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MGM Resorts reduces quarterly net loss

MGM Resorts International reduced a quarterly net loss from a year ago, thanks in part to increased results from the company’s jointly owned Macau casino, and the company’s top executive sees a strengthening local economy.

But what surprised Wall Street was the company’s figures away from the gaming tables in Las Vegas.

On the Strip, where the company operates 10 resorts including Bellagio, MGM Grand, Mandalay Bay and New York-New York, revenues from hotel rooms jumped 13 percent in the first quarter, which ended March 31.

Room occupancy on the Strip grew 2 percentage points to 87 percent while the average daily room rate increased 13 percent to $130.

The increases led to a 16 percent jump in revenue per available room, a nontraditional accounting method Wall Street uses to determine profitability. MGM Resorts said much of the increase was due to a jump in convention business.

MGM Resorts Chairman and Chief Executive Officer Jim Murren said the quarterly numbers prove that a Las Vegas recovery is under way. Murren said the improved results were companywide.

“We’re seeing this trend continuing into the second quarter,” Murren said in an interview. “I’ve heard from a lot of investors today who have looked at Las Vegas and can see the revenue growth is broad-based across all our hotel brands. There is an underlying demand for Las Vegas across the portfolio in leisure and retail travelers and conventions.”

Murren said convention business could have “double digit increases” in this year and next year.

The company also said its Strip casinos experienced a 5 percent decline in gaming revenues, mainly due to a lower-than-normal table games hold percentage.

KDP Investment Advisors gaming analyst Barbara Cappaert said it was “impressive” that second-tier MGM-operated Strip casinos, such as Luxor, Excalibur, Monte Carlo and New York-New York, were able to raise room rates and fill hotel rooms.

“Occupancy on the Strip is not up to pre-2008 levels but more properties are now generating occupancy of 90 percent or better, which bodes well for room rate increases and (cash flow) improvement over the course of this year and next year,” Cappaert told investors.

Jefferies & Co. gaming analyst David Katz said the results show “some signs of life in Las Vegas.”

Investors reacted positively to the news, sending shares of MGM Resorts up 10.32 percent on the New York Stock Exchange to close at $14.22, up $1.33.

In the first quarter, MGM Resorts said its net loss was $90 million, or 18 cents per share. In the same quarter a year ago, the company lost $97 million, or 22 cents per share.

Company revenues were $1.5 billion, an increase of 3 percent from a year ago.

CityCenter, which the company owns in a 50-50 joint venture with Dubai World, saw its net revenue increase 46 percent to $262 million, compared with $179 million a year ago .

Aria, CityCenter’s centerpiece hotel-casino, saw its net revenue increase 41 percent to $225 million during the quarter.

Hotel occupancy at Aria was 86 percent, with an average daily room rate of $201. The figures helped Aria increase revenue per available room by 13 percent over the fourth quarter and 41 percent from the first quarter of 2010.

The bright spot was the MGM Grand Macau, which the company operates in a 50-50 partnership with Hong Kong businesswoman Pansy Ho. The 600-room hotel-casino reported operating income of $126 million, a 158 percent increase from the first quarter a year ago. MGM Resorts received approximately $31 million in distributions from the joint venture during the quarter.

MGM plans to take 51 percent control of the MGM Grand Macau following an initial public offering on the Hong Kong Stock Exchange this year.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow him on Twitter @howardstutz.

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