美高梅國際酒店集團 (MGM) 2009 Q3 法說會逐字稿

Good afternoon, and welcome to the MGM Mirage third quarter conference call.

Joining the call from the Company today are Jim Murren, Chairman and Chief Executive Officer, Bobby Baldwin, Chief Design and Construction Officer of MGM Mirage and President and CEO of CityCenter, Dan D'Arrigo, Executive Vice President and Chief Financial Officer, Gary Jacobs, President of Corporate Strategy, General Counsel, Bob Selwood, Executive Vice President and Chief Accounting Officer, Corey Sanders, Chief Operating Officer, Core Brand Properties.

Participants are in a listen-only mode.

After the Company's remarks, there will be a question and answer session.

Now, I would like to turn the call over to Mr.

Dan D'Arrigo.

Thank you, Molly, and good morning everyone.

Welcome to MGM Mirage's third quarter earnings conference call.

This call is being broadcast live on the Internet at www.MGMMirage.com and at www.CompanyBoardroom.

com.

A replay of the call will be made available on our Company Web site.

This morning, we furnished our press release on Form 8-K to the SEC, as well as provided additional information and supplemental information was posted to our Web site, which gives significant detail behind the numbers included in the press release.

Before we get started, a quick Safe Harbor disclosure.

Information we present on this call may contain forward-looking statements as defined by the SEC.

Such forward-looking statements are protected by the Safe Harbor amendment to the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from estimates.

Listeners should also refer to our disclosures about risks and uncertainties made in our filings with the SEC.

Now I'd like to turn it over to Mr.

Jim Murren.

Thank you, Dan, and good morning everyone.

I'm going to give you a sense of what the third quarter results mean to us and the Las Vegas market and also our assessment of the market on a going-forward basis and our position in it.

Bobby of course will provide significant information on city center and Dan is going o come back and talk about our outlook and our financial position as well as discuss the significant operating leverage built into our business model.

For some time now, we have operated on the principle that economic segment diversity will eventually lead to long-term strength and stability.

We have also advocated and pursued a best-in-market strategy.

We are now seeing the positive results of those strategic philosophies.

It's really not a stretch to say that in the third quarter, our results were monumental for our Company.

From an operating perspective, we saw net profit excluding our impairment charges improve.

We revised our credit facility to be more like our historical credit facilities.

We have prepared CityCenter for the world.

We have anticipated and executed well on all these fronts, and we have also helped exceed even our own expectations in terms of profits for the quarter.

And we have delivered these results in the face of continuing economic challenges because of our financial discipline and because of our focus on continued efficiency efforts without sacrificing guest satisfaction or loyalty.

In fact, and we track this quit a bit, our guest service scores compiled by Harris, which is an independent third party, are at higher levels than they have been in previous years.

It is our philosophy that improving customer satisfaction at a time when other competing properties are cutting back services is essential to long-term profitability for positive product differential.

As far as our performance, the key takeaway here, that in the third quarter in my mind at least, is that we effectively implemented our marketing strategies -- our consumer marketing strategies at a very high level.

And we significantly outperformed everyone else in the market here, and in fact, everywhere in which we operate.

We have the strategy of diversity of our products and for an increasing diverse marketplace, we think that's quite important.

We added market share in both the international and domestic high-end gaming business, and we added market share in conventions and in hotels.

In fact, although Bellagio didn't hold quite as well as we would have liked, it had its best baccarat quarter ever, in terms of drop.

The MGM Grand had its best month ever in baccarat in terms of drop in September, as an example.

In fact, Company-wide, MGM Mirage had its third best quarter every in international marketing.

I think that bodes well for the remainder of the year.

On the hotel side, we operate under a simple principle.

We earn occupancy.

We don't buy it.

That's exactly what we've accomplished.

When you consider what has happened to our competition, we consider it a significant success that we maintain a 95% occupancy year-over-year in the third quarter even though we've seen our room pricing increase throughout 2009 relative to the overall market.

Some properties did better than others because some market segments did better than others.

That's to be expected, and that's why we think diversity should be rewarded.

For example, Bellagio's RevPAR in the third quarter was down 21% year-over-year, but that was still a lesser decrease than comparable luxury properties in this market which were down more like 30%.

It always pays to have the best in segment in philosophy and the best in market property: On the convention side, we confirmed approximately 550,000 convention room nights in the third quarter, which puts us at a booking level very similar to those before the downturn.

And it demonstrates the success of our facilities and our sales teams.

There's been a lot of rhetoric about the impact of a particular statement emanating from Washington.

Now I'm not a pundit.

I'm too focused on work, but I admit it has been a struggle for the entire industry.

But we have, in fact, returned to booking levels that are better than what we were seeing earlier this year and back to more normal levels.

And we are confident that next year will be even better in this regard.

We continue to garner numerous rewards, many achievements from very discerning groups -- Mobile 5 Stars, at Sky Lofts, and Joel Robuchon, important incentive group -- meeting group planners, very important awards in our restaurants, Michelin Stars, Five Diamonds, and the list goes on and on.

We believe in quality.

We believe in service, and we are delivering that.

And we are being recognized by our peers and by the people that count:

There's a theme in all this.

It's a very simple but essential theme.

In fact, it's the adopting the Girl Scout Motto.

We make new friends, and we keep the old.

Strengthening our relationships with existing customers while developing relationships with new customers every day: These numbers that we reported today is evidence that we are exceeding on both fronts.

It's our view that great companies, regardless of the industry in which they operate, build market share coming out of recessions.

That's what we are doing.

Maybe as important as our absolute performance is the fact that we did so while preparing for the largest resort opening in history.

Not Las Vegas history, but in all history.

And we are less than 45 days away from CityCenter's opening.

