by Liz Benston and Richard N. Velotta
LAS VEGAS -- A parade of executives from major Las Vegas casino companies impressed visitors at an industry conference and trade show Wednesday with bullish financial outlooks for the remainder of the year and early next year.
With the anniversary of the Sept. 11 terrorist attacks behind them, company chiefs said their hotels and casinos are back from a devastating decline in tourism. They also indicated that they are prepared to meet the specter of higher casino taxes and have the financial strength to continue with expansion projects and to pursue growth opportunities.
New federal regulations on financial disclosures prevented companies from making specific forecasts. Still, executives said they expect to do well in local gambling markets outside Las Vegas that weren't affected by the tourism decline. Locally, a lack of new casino projects, demand for convention and meeting space and a growing market of upscale customers will drive earnings for years to come, they said.
"We think Las Vegas will show tremendous growth over the next decade," Jim Murren, chief financial officer of MGM MIRAGE, told a crowd at the Global Gaming Expo's Gaming Investment Forum Wednesday.
Companies said they expect to pay higher taxes on casino revenues in Nevada next year, but only as part of a broader-based business tax that won't just effect the gaming industry.
"We have taxation with representation here in Nevada," Glenn Schaeffer, chief financial officer of Mandalay Resort Group, said at a separate luncheon Wednesday.
Companies appeared more divided on the issue of Internet gambling, with some saying they will watch from the sidelines as other companies, such as MGM MIRAGE, experiment in regulated jurisdictions abroad.
"We don't build billion dollar casinos so people can play blackjack in their living rooms," said Ellis Landau, chief financial officer of Boyd Gaming Corp.
"I don't know that Internet gambling is the right medium to deliver our product," said Gary Loveman, president and chief operating officer of Harrah's Entertainment Inc.
The following are excerpts from presentations at the forum:
MGM MIRAGE
The company has booked a slew of major entertainment events across its Las Vegas Strip properties through year-end, including the Rolling Stones and a Shadow Creek golf tournament. Entertainment bookings were nearly nonexistent a year ago, Murren said.
"We expect it to come back like it did in fourth quarter 2000. How many companies in the hospitality industry can say that?"
The company isn't competing for big conventions like competitors Venetian and Mandalay Resort Group, which is building a 1.8 million square foot convention center due to open in January. It's flourishing in the smaller conference sector, however, stealing away conference business from other major cities and resort areas, especially in the Southwest, Murren said.
"We turn away millions of dollars ... at Bellagio because of demand for convention business. Our price points are better. It's easier to get here ... and it's more fun."
Mandalay Resort Group
The De La Hoya-Vargas boxing event at the company's Mandalay Bay hotel-casino on the Las Vegas Strip last weekend yielded the most profitable weekend in the company's history and also served as a major turning point this year, boosting hotel revenues after a September slump and softer summer season, Schaeffer said.
The company, which has thousands of rooms on the Strip, is more sensitive to room rates than competitors, Schaeffer said. But it's also best poised to reap the benefit of higher rates, which will be triggered by other projects such as new hotel towers at Bellagio and The Venetian, he said.
"We were the slot machine leader 10 years ago. We are the hotel room leader today ... We won't build another room that we can't rent for more than $200 a night."
Mandalay Bay's upcoming convention center and nearby tower of hotel suites will further move margins upward by displacing lower-level customers, he said.
The convention center will be mostly booked by groups that would have gone to other cities, such as Phoenix and Dallas, he added.
Harrah's Entertainment Inc.
The company expects to improve on its Total Rewards slot player loyalty club by crafting alliances with retailers and adding another tier for customers that don't spend as much.
That is part of a strategy to market the company the way other established consumer products companies sell products, Loveman said.
"Our goal (is) to be the best loyalty marketer in American consumer enterprise," he said. "We're only catching up ... the gaming industry is woefully behind."
The prospects for casino expansions nationwide are good, he said, as regions that experience gambling for the first time experience big revenue boosts that help fill state coffers. Also, customers are now traveling to out-of-the-way places to gamble -- something they can't do at home, he said.
"We have very profitable products to sell and are distributionally challenged."
Station Casinos Inc.
Local Las Vegans are spending somewhat less at Station's neighborhood casinos, mainly driven by a decline in overall consumer confidence, executives said. Still, continued population growth will fuel earnings in the future, they said.
The local market is expected to grow 50 percent by 2010, ballooning into a multi-billion dollar market second only to the Las Vegas Strip, Atlantic City and Chicago, said Chief Financial Officer Glenn Christensen.
Retirees, a significant component of local business, continue to relocate to Las Vegas from cold-weather climates or states like California, which have a higher cost of living, he said.
