Saturday, June 28, 2003
Copyright © Las Vegas Review-Journal

Mandalay CEO exudes confidence in outlook

Mandalay Resort Group President and CFO Glenn Schaeffer, seen in 2002, says the company's convention center and its all-suite hotel tower under construction are key to its success. Photo by John Gurzinski / REVIEW-JOURNAL FILE PHOTO.

Mandalay Resort Group shareholders got a jolt of President Glenn Schaeffer's supreme confidence at the Strip giant's annual meeting.

Confidence in the destination resort industry, in the Strip and, most of all, in Mandalay Resort Group and its prized Mandalay Mile of properties: Excalibur, Luxor and Mandalay Bay, was the essence of Schaeffer's Thursday remarks at Mandalay Bay.

"You are sitting here at the most famous hotel in the world," Schaeffer told shareholders. "It's kind of a Monopoly board we're putting together here at the Mandalay Mile."

The company's evolved into a hotel-revenue driven operation that is poised to capitalize on an expected upsurge in room demand once the economy heats up and threats from terror and war cool down, he said.

Mandalay Bay's new convention center and its all-suite hotel tower now under construction and scheduled to open by the end of the year are key to the emerging power of the company's south Strip portfolio, he said.

With demographic numbers promising a continuing stream of baby boomers looking to spend ever-increasing amounts on entertainment, the company's future is promising, he said.

Mandalay pursued jurisdictional growth outside of Las Vegas in the '90s, including lining up casino joint-ventures in Illinois and Detroit. But the company's focus is now on the Strip, specifically the south Strip.

The company's reliance on Las Vegas generated criticism in the wake of the post Sept. 11, 2001, tourism slowdown that affected destination casinos more than their local-market cousins.

"This year about 70 percent of this company's cash profits will derive from its properties on the Las Vegas Strip," Schaeffer said. "(The number) will rise to 80 percent over the next few years."

He said he expects Strip room rates to rise.

The Strip room supply isn't bigger than its corresponding demand, he said, noting that room supply is projected to grow at only a 1 1/2 percent rate over the next few years, far below its '90s pace.

"We don't have oversupply on the Strip," Schaeffer said. "The Strip is one of the few places where prices go up every year, absent a 9-11 or a war."

Schaeffer said the company was still not ready to publicly announce plans for its long-awaited "Project Z," a fourth Mandalay Mile megaresort that would take a now-open spot near the southeast corner of Russell Road and the Strip.

Deutsche Banc casino equity analyst Marc Falcone said Friday Mandalay's bet on Las Vegas is a smart one, noting that companies like Harrah's Entertainment that aggressively bought into riverboat gambling are now facing big tax increases in several of those markets.

Schaeffer closed his remarks by telling shareholders that they've invested in a winner.

"We have struck the lead now," he said. "We have been doing it for a long time, we think we're dong it better and we'll continue to use the Mandalay Mile in a dramatic way."