At a time when the competition for detail and the competition for eyeballs is at its highest, we believe CityCenter will truly differentiate ourselves as the premiere Las Vegas resort and will be the new, must-see, iconic destination in Las Vegas.

CityCenter is perfectly complementary to our already diverse portfolio.

It literally has the best location on the Las Vegas Strip.

It is and will always remain the most central irreplaceable real estate on the Las Vegas Strip.

It is an investment, not just for next year, but for the future.

And we believe that CityCenter will set the standard for years to come.

Everyone knows the importance of a good neighborhood.

CityCenter will add positive incremental value to its neighbors, Bellagio and Monte Carlo, which have historically been surrounded by vacant or underdeveloped land.

We are obviously excited about the project -- all of its elements.

Our development team, all of our partners, architects, engineers, and design firms, we can see and are expecting to enjoy its long-term potential right from Day One.

We have created an icon, a must-see experience, that will be enjoyed by millions of people and will be a stunning addition to this already quite amazing city.

As far as our view on Las Vegas, a couple points.

Our performance demonstrates we are laser-focused on the market.

Others might be distracted with financial transactions or foreign markets, but we know exactly what's happening here in Las Vegas because we make up a significant portion of the market.

From our point of view, we are encouraged with what we saw in the third quarter.

But we know we are not out of the woods yet.

A recovery in convention and business travel is key to increasing rates.

And based on early bookings, it looks to us like that is achievable in the second half of 2010 and throughout 2011.

We have some important points about this that we want to bring up to you.

One, our lead volume was up dramatically in the third quarter, up 9% versus last quarter, the second quarter or in the first quarter.

That is telling us that corporations are starting to move out of their retrenchment mode and getting back out in front of their customers.

We are also seeing that they are trying to secure their meetings before dates or space fills up again.

We are seeing industries like the pharma industry, insurance, and even auto industries showing signs that they need to get back to Las Vegas.

And in other good news, our conversion rates are also rising as people are serious when they talk to us, and we are booking higher rates of those calls.

Our lead volume is increasing.

In fact, we had the biggest increase in leads in October we've had all year.

And the significant increase has come in ARIA, which I'm sure Bobby will talk about.

That's been a real star for us lately.

Cancellations have slowed down dramatically since the beginning of the year.

We are not quite at our normal levels, but we are getting close.

And I think this is significant.

90% of the cancellations we had were for business occurring this year in 2009.

We are getting very few cancellations for 2010 or beyond.

We've also seen a significant improvement in our attrition both in the third quarter but getting into the fourth quarter this year as well.

We've been working very hard to reverse some of the damage caused by the rhetoric out of Washington.

Our Company has been working with the US Travel Association, with our state legislators, and with other partners, and we are seeing the communication out there in the marketplace and the business starting to come back.

Our booking trends are starting to reflect that.

In the third quarter, definite convention bookings, which I mentioned -- 550,000 room nights, are really nearly right back to where we were before the market crash.

The better news is that we have more books -- more leads than almost ever before in the pipeline for 2010 and beyond.

We are starting to see a lot of last minute searches for 2010.

Companies that had not intended to book for even the early part of 2010 are starting to talk to us.

And we have got some big business that we won from some of our competitors which we think is going to be quite positive from a profitability perspective.

So I think we are well positioned.

I think we are better positioned in not only the convention and leisure segments, but at all price points as we have seen.

We can build market share, and we are doing so not only in that business, but in our casino business, our leisure business, and our FIT.

So if we step back and see what we have done and where we have come, we know some things.

We have the most desirable assets.

We think we have the best management.

We have very loyal customers.

We have the most significant new development in this city's history about to open.

We are, therefore, very confident that we can continue to improve our trends over time.

We remain cautiously optimistic for what lies ahead, not only for the remainder of this year but into 2010 and '11.

And we are very proud of what have we accomplished this quarter, a milestone quarter for MGM Mirage.

So I will turn it over to you, Dan.

Thank you, Jim.

I'll first start off by addressing our overall operating results as outlined in our release.

We generated earnings per share of $0.01 for the third quarter, excluding the $1.72 per share impact of the non-cash impairment charges that we previously disclosed.

Significantly ahead of our estimates and the consensus estimate of $0.07 to $0.08 loss per share for the quarter.

We also generated $415 million of property EBITDA in the quarter, significantly ahead of our forecast and again, ahead of estimates.

You'll note in the release, we presented our operating results on a same store basis excluding Treasure Island.

The same is true in these remarks.

We continue to produce a sequential improvement in our operating margins to 27% in the third quarter compared to 25% in the second quarter of 2009.

The 27% margin is only slightly below last year's third quarter margin of 28%.

And we continue to benefit from a strong focus on cost management.

FTEs are 12% lower in 2009 than 2008, and down 17% when compared to 2007 despite occupancy levels consistent with the prior year and our service standards, second to none.

We look for meaningful margin improvement as room rates improve given the significant operating leverage in our business model.

As we've outlined before, for every $5.00 increase in ADR, we generate over $50 million in annual EBITDA.

For every 100 basis points improvement in occupancy, we generate nearly $40 million of annual EBITDA.

And as our room mix shifts back to our historic levels, we will be able to generate significant gains in our RevPAR going forward.

This quarter, we reported a loss from our unconsolidated affiliates, largely attributable to the $203 million non-cash charge related to our share of the CityCenter residential inventory.

At MGM Grand Macau, we earned operating income of $50 million including depreciation expense of $23 million, resulting in a property EBITDA number of $73 million at the joint venture level.

The Company's 50% share of MGM Grand Macau's operating results was approximately $24 million in the third quarter.

Borgata also led the market, once again producing strong operating results.

In our regional markets we continue to perform well.

Our combined Mississippi properties saw their EBITDA increase slightly over the prior year led by continued strong results at Gold Strike Tunica.