Boyd Gaming Corp.
Boyd would consider a joint venture with the right partner to build a new Strip property at the site of the Stardust hotel-casino.
Landau said the company is considering options at the site of the 1,500-room north Strip hotel-casino, the only underperforming property among the company's holdings in five states.
Landau said cash flow at the company's hotel-casinos is up 22 percent over last year. That includes a 26 percent increase at Delta Downs, the company's new Louisiana race track, but a 24 percent decrease at the Stardust, the Boyd property that has suffered most from the effects of the Sept. 11 terrorist attacks.
The company will consider its options once development has begun on Steve Wynn's Le Reve project across the Strip and after the opening of Boyd's most anticipated project, The Borgata in Atlantic City.
Landau said the company has great expectations for The Borgata, the first hotel-casino to be opened in Atlantic City in 13 years. Boyd is in a 50-50 partnership with MGM MIRAGE on the $1 billion, 2,010-room resort.
The hotel-casino will open next summer. MGM MIRAGE is planning another resort, a $1.5 billion property, adjacent to The Borgata, Landau said.
Las Vegas Sands Inc.
The company that operates The Venetian hotel-casino on the Strip will consider a public stock offering when it builds a new resort adjacent to The Venetian and two casinos in Macau.
William Weidner, president and chief operating officer of the company, noted construction is under way on 1,000-suite addition atop The Venetian's parking garage and a 150,000-square-foot addition to the resort's convention center.
But most of Weidner's presentation Wednesday was devoted to the company's expansion into Macau, an island resort off the China coast.
Construction will begin within a month on what once was considered a temporary casino. Now, the plan is to make it the first of two.
The first project will be known as the Las Vegas Sands -- a name designed to immediately generate identification with Las Vegas casinos. In about two years, the company will build a second property, a replica of The Venetian with 1,500 rooms.
The Las Vegas Sands will have a 120,000-square-foot "gambling stadium," a casino floor with a 50-foot-high ceiling.
Weidner said the company is enthused about having access to a new, large market of potential gamblers. Guangdong province, in southeastern China, has a population of 90 million people and Weidner said there are 130 million people within a day's drive of Macau and 1 billion people within a two-hour flight.
Mikohn Gaming Corp.
Las Vegas-based Mikohn is restructuring its company with new management and a plan to save $9.6 million annually to improve the company's bottom line.
Chief Executive Officer Russ McMeekin said the company, developer of the Clue, Trivial Pursuit and Yahtzee slot machines, Caribbean Draw Poker and Progressive Blackjack table games and CasinoLink and TableLink player tracking systems, has visited 70 customers worldwide to receive feedback on the company.
McMeekin said the company, which has 2,600 slot machines in the field, hopes to increase that to 2,900 by the end of the year and 4,000 by the end of 2003. The company also expects to increase its table game revenue by 15 percent to $17.1 million next year.
International Game Technology
Concerns about a slowdown in state regulators' approvals for slot machines are unfounded, executives said. Also, the company is heavily promoting brand extensions to popular existing games that take less time to approve. Those mark only a few of the roughly 70 new games the company has unveiled at this week's trade show.
On the expansion front, the company is awaiting decisions in states such as Pennsylvania, Ohio, Maryland and Kentucky, where the expansion of gambling has become an election issue, said Thomas Williams, IGT's chief operating officer. Many states are not only looking to plug budget problems with casino taxes but are working to prevent the flight of gamblers to nearby states, he said.
The company is also poised to reap the benefits of new "cashless" technology that allows slot players to use and redeem paper vouchers instead of coins.
"All new casinos have opened with ticket in, ticket out technology," he said. Casinos using the technology have significantly increased returns as well as reduced the labor costs involved in filling and emptying machines, he added.
Alliance Gaming Corp.
The company's slot making division, Bally Gaming and Systems, introduced more than 100 new kinds of games at the Global Gaming Expo, up from 32 last year and fewer than 10 the year before.
The Bally unit now produces about half of the company's cash flow but is expected to yield the vast majority of its cash flow in just a few years, Alliance President Bob Miodunski said.
Other units, such as the company's slot route operation and its German manufacturing division, will eventually be dwarfed by the market share growth of Bally, he said.
That means Alliance will likely sell its German unit and may also get rid of its slot routes in a few years, he added.
Business at Bally has been helped by the buzz of its new games as well as a speedier replacement cycle for slot machines in casinos, Chief Financial Officer Robert Saxton said. That's driven by the introduction of "cashless" gaming systems by Alliance and competitors, he said.
New markets in the United States and abroad, especially in the United Kingdom, are expected to welcome Las Vegas-style gambling, he added.