Resort hype churns but can’t quench concerns
The public relations machine for the $9.2 billion CityCenter was churning this week. Aria, the project’s centerpiece, topped off. Restaurants and high-tech hotel room enhancements were unveiled.
Macquarie Capital gaming analyst Joel Simkins, however, was not impressed.
Simkins downgraded shares of CityCenter’s developer, MGM Mirage. He has questions about CityCenter’s ultimate success. MGM Mirage is also affected by fears that Las Vegas’ convention traffic is softening.
"While the Street is still holding out a glimmer of hope that the convention business will stabilize and CityCenter will come together relatively on budget, we think forward expectations are too high," Simkins told investors.
The Street was pleased that MGM Mirage sold half of CityCenter to Dubai World last year, but Simkins still has concerns about sales of the 2,653 residential units and the project’s performance when it opens in late 2009.
"We think CityCenter will create excitement for Las Vegas in the long run," Simkins said. "It may end up cannibalizing the rest of the company’s portfolio."
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Deutsche Bank analyst Bill Lerner said the Lehman Bros. bankruptcy and the AIG bailout had little effect on the gaming industry.
Boyd Gaming Corp. said Lehman played a minor role in its credit facility. AIG provides some insurance to International Game Technology and Ameristar.
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Recent Gulf Coast hurricanes took a toll on Pinnacle Entertainment’s flagship L’Auberge du Lac resort in Lake Charles, La. The hotel-casino was closed twice in two weeks after the storms hit near the community 140 miles east of Houston.
"The effects on the feeder markets were detrimental," Morgan Joseph analyst Justin Sebastiano said. "Many would-be gamblers left their homes in anticipation of the storms.
"As residents filter back to assess the damage, we argue that taking a trip to a casino will not be at the top of their to-do list."
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Here’s a little known Strip fact: There are actually two volcanos at The Mirage.
When Steve Wynn built the resort’s feature in 1988, designers constructed a smaller version to test the attraction’s capabilities.
What started as a $150,000 quarter-scale mock-up grew to a cost of more than $1 million. Like the full-size version, the volcano erupted with fire, steam and water. Wynn never removed the miniature.
The smaller mountain still sits within a garden near The Mirage’s walk-in entrance.
MGM Mirage is spending $25 million to turn the 20-year-old Mirage volcano into a choreographed fire-and-water-spewing spectacle set to a soundtrack.
Howard Stutz’s Inside Gaming column appears Sundays. E-mail him at hstutz@reviewjournal.com or call 702-477-3871.