MGM Grand Detroit was down slightly year-over-year and continues to lead that market with an approximate 40% market share.

Moving on to non-operating results, in line with our guidance, our gross interest expense was $257 million in the third quarter, with capitalized interest at $76 million in the third quarter.

As we mentioned previously, we had that two non-cash charges representing two separate charges.

We had a pre-tax non-cash impairment charge of $956 million in the quarter related to the Company's investment in CityCenter.

And a $203 million non-cash charge related to our share of the CityCenter residential inventory.

In the third quarter, we made yet further strides to significantly improve our financial position highlighted by a $475 million unsecured bond deal which we executed in December at a very attractive yield.

As you may recall, we had a bond exchange in the marketplace at the time.

Due to a strong rally in the bond market, we limited the outcome of that exchange and accessed the market with this new issuance at more attractive rates and a longer maturity.

Just this week, we secured another amendment to our senior credit facility.

This is an important milestone for our Company, as day by day, we are seeing a return to normalcy in terms of our credit facility.

We are pleased with this amendment, the support of our bank partners, and the details of that full amendment is filed in an 8-K filing early this morning.

That's an important step, as I mentioned, as we return to normalcy and provides us with capital markets access as we've had always in the past.

As of today, we have availability of $1.6 billion under our credit facility.

This is enough capacity to take us through 2010 as we have approximately just inside $1.1 billion of senior debt maturing between now and the end of 2010.

We are in good shape as far as our bank covenant.

We have a minimum bank EBITDA covenant of approximately $900 million.

And as of the end of the third quarter, we are totaling approximately $1.4 billion against that covenant of $900 million.

Our revenue and market outlook.

Our room rates, we believe, will remain soft in the fourth quarter as we continue to occupy our buildings at higher levels, but we expect a lower year-over-year percentage decline than what we saw in the third quarter.

And we expect to continue to price at a premium to the overall market.

Some details to help with your forecasting and your models going forward here in the fourth quarter.

Our total stock compensation expense we estimate to be approximately $10 million in the fourth quarter.

Corporate expense is estimated to be approximately $30 million to $35 million, including $4 million of stock compensation expense.

Pre-opening expenses will be higher in Q4, primarily resulting from our share of pre-opening expenses with CityCenter's opening on December 16th.

Depreciation is estimated to be $170 million to $180 million in the quarter.

Gross interest expense is estimated to be approximately $250 million to $260 million with capitalized interest of $40 million in the fourth quarter.

Our previous capital expenditure guidance was $200 million for the year.

We are tracking to come in inside of that number, and so that guidance will be slightly lower as we finish up the fourth quarter.

Now I will hand it over to Bobby for an update on City Center.

Thank you, Dan, and good morning everyone.

CityCenter construction continued to be on track as planned, and in fact, the first phases of CityCenter will open up within the next 30 days.

As you already know, the opening will be phased with Vdara opening first on December 1st.

This will be followed by Crystals on December 3rd, and then Vdara on the first.

Vdara's opening the 1st of December.

This will -- let me see, no.

Mandarin will be open on December 4th.

So Vdara on the first.

Crystals on the third, and Mandarin on December fourth.

ARIA, as you know, will open on December 16th.

As it relates to Aria, the CityCenter Human Resources is currently transitioning from the job offer phase and entering into the new hire processing and uniform fitting phase.

Beginning November 30th, mass new hire on-boarding and training will commence.

During this final phase of pre-opening, we expect to deliver approximately 340,000 hours of training spanning 90 different courses.

Of the 12,000 employees at CityCenter, 31,000 were hired from existing MGM properties.

We have been partnering with Forbes Five Star throughout the planning, development, and execution of these training programs, which are designed to prepare ARIA and Vdara employees to provide exceptional customer service and deliver the brand promise.

The executive team consists of industry professionals that bring an average of 18 years of experience from MGM Mirage.

At ARIA, we continue to see a steady pace of room bookings.

We've already contracted 38% more room nights with convention groups over what Bellagio had done two months prior to its opening.

As for the room rate pricing in the transient and leisure market segment, ARIA continued to be priced at a premium to Bellagio.

From opening through August 31, 2010, which is a 258-day period, ARIA is priced greater than or equal to Bellagio 80% of the time in the transient market and 90% of the time in the leisure market.

The advertising in public relations budget allocated for all components of CityCenter totals approximately $20 million during the pre-opening phase.

ARIA's consumer advertising campaign started this September in top travel and luxury lifestyle publications.

We are currently finalizing the ARIA television spot which is scheduled to start running on national cable network in Los Angeles on November the 15th and run in the key feeder markets of Chicago, Dallas, and San Francisco thereafter.

The Vdara Hotel and Spa immediately followed ARIA with a national print campaign in October.

Vdara will open December 1st with a morning press conference and an evening party hosted by the luxury publication, Vanity Fair.

Crystals retail and entertainment district launched its advertising campaign this week in targeted Southern California markets.

Crystals will begin welcoming guests December 3rd, as I mentioned, and will host a party that evening with one of Hollywood's hottest stars, Eva Longoria Parker.

In addition, today, November 5th, we have launched a new CityCenter Web site designed to educate consumers on the unique assets and experiences that we will offer all of our guests.

You can view this Web site by visiting www.CityCenter.com.

To drive consumers to this new and informative site, a national online and print marketing campaign will launch in early November and run throughout the remainder of 2009.

This campaign will kick off on November 9th in USA today and will run in such nationally recognized publications as the Wall Street Journal, Vanity Fair, and The New Yorker.

In addition, three major online events will take place in late November and early December that will allow CityCenter to reach over 30 million online users.

Post-opening, CityCenter will continue its advertising campaign to build upon the brand awareness.

Throughout 2010, we expect to spend $27 million in television, print, and media placement.

