Las Vegas Update: Behind the MGM:Mandalay Merger

Clients never felt a thing. There was no thunderclap or roiling of the earth but when the Nevada Gaming Control Board rubber-stamped the $7.9 billion buyout of Mandalay Resort Group by MGM Mirage in February, there was a real, if invisible, shift in the landscape of the Las Vegas Strip.

The deal created, for the moment, the world's largest casino company with 11 Strip resorts and 75,000 employees. The title wasn’t held long when Harrah's Entertainment Inc. acquired Caesars Entertainment Inc. in a $9.4 billion deal. The Harrah’s merger may be bigger, but it doesn’t have the same impact on Las Vegas. The MGM Mirage/Mandalay Bay merger puts 36,500 hotel rooms and 40 percent of all slot machines on the Strip under one owner.

Back in 2000, MGM Corp., led by billionaire developer Kirk Kirkorian, bought Mirage Corp. from Steve Wynn and company. The new MGM Mirage company owned 12 properties outright and a significant stake in two others including one in the United Kingdom.

The latest transaction resulted in a company that rules 28 properties worldwide.

So what does all this mean to consumers and the travel agents who serve those consumers? Either a lot or not much, depending on your outlook.

“It’s definitely going to impact my business,” said Leo Falkensammer, vice president and CFO of Prestige Travel in Las Vegas. His company books about a million room nights a year in Las Vegas. “Whatever happens at the MGM, they are going to effect those same rules at Mandalay Bay.”

He said he doesn’t think that impact will necessarily be negative. He has always had good relationships with MGM Mirage. He thinks the mergers will be positive for consumers.

With the merger of Boyd Gaming Corp., owner of the Stardust and several downtown and off-Strip properties, and Coast Casinos Inc., which owns the Barbary Coast on the Strip and three off-Strip properties, there will now be three large companies “beating up on each other” and the competition will remain stiff, Falkensammer said.

Company insiders say there is little danger that the near-monopoly will result in a cookie-cutter look on the Strip.

“MGM Mirage as a corporation has always relied on their properties to maintain their individual identities and I think you can expect to see that practice maintained with respect to the newly acquired properties,” said MGM Mirage director of public affairs, Gordon Absher, who until recently held a similar title at Mandalay Bay.

He said agents and clients should not worry that putting a lot of hotel rooms into a few hands will have an impact on pricing.

“Occupancy is always a top concern,” he said. “Different properties are going to maintain their identities and with that their general price levels. We are in the business of selling hotel rooms and we are going to do everything we can to maintain our occupancy levels.”

Absher said it is likely we will see the company investing more money in renovation and expansion of the former Mandalay Bay Corp. properties.

“As part of the transition and as the members of MGM Mirage become more familiar with the new properties, I think you can look for the company to fall into the practice of reinvesting in existing properties,” he said.

He cited recent renovations at the Bellagio and the MGM Grand as examples of the company’s policy of keeping the properties up to date. A new tower opened at the Bellagio in December and all existing rooms were remodeled to bring the entire inventory up to the same standards as the new rooms, Absher said.

The MGM Grand recently remodeled the public areas at the Las Vegas Strip entrance to the hotel, adding restaurants, lounges and remodeling the race and sports book. The “Emerald Tower” that predates the MGM Grand as part of the old Marina hotel once stood in its place, has been completely revamped and is now known as the West Wing.

“MGM Mirage has a tradition of not being afraid to spend money on their existing properties. I think you will see that continue at the new properties,” Absher said.

He also said there will be no name change for the merged companies as there was when MGM took over Mirage Corp. The company name will remain MGM Mirage but the stock symbol has changed.

“When Sony bought out MGM they gave up the MGM stock ticker designation. We used to be MGG. Now we are MGM,” he said.