting a wider-than-expected quarterly loss after soaring costs offset a revenue recovery for the operator of Las Vegas Strip icon Bellagio.

Shares of the company, which also operates the luxury MGM Grand and CityCenter complexes on the Strip and casinos in booming Macau, slid 2 percent as Wall Street fretted that a higher-than-anticipated 57-percent increase in fourth-quarter costs may carry through into 2012.

CEO Jim Murren told Reuters on Wednesday that corporate expenses swelled partly because of costly IT outlays designed to support a revamped loyalty club system but that he was confident the Street would not see a repeat of that in 2012.

And he argued that 2012 would be a banner year for not just MGM — but the industry in general — as an improving economic picture encourages consumers to visit Sin City in record numbers.

“It’s shaping up to be a record year for visits,” Murren said in a brief telephone interview. But “we’re not going to get back to 2006, 2007 levels soon.”

Murren, echoing the hopes of many in the industry, was also confident that online poker will finally be legalized on a federal or nationwide level this year, despite the challenges of passing politically sensitive legislation in an election year.

He said dozens of states might also go it alone if federal legislation does not emerge, in which case MGM also stands ready to be first out the gate. Regardless, legal online poker would help encourage some of the estimated $3 billion-plus that now flows abroad to remain at home.

“MGM Resorts hopes to get a solid share of that market,” Murren said.

Revenue per available room — a closely watched metric in the hospitality industry — leapt 13 percent to $111 in the final quarter of 2011. Murren told analysts on a conference call that REVPAR should grow at mid- to high-single-digit percentages in 2012.


In the key battleground of Macau — already the world’s largest gambling market and still growing rapidly — MGM has been spending more in Macau to compete with larger rivals Sands and Wynn Resorts Ltd.

Gambling revenue surged 42 percent to 267.87 billion patacas in 2011, several times faster than on the Strip.

But the company has a smaller footprint than its rivals: Sands was first in. To expand its footprint and safeguard its share of the booming gaming market in the former Portuguese enclave — the only city in China where gambling is allowed — MGM Resorts is poised to begin construction of a multibillion-dollar new resort this year on Macau’s Cotai strip.

MGM China, which owns and operates MGM Macau, rode a 26 percent surge in net revenue to $719 million in the fourth quarter.

This month, rival Las Vegas Sands Corp posted an in-line profit as strong revenue from Asia was partly offset by higher expenses.

For the quarter, MGM posted a net loss of $113.7 million, or 23 cents a share, compared with a net loss of $139.2 million, or 29 cents a share, last year.

Excluding special items, MGM lost 21 cents a share, compared with analysts’ estimates of a loss of 19 cents, according to Thomson Reuters I/B/E/S.

Consolidated net revenue in the fourth quarter rose 55 percent to $2.3 billion beating analyst estimates of $2.22 billion.

Expenses rose 57 percent to $2.2 billion.

Rooms revenue at wholly owned domestic resorts rose 10 percent with a 13 percent increase in revenue per available room at the company’s Las Vegas Strip resorts.

Analysts said the Las Vegas results were solid with the outperformance of certain properties such as the Bellagio boding well for the overall core portfolio.

Shares of the company were trading down 2 percent at $13.91 on the New York Stock Exchange. The stock had nearly doubled in value since touching a year low in October last year.

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