At Crystals, we have executed 43 leases to date, including three stores that CityCenter will own and operate.

We are currently on track to open Crystals December 3rd, as I mentioned.

Construction of the core and shell is complete, and 45 tenants have received possession of their space before their own interior fit outwork.

We anticipate 47% of the square footage to open in December and have 82% of the square footage in terms of leases open by July of 2010.

On October 5th, CityCenter announced a 30% price reduction offered at closing to existing buyers of CityCenter's three residential buildings.

In the three weeks since the announcement, City Center Residential has met or held telephonic appointments with over 700 buyers of the 975 buyers that we have.

We've also seen a 50% increase in traffic at our residential sales pavilion and approximately 150% increase in phone calls and visits to our residential Web site.

Six additional units have been sold since we announced the price reduction.

These were new contracts on new units.

The response has been very positive with the majority of the buyers contacted to do date expressing appreciation for the accommodation we've offered in terms of price reduction.

The positive reception and new-found value are further evidenced by a number of buyers actually upgrading their original purchases.

We are planning to begin closing on condo units at Mandarin Oriental starting January of 2010.

Followed by Veer in February, and lastly by Vdara in March.

We continue to have productive dialogue with our residential financial advisors as well, and we will be prepared to discuss closing and financial alternatives with our buyers over the next several weeks.

Finally, as relates to the budget for CityCenter -- with regards to this budget, $7.75 billion has been funded, to date.

And we have approximately $740 million left to fund the completion of CityCenter based on our $8.5 billion budget.

We have about $350 million remaining to be drawn on our CityCenter credit facility and $140 million in remaining sponsor equity to be contributed.

The remaining funds will come from closing proceeds from condo sales.

That completes my report, and I will turn it back to you, Dan.

Thank you, Bobby.

Molly, at this time, we are ready for Q&A.

(Operator Instructions) Your first question comes from the line of Joe Greff with JPMorgan.

Good morning, everyone.

Jim, you were quoted in the press in the last few weeks talking about your expectations for RevPAR growth next year on the Las Vegas Strip for your properties on the Las Vegas Strip.

I believe talking about 5% to 10% growth next year.

To me, you were quoted correctly.

Can you talk specifically what you think the drivers there?

How much of it is mix-related?

How much of the convention booking patterns that you have experienced?

And how much of it is market share gain?

Sure, Joe.

We have been doing quite a bit of work on this, and we have quite a bit of data available to us given the fact we have so many properties here.

And we have been working with the LVCVA and some other partners, and we think that visitation this year, 2009, is going to end up around 35.4 million.

And we think the visitation next year will be closer to 38 million, probably around 38.1 million.

We think it's going to be up around 7%, is our guess.

We project the room capacity next year in 2010 to be around 54.4 million available room nights.

That's adding the capacity that we are adding, and everything we know about the market.

And that's about a 5% increase over 2009.

So we think visitation is going to be up about 7%.

We've been saying 5% to 10%, but we think it's going to be up about 7%.

We think capacity is going to be up about 5%.

We think that our market share will increase next year.

It is increasing right now through our cross-marketing efforts and through database mining through the programs we've already talked about.

Our convention market share pick-up.

We think our market share will improve, and our premium over the city-wide occupancy, which is already there today -- the gap will continue to rise in 2010.

And, of course, we think CityCenter will be additive.

We are projecting that city-wide occupancy next year will be around 80%, city-wide, and we will be north of 90% for 2010.

The reason why we think this is that we've been drilling into the numbers, not only in terms of historically what has happened when there's been significant new openings.

Not only properties that we own, but properties that our competitors have added and looked at recent experiences.

For example, when Mr.

Wynn opened up Wynn -- in 2005 -- I believe that was, Bobby.

That property helped grow the market.

And as it grew the market, Wynn accomplished a fair amount of that market share increase, but MGM Mirage had market share increases that year as well.

We believe that the visitation that we are going to see next year will lead to higher table win and higher slot win.

We think both will be up double digits in the market, in fact.

And that we believe that MGM Mirage is going to get more than its fair share of table win and slot win.

So it's the big question of 2010 -- what's going to happen as the economy recovers?

We believe that what we've accomplished already this year, the programs that we have in place, will increase our market share of our existing portfolio.

And that we believe that CityCenter will help drive visitation for the whole market -- our sales and our competitors alike.

But that we will be able to use CityCenter as a tool to help cross-market our portfolio here, increase our market share.

Okay.

Great.

I have two other quick ones.

One is on Macau.

How much did hold benefit the property level EBITDA performance?

And clearly, it wasn't all of the performance there.

But can you just talk about what you are doing specifically at the property?

I know you you have made property-level changes.

I know you've added a couple of junkets there.

And then, I have a separate question for Bobby on CityCenter.

I know you talked about spending some marketing advertising dollars -- I guess, starting now.

How does what you're spending at CityCenter now -- for you, Bobby.

How does that compare to what was spent at this point in front of the Bellagio opening back in '98?

Thank you.

Okay Joe, I will tackle that one, and maybe Dan can jump in as well.

Our hold was up a little bit in the third quarter.

It was about 3%.

I think the market is around 2.8%.

2.75%, 2.8%.

It's up a little bit.

That helped a little.

Really what's occurred in Macau for us is a variety of internal and external factors.

One is that, Grant Bowie is doing a heck of a good job for us.

He has brought in some talent that has dramatically improved efficiencies.

Working with the existing team, Janice Fitzpatrick has been a great CFO for us there and the other group to increase efficiencies, increase profitability for the revenue that's coming in, number one.

Number two, we've extended our reach toward more junket operators.

They are having a very positive impact.

They like our facilities.

They are quite beautiful, and they are having very productive rooms within the MGM Grand and that has led to a significant increase in gaming revenue and market share.

Number three, we've done a better job on marketing ourselves.

