One on One with Terry Lanni, CEO of MGM Mirage
Tuesday, September 23, 2008
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SUSIE GHARIB: Well, the weak economy and the financial crisis are hurting Las Vegas and the casino industry. Joining us now, Terry Lanni, CEO of MGM Mirage, the nation's second-largest casino company. Mr. Lanni, welcome back to NIGHTLY BUSINESS REPORT.
J. TERRENCE LANNI, CHMN. & CEO, MGM MIRAGE: Good evening. It's great to be here.
GHARIB: As you well know, consumers are struggling with high food prices, high gas prices, job losses, how is all of this impacting your business and MGM's earnings?
LANNI: Well, indeed, the impact of the economy is affecting our business. It's not nearly as staggering as some people think. In fact, it was interesting, we had bankers out from the People's Republic of China last week, and they were amazed how busy all of our casinos were. They basically thought from the news that they got that it basically a wasteland. But they were rather impressed with that. So it's down but not dramatically.
GHARIB: We're also hearing that many of the major airlines, because of high jet fuel prices, are cutting back flights to Las Vegas. So how are you deal being with that? Are you offering discounts to lure people in?
LANNI: No -- well, obviously, we do offer discounts and I think other properties from other companies along the strip are doing the same thing. But when you look at it, the airlines are down about 4.5 percent, which is not a good number, but it's also not as dramatic as maybe the press would have you believe.
GHARIB: Mr. Lanni, there's a lot of debate, you heard our stories about this government bailout plan for the banks and for Wall Street, from your perspective, do you think that this is the best solution to the crisis?
LANNI: Well, maybe what Secretary Paulson should do is come here with some of the government's a money and take a chance at some of our tables, it might be an opportunity here to win, because we do have winners and winners make players. But on a serious note, obviously something has to be done. I think the secretary and Mr. Bernanke have made some good suggestions. I think it's appropriate that the Senate is raising some questions about oversights and some controls. And I think those are necessary. And I think they'll work something out in the next 48 hours.
GHARIB: You have you a lot of contact with different types of Americans, rich ones, middle-income ones, all kinds of Americans. From what you're hearing, what's your sense of how much longer it's going to take to get out of this financial crisis and the weak economy?
LANNI: Well, you know, one of the advantages we have with the dollar as weak as it is, we have a lot of foreign guests now coming into Las Vegas. So where we have offset some of the loss in domestic business with visitors from Europe, from the Far East, and from Canada, with the Canadian dollar at parity now with the U.S. dollar, or thereabouts, it's an opportunity in that particular regard. So we're taking a look at areas where the economy is still doing well and reaching out to customers in that particular area. And all in all and basically as said, we're doing pretty well. We are down probably about 4.5 percent visitors. We're probably down about 8 to 9 percent, maybe up to 11 percent in EBITDA, cash flow from out properties. But again, it's not a disaster. And I think it's going to take some time. I would suspect that it's going to be probably at the very end of '09 and beginning of 2010 before we see any turn at all. But that's pretty much of a guesstimate on my part.
GHARIB: Well, does the weak economy and these issues that you're talking going to change the plans for the opening of your big -- what is it called, CityCenter?
LANNI: CityCenter.
GHARIB: CityCenter project. I mean, will you be -- yes, will you be able to fill customers into the hotels and the condos and go shopping at all the new retail outlet that you're opening up?
LANNI: Well, the interesting thing is, forward-looking bookings actually for our existing hotels are rather strong in 2009. Conventioneers are still coming, they're not spending as much money, but our view is that we will open it on time at the end of 2009, and that it will be a success from day one. And we believe there's sufficient opportunities for us with guests from international areas. There is a great demand for that hotel already and forward bookings for that hotel, the ARIA Hotel, which is part of CityCenter, are very strong.
GHARIB: All right. Is the tight credit situation impacting any of your growth plans? Are you putting projects on hold?
LANNI: Well, we obviously have to take a look at projects. CityCenter is moving ahead, will be completed on time and I believe on the budget. As far as new projects, we have some that are waiting for the capital markets to change, we will not be able to move far ward with those until the capital markets change. And we have let the appropriate people become aware of that.
GHARIB: All right. Thank you so much for coming on our program.
LANNI: It's my pleasure. Thank you for having me.
GHARIB: My guest tonight: Terry Lanni, CEO of MGM Mirage.