MGM Mirage International is the largest marketing network in the gaming industry, and we frankly, did not do a good job of -- as good as we should have.

And we are doing better every day of getting business from our branch network to our property.

And that's been a challenge early on, and it's improving right now.

So those are some of the internal things.

Externally, we've been operating in a construction zone.

And that has had a very detrimental impact on egress into the property.

All of those construction projects are coming to a close or have finished.

The Arc de Triomphe is open.

Encore is nearing completion.

One Central is nearing completion which will be vital to the MGM Grand as it will improve circulation throughout the property and increase visitation and traffic and resident population to MGM Grand.

And we are finally going to get our right turn lane which we've been talking about forever, but we are actually going to be able to conveniently drive into the front door of MGM which we have never been able to do.

So I think that some of the external factors have helped.

I think we have made some substantial changes internally, and I think the results we saw in the third quarter are an indicator of what we can accomplish on a going-forward basis.

Bobby?

Joe, as it relates to the advertising, we have $20 million in total in the front-end before we open and $27 million in 2010 in total.

I would say that compared to Bellagio or even Mirage on a present value basis, the $20 million upfront is probably about standard.

The $27 million in the first operating year is a little heavy.

Usually advertising runs 1% to 2% of revenues, and we are forecasted to have about $1.2 billion in revenues.

We thought it was in the Company's best interest, MGM Mirage and its partners, Dubai World to really drive the point home in 2010.

Originally, we were going to be opening up with two or three other projects in late 2009 and 2010.

Most of those projects, in fact all of them, have fallen away except for us.

So we want to take advantage of the fact that we are the only ones opening up new in the Las Vegas marketplace.

Great.

Thank you.

Your next question comes from the line of Larry Klatzkin with Cap [Delay].

A couple questions.

One, you've done a nice little agreement with the bank.

Could you talk about where you might be -- you may play out with the banks and maturity coming up in 2011?

Sure, Larry.

I think that the -- this last amendment, I think, is the materially different one than the prior ten I think that we've had as we've been twisting and turning over the past year.

This really is the exclamation point to the recovery of MGM with its bank group.

Because what this amendment accomplishes is bringing our facility back to the type of terms that we've always had with our banks.

And what that allows us to do is buy ourselves not only the time, but increase the optionality in terms of how we refinance not only this facility, and in fact, all our maturities on a going-forward basis.

So what I think is going to happen is that we are going to continue to talk to the banks.

There is certainly not -- they are not fussed at all about us right now.

They have got bigger irons in the fire, and we are going to work on timing.

And when it would be the best time to redo the bank deal.

We think now that we have pared the deal down from $7 billion to $5.5 billion, it makes it much it a more manageable role.

We think that we have tools.

We know we do -- at our disposable to provide the banks incentives to allow us to do a new five-year deal.

We think we will probably do that some time either late this year or more likely in the first half of 2010.

And as you know, that facility does not go current until October of 2010.

So we are in a much different position than we were even a week ago.

We've restored the facility to what I'd call a normal facility, and it allows us to do lots of things on a going-forward basis and gives us the time and the flexibility that we have not had up until recently.

Okay.

That's great.

As far as just trying to get some understanding -- income stream from MGM Hospitality and maybe a little update on some of the projects.

I have heard you are still working on new contracts and everything?

You have what -- eight firm and five in process?

Well, now it's nine because Gary Jacobs, Jamal Aziz, and I just arrived from Cairo yesterday.

And we signed another deal in Egypt.

Literally, I don't know what time zone that was, Gary, but it was maybe 48 hours ago.

That is a Company that's generating income for us now.

It makes, what?

About $10 million, $15 million a year, something like that, Dan, right now.

But ultimately, we will be much larger as we start fully developing these properties in the Middle East and into China and other markets that we are working on.

We have projects that are in various stages of development that are over 30 individual distinct development projects.

Whether they are signed deals, LOIs that have been signed, or negotiations that are getting quite firm.

So we do believe this is going to be a substantial Company for us on a going-forward basis.

It won't be largely profitable over the next couple of years.

It won't be significantly meaningful to our cash flows.

This is an enterprise that will generate, we think, $100 million to $200 million of EBITDA annually within the next five years.

Okay.

Good.

As far as MGM Macau goes, could you -- you did [73].

Could you give us a monthly trend to see how it's trended?

I would rather not, Larry.

We had a pretty consistent quarter, let's put that it way, in the third quarter.

And we are having consistent kind of results from a drop perspective on even in the current quarter.

So we are chugging along at a pretty healthy rate right now.

Then LVS talked about that not only are group bookings better, but they are also getting banquet business which is very profitable.

Are you seeing something similar there?

We sure are.

That means that you have -- the bang for the buck on that business should be going up?

Yes, they will.

Okay.

As far as condo sales, you have to make what?

I guess $242 million, or you have to put money in?

Are you pretty confident that you should close on at least enough that you won't have to put any more money in.

You want to tackle that first, Bobby?

And then I'll chime in.

Sure.

We have $244 million of the first condo proceeds, as you know, go to fund the completion of CityCenter.

We have an internal forecast as to what the yield will be in terms of the closings, which would satisfy the $244 million.

We have polled, as I mentioned, about 75% to 80% of our buyers, and we believe we are going to yield in terms of closing proceeds above the financial model that we've been working on the last couple of months.

We are getting a lot more positive feedback in an almost impossible marketplace from our existing buyers as well as a few of our new buyers.

Alright.

Great.

Thanks.

And, Larry, one thing to point out, too, is right now the mindset is on December 16th every bill is going to be paid, and that's not the case.

We are going to be paying bills throughout a lag time period into well into next year, and we will start closing on condos as Bobby said earlier in early January.

And so from a timetable standpoint those will all match up pretty well.

Alright.

Thanks.

And corporate expense for next year, just keep the same pace as fourth quarter?

That's a reasonable assumption.

That's good enough for now.

Okay, thanks.

Thanks.

Next question comes from the line of David Katz with Oppenheimer.

Hello.

Good morning.

Hello, David.

Jim, just going back to some of the homework it sound like you've been doing on visitation, incremental room nights, and some expectations about how those are going to flow.

How much of a deep dive have you done within that in terms of segmenting that?

Right, because while I can see the incremental room, the incremental visitation percentages aren't that great.

If you were to slice room segments -- and I realize at the moment pricing segments are compressed.

If you were to take your -- CityCenter's comp set of properties.

It's a little bit of a smaller group and an incrementally larger growth.

And the visitors -- obviously, all of those numbers and percentages start to get a little bit more focused.

Have you been able to segment any of that?

Any of those numbers?

Or talk about any expectations within CityCenter specific segment?

That's a good question.

We've done quite a bit on that, and it's not all perfect science, as you know, going forward.

A few things that I think are significant.

Yes, you're right.

A lot of the rooms being added to the market are in the high-end and certainly will compete against the high-end properties here.

So the question is whether we can fill those rooms at attractive rates while still maintaining attractive rates at our existing portfolio of high-end properties as well as our competitors.

A couple of things on that.

One is, we are getting pricing premiums most times, not every day.

ARIA and Vdara are getting very good pricing in the market.

And it depends really on what's going on next year from a convention perspective at Mandalay or at Mirage or at MGM Grand or Bellagio.

We are seeing -- the indications are.

We are seeing good pricing on a going-forward basis for ARIA and Vdara.

Particularly since they are brand new, it's encouraging.

Number two, a lot of the conventions that we are booking -- and conferences -- are booking, obviously, at higher rates than this year.

And they are also going into our higher ends properties like ARIA, but also Mandalay, Bellagio, Mirage, et cetera, MGM.

Third, the casino room nights are up significantly.

I don't think I mentioned the number.

But maybe I should have.

I think we are up about 100,000 a room night year-over-year in the casino block.

And that transcends the high-end.

I'm talking about going on all segments.

That goes to the economy segment and the mid-market segment, and I think will you find -- I think we will find that our casino room nights will be up year-over-year as a percentage of our total rooms in our existing portfolio.

And that will be very positive, I think, for gaming revenues, both tables and slots.

And our leisure relationships are the best in the industry, and they are indicating higher revenues coming to us through higher bookings as well.

So I think that what we are expecting to see is continued robust occupancy relative to where we've been for the balance of this year and into next year.

And we are filling a lot of those rooms with casino rooms, leisure, and FIT as the convention business continues to heal itself.

And we see the convention business starting to improve in April and accelerating throughout 2010 and into next year.

And that will accrue to the benefit of primarily the higher end properties.

So when we look at our overall visitation for the market versus the room mix, you're right.

The room growth is coming more at the high-end.

Visitation, we think, will be across the board.

But we think we are going to capture better market share as we are this year in all of those segments -- in the mid-market segment, the economy segment, and in the luxury.

And that our occupancy rates for next year will be better relative to the Strip than they are even this year.

And that our room rate spread -- our fair share of room rate -- will also be higher because of the programs that we've been talking about.

Okay.

One follow-up if I may.

When you look at the room nights that you have booked, I don't know if you mentioned the time frame or the distribution of those room nights -- when they are?

And then it's an interesting dynamic when you look at Las Vegas and the value proposition, and we are all clear about what the value is in the cost of those rooms and on the access and all of those things?

And when you talk to convention people and meeting planners who typically are very price-sensitive, what is the hook?

How much of a hurdle is still the optics issue versus price?

And are you able to make up for that optics with price at this point?

Or is there something else?

Some other way around it?

I think the first part of the question is where are those rooms going to actually come into the system in the ones that we have booked, that's correct?

Yes.

Okay.

So, we have booked for 2009, for example.

We've booked rooms into the quarter.

It begins really slightly in the first quarter and accelerates into the second, third, and fourth quarter of 2010 almost on a consistent basis.

So when we are talking about the rooms we have booked for next year, every quarter in 2010 improves.

And we are getting new leads, and we are booking new business right away.

The lead times have also been expanded.

So, in other words, we've talked about booking windows being very tight -- within 60 days, within 30 days.

We are starting to see more rooms being booked 60-days plus out, which is also an encouraging sign where we are able to capture some of those rooms.

And therefore, help us yield our rooms better on a going-forward basis.

And obviously in 2011, it improves further.

The hook on the convention side is -- there are several.

We spend a lot of time.

We have Chuck [Bolan], Richard Harper, Bill Hornbuckle, a lot of folks within our Company.

Of course, Bill McBeth at ARIA, and what they are doing at that property is significant.

We have been working with our trade groups in Washington.

We have just recently come back from DC, and the hook is the following.

That is, that we have one of the most if not the most value attractive markets in the United States to host a convention or a conference.

Number one.

Number two, many of the dates that people had wanted in the past were just not available.

Or the space or the amenities.

They just were not available.

And because of the cancellations that occurred last year that affected occupancy of conventions this year and in the early part of next year.

They are starting to get more of the environment that they want.

Number three, we've used our amenities more, and I think we have more of them than any other convention market in the country rather than just pure price.

So, in other words, you can create experiences to the convention guest that are unique to MGM Mirage.

Private tours of the gardens at the Mirage.

The habitat.

Going to the shark reef.

Going out to Shadow Creek.

Using our arenas as marketing tools.

Having events at special places on pools or at the mansion.

We have just so many tools available to us.

And what we have tried to do, and we think being successful in this is get people out and take a look at our property.

And we are finding -- and maybe it's a little obvious, but we are finding that since we have the newest convention facilities in this town.

And we believe that we operate them at a very high level, and we have great marketing and service people.

That once people give us a chance we generally convert on them.

So clearly, this is an opportunity to build some business.

Re-establish the relationships that we've had.

And we have been taking significant conventions from competitors here in Las Vegas.

And more importantly, from competitors in markets like San Francisco, Los Angeles, Southern California in general, Texas, Arizona, and even parts as far a way as Chicago and New York.

As we bring that business into town, it helps everybody.

But it certainly helps us.

And we've been selling service, amenities, value proposition, and great weather, and opportunity.

And getting higher rates than what you're posting this year.

Vastly higher rates than what we would have had otherwise.

Because the convention room night rate is significantly higher than say the leisure segment.

And that's the point -- is that if we were not able to book this business in 2010 and '11, we would be continuing to fill the rooms with the other blocks and largely that will would be leisure.

And depending on the property, we are getting room night, ADRs, for conventions at $30, $40, $50, $60 a night higher than the leisure rate.

And so as our mix improves and moves back to more normal levels of convention as a percentage of our overall mix, our overall ADR has to improve.

We are already starting to see that happen.

We are projecting that happening in 2010 and '11.

Thanks very much.

Appreciate it.

Your next question comes from the line of Steve Kent with Goldman Sachs.

Good morning.

Just two questions.

First off, can you provide what the overall hold percentage was in the quarter versus a year ago?

I think in the press release you said it was toward the high-end, or above the high end of your normal?

Second, Jim, when you reference conference bookings, and I thought you actually gave a number on that.

Is that same store sales, or is that with CityCenter capacity being added in?

We will tackle the first part.

You've followed us a long time, Steve.

We don't give hold percentages quarter-to-quarter.

But it was just slightly higher than our range.

It wasn't materially so.

So maybe 100 basis points higher than our top ends of our range, for example.

Something like that.

So we are happy for that, but it was not a blowout from a hold perspective.

The second part of the question, could you repeat it?

Just, Jim, I thought at one point in your script, you said something about conference bookings.

Like even a percentage that you've seen up in just the past few weeks or past few months.

What I was trying to understand is how much of it is same store sales, Jim?

Versus how much of it is the added capacity?

And maybe it's both.

But I just wanted to understand, when you are giving numbers like that.

Is it same store of existing inventory, or is it with the addition of the rooms of CityCenter and the capacity at City Center.

It's not same store.

Because ARIA is included, but ARIA is so small relative to the overall rooms because of the vast space that we have at Mandalay Bay.

So we can break it out separately on a same store basis.

We didn't do it here, but everything I'm looking at -- the booking trends, for example, the convention bookings -- that's all Mandalay.

For the most part.

And the room nights we have in the pipeline for 2010 and '11 are for the most part all of the MGM Mirage wholly-owned properties.

ARIA has a conference facility similar in size to Bellagio and really very small as a percentage of the overall portfolio we have at MGM Mirage.

And so, we will break that out.

I don't have that in front of me, Steve, but it is not material.

It can't be 5% of the increase in the room nights booked that we have for 2010 and '11.

Okay.

Thanks, Jim.

Our next question comes from the line of Robin Farley with UBS.

Hi, Robin had to step away.

This is actually Louise, and I had two quick questions for you.

Jim was quoted on the news flyers as saying he expects Strip RevPARs to be up 5% to 10% in 2010.

And I wanted to know if your outlook for that has changed?

And the second question is, what is the potential to list your Macau assets in Hong Kong?

And if the listing in Macau would reduce -- which I think would reduce your stake and your partners' stake.

Would that help resolve the New Jersey issue in any way?

Sure, I didn't see that quote.

But if that's what it said that's not what I said.

I said the visitation in Las Vegas, we think, will be up 5% to 10%.

I have never talked about Strip RevPAR.

This was something Jim had mentioned back in October -- mid-October while he was being interviewed.

Well, this is Jim, and Jim did not say that.

Jim said.

Sorry about that.

I've talked to Jim, and Jim said that he thought that visitation would be up 5% to 10% in 2010.

And we still think that.

I gave a more specific number today, but that's our range.

As it relates to the Macau listing, we are clearly very interested in doing that.

And we've been moving very determinedly toward that goal, and we believe that that will occur and could likely occur even as early as the first half of next year.

And I don't think it has much of a direct correlation to New Jersey.

The New Jersey issue that you're referring to is a healthy debate that we are having between ourselves and the DGE.

We've had extremely constructive conversation with the DGE.

We have a good working relationship with them and with the Casino Control Commission as well.

And it's just a process we think is going to have to play out over many months, maybe even quarters.

A Macau IPO might have a role in that, I don't know.

But we are moving forward.

We are very determined to take Macau public.

Our partners, as well as ourselves, want to do that.

We think it would be a value to the MGM Mirage stakeholders, and it is an objective that we have and one we are working toward.

Separately, and as relates to New Jersey, it's a process that has been going on for several years.

It could go on for a considerable period to come, but one that we think will come to a resolution that we feel good about regardless of what that might be.

Okay.

Thank you.

Thank you.

Your next question comes from the line of Janet Brashear of Sanford Bernstein.

Thank you.

A couple of questions on the cost side.

First, had you a goal of $600 million of cost savings.

Can you tell us how those cost savings are going?

And maybe where we would see what you've achieved to date in the operating statement?

How much of that is permanent?

And how it's going toward positive operating leverage?

Also on the cost front, I noticed that you added Joseph Sugarman to your Board who is a physician and wondering what sort of significance your healthcare costs are playing in the current environment?

And if that's perhaps a reason for his addition to the Board?

And finally on the CapEx side, you spent $28 million this quarter on capital projects other than CityCenter.

I'm wondering if you could tell us what you would feel is a normal run rate for those capital investments to keep them up to speed.

Thank you.

Okay, thanks.

We are all going to jump in on that because you have a good menu of questions here.

So maybe Dan first on the cost savings side?

Janet, we've taken over are out a little over $700 million on the annual basis of cost savings.

And the numbers through the third quarter, we've already anniversaried a lot of those in.

We have probably had about 85% of those costs reflected in the numbers already.

We have got a few programs that we did late last year -- earlier this year, that we are still gaining traction on.

But on an annual basis, we've taken out over $700 million of cost savings out of the system.

And just to add to that point, this is something we started really back in 2007 and throughout 2008.

And we are largely complete with those programs.

We are always looking for ways to save money, and we'll probably finds more ways.

We are pretty good at that, but those programs are largely complete.

And we eliminated thousand of positions within this Company.

When you look at, for example, this past quarter, when you see that our FTEs were down about 12% year-over-year, but our occupancy was equal with last year.

I think that's a very telling correlation.

And that is that we are occupying the buildings at very full and normal levels with 12% fewer FTEs than we did a year ago and achieving higher service standards and higher service scores than we did a year ago.

So it has been the product of an immense amount of work internally to reconfigure our business, to bring our employees closer to the customer, reduce layers of management, increase efficiencies.

And so as our revenues are recovering here, you're seeing an impact on our margins.

And that is why we believe that this Company's margins when the recovery in the economy is complete, will be higher than they were even during the heydays of the early part of this decade.

So it was an important program.

It was painful.

It was hard.

It was comprehensive.

We did it before anyone else.

And it was successful.

And now, we are moving forward building revenue, playing offense, and increasing our margins by keeping our costs in line, our payroll in line, and moving up our revenues.

As it relates to healthcare, could you flesh out that question -- ?

Well, I was asking if the addition of Joseph Sugarman to your Board is a result of concern about rising healthcare parts as part of your cost structure?

So maybe you could tell us how significant that is as a factor?

It absolutely was a major consideration for bringing him on the Board, and healthcare, obviously, is a major issue for us.

We spend several hundred million dollars a year -- I think it's like $400 million a year on healthcare benefits.

And so we've been very focused on the dialogue going on in Washington.

And we have our own views, and Dr.

Sugarman is going to be very helpful in that regard.

I think the next question was on CapEx, was it?

Okay, Dan, you want to tackle that.

Janet, we've prepared for the opening of CityCenter over the last several years, and we've had historically high levels of capital expenditures heading into this opening in preparing all of our resorts for the opening of CityCenter.

This year, our guidance is $200 million in CapEx.

And that's pretty healthy number for a maintenance number when you consider the condition our properties are in.

I don't see that increasing significantly next year.

And as all eyes will be on CityCenter, and we still are distinctively ahead of our competitive set here when you look at the properties on a property by property basis.

And so we feel we are in very good shape from a physical plant standpoint and can weather these next couple of years in terms of lower CapEx spending than historical averages.

Obviously, we didn't anticipate the recession being as severe.

But we did anticipate CityCenter opening, which remarkably is opening to the day of what we thought it would open four years ago.

And that's a tribute to Bobby Baldwin and the team.

And because we knew CityCenter was opening in the fourth quarter 2009, we invested extremely heavily in all the other properties to make sure they were as competitive as possible when CityCenter opens.

So that's obvious to anyone who has been out here lately looking at our properties -- they've never looked better or been in better shape.

From a CapEx perspective, we will maintain these properties at a very high level.

We will make sure that we accomplish everything from a safety and maintenance perspective that we need to.

We will continue to refresh them.

We will continue to add money into technology and spend.

In fact, we are going to spend probably $10 million, $15 million more on technology next year than we did this year.

And we will be able maintain that CapEx for the next few years.

I think that's going to have a very positive impact on free cash flow.

So we have time for one more question, Operator?

Your next question comes from the line of Dennis Forst with KeyBanc.

Get to play anchor.

Jim, I was curious, or maybe for Bobby, to understand the writedowns.

The $200 million writedown of residential.

What was that as a percentage of what it's on the books at, first of all?

Well, the $200 million was our share of -- obviously, 50% share at the CityCenter level.

That is a result of the joint venture Board's decision of the 30% reduction in the price.

So that correlated directly to the price adjustment at CityCenter.

So it's approximately 30%.

30% of your 50% share?

A little bit more.

Our write down was a little bit more for technical reasons, but it wasn't much more.

It's about 30%.

Then the writedown on CityCenter.

What does that leave your share of equity or investment?

$2.44 billion.

Leaves it at $2.44 billion.

Okay.

And then, Bobby mentioned an estimate of revenues of $1.2 billion.

Is that for ARIA?

Yes, that's ARIA.

That was ARIA.

Okay.

And then lastly on CityCenter.

You said you spent $7.75 billion.

$740 million left.

You can draw $350 million.

Proceeds from the sale of condos is about $240 million.

That leaves -- what, $150 million to come up with and your half would be about $75 million?

No, you're missing the one component.

There's still a letter of credit outstanding for Dubai World's remaining equity share that will get pulled for that remainder.

You don't have anything left to put up, assuming that the two -- ?

We are fully funded through our letter of credit and the remaining letter of credit there for that delta at Dubai World.

The $2.44 billion is your share of CityCenter on the books?

Once CityCenter opens cap interest should go away.

That's correct.

That's why our guidance is lower in the fourth quarter as CityCenter opens.

It's substantially complete in mid-December.

Next year, it should be -- maybe not zero but pretty close.

Pretty minimal.

Okay.

Great.

Thanks a lot.

Thank you.

And thank you, Operator.

We are obviously around all day for any follow-up questions folks would have.

Thank you for joining the call.

Thank you.

This does conclude today's conference call.

You may now disconnect.