美高梅國際酒店集團 (MGM) 2010 Q1 法說會逐字稿

Good morning, and welcome to the MGM Mirage first 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.

Participants are in a listen-only mode.

After the Company's remarks, there will be an open Question and Answer Session.

Now I will turn the call over to Mr.

Dan D'Arrigo.

Thank you, Concetta, and good morning, everyone, and welcome to MGM's first quarter earnings call.

This call this morning are being broadcast live on the internet at www.MGMMirage.com, and at www, CompanyBoardroom.com.

A complete replay of the call will also be made available on our website.

This morning we furnished on Form 8K a copy of this earnings release to the SEC.

As you recall, our format has been updated and now all information is located within the context of the press release rather than in separate tables posted on our website.

Before we get started, as you all know, 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 amendments of 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 disclosure about risks and uncertainties made in our filings with the SEC.

Now I would like to turn it over to Mr.

Jim Murren.

Thank you, Dan, and good morning, everyone.

Given the fact that we preannounced our earnings awhile ago, we thought it would be a good idea to focus on the trends that we're seeing right now and give you data to back up those themes.

So we're going to talk about four concepts today in the morning.

One, we're going to talk about Las Vegas and the trends we're seeing which fortunately are stabilizing and improving.

Second, we're going to talk about convention bookings, because as you all know, it is critical to the market and our future financial performance and we're going to talk about the second half of this year and beyond and those trends are strengthening.

We're going to talk about our assets and how we're leveraging them to drive incremental revenues from the initiatives we have under way right now which we see is gaining traction and then we'll talk about CityCenter and the metrics that have been improving sequentially throughout the first quarter and that trend also has continued here in the second quarter.

First about Las Vegas.

We talked about this before, and the good news is we have more data to back it up that this market is healing.

We see it happening nationally of course but here in Las Vegas specifically the data shows that we have gone through the worst of the economic storm here.

Locally, we still have a rugged market here from a standpoint of looking at housing, looking at an unemployment figures, but the metrics that impact our visitation to Las Vegas and our business are starting to improve.

We're starting to be able to yield up rates.

In the first quarter we yield up room rates a little over half the time, but in the month of April, we yield up rates almost 70% of the time.

We continue to catch premium to the market both in terms of occupancy and in terms of rate, so as we're able to yield up rates it will benefit the entire market with ourselves being the largest beneficiary.

We see also some of the macros in terms of McCarron Airport.

The passenger declines have slowed and load factors are moving up, and our contacts with the airlines are promising, particularly for the back half of this year and into 2011.

We see visitation in the market up, which is really quite remarkable given how weak the citywide convention business was in the first couple months of this year and yet visitation was up 2% and we still expect 38 million plus visitors to come to Las Vegas this year.

It was a fairly aggressive forecast we made a year ago.

We feel like that's highly achievable now.

Strip revenues through February also grew, and that was mostly due to baccarat, but there is also growth in other business importantly slot handle was also strong in the first couple months of this year which is also of course encouraging.

We're merging from this downturn.

We believe as stronger company.

We have gained market share in the important business of baccarat, both in terms of drop and in win and looking at that even without ARIA, our market share is up across our portfolio of wholly owned properties versus a year ago, and of course when you add ARIA to the picture, we're up dramatically.

The domestic play remains challenging, and we think it will be so for the balance of this year, but again we're starting to see a little bit of sign of life there, and that should improve as the economic recovery continues to gain steam.

The consumer spend remains challenging, but even there, when we're talking about RevPOR we're starting to see signs that the consumer is spending more when they visit us.

For example, show ticket sales, fine dining restaurant covers and the checkout averages that we're getting at even our midscale restaurants are also now up year-over-year and we couldn't have said that a year ago.

So slowly we're improving here in Las Vegas.

We see the signs that are fairly tangible, and it is encouraging on a macro perspective for the second half of this year and into 2011.

Specific on conventions, I know it is important to everyone on the call, it is important to us, so we'll give you a sense of what we see happening.

In the first quarter, convention room nights represented about 14.5% of our total room mix.

That's flat year-over-year, which is pretty impressive given the fact that as I said earlier the city wide convention attendance was down dramatically, down almost 14% city wide through February.

But 14.5% is lower than what we typically do in the first quarter, and in fact it was 5 percentage points lower than the first quarter of 2008.

First quarter is typically very strong in the convention business.

So the 14.5% mix is lower than we would like it to be, and lower than we believe it will be next year.

We're building toward a normalized convention room mix for an annual basis of about 16%.

Recall on the last conference call we said it was only a bit over 11% in 2009.

As that improves into the midteens, it has a dramatic impact on our overall rate.

Recall that our convention ADR is $140 plus a night, whereas our leisure ADR is only about $80 a night.

As we yield our rooms away from leisure in this sense to convention, the profit impact is profound.

Of course, that customer spends more, and so our RevPORs, our total revenue per occupied room also improves.

Some of the conventions have shown an improvement in attendance, and attrition rates are getting back to normal levels.

A couple examples of this.

On the city wide basis CES, Magic, NAB, they actually all showed improvement this year in attendance versus a year ago.

We know Las Vegas is a premier destination for conventions, and we know the whole market is gaining share as companies and convention planners are venue shifting away from more expensive convention markets and into markets like Las Vegas, and we think that is going to be very positive for 2011 and beyond.

We just grabbed another really important convention, a Fortune 20 company that shopped around the country, picked Las Vegas as its new home for a very major event and we're proud to say that that new home is at Mandalay Bay.

We think that as this convention business comes back and operating leverage is obvious to everyone on the call, we think that that will have the logical impact on RevPAR.

We said last earnings call we thought that RevPAR would turn positive in the second half of this year.

We're ever more confident that that is going to happen.

Our RevPAR was down 8% in the first quarter.

It will be down less again here in the second quarter, probably in the mid-to low single digits, and that's four or five quarters in a row where our RevPAR trends are starting to sequentially improve and we're going to be in the black we believe in the second half of the year for sure in RevPAR.

Our convention bookings for 2011 lead us to be more confident in terms of RevPAR and overall room trends.

The pace number is very strong.

At the end of the first quarter the net convention rooms on the books, excluding ARIA and Vidara, so on an apples-to-apples basis for next year the convention rooms that we have on the books for next year is the highest that we have ever had since we started tracking the data earlier this decade, and it is up about 20% year-over-year versus last year.

So our pace for rooms for next year up over 20%, versus where we were a year ago, and the room rates we're getting are also trending higher than what we have been achieving over the last year or two.

The third point we'll get into and get into more in the Q&A is how we are leveraging our assets to drive incremental revenue.

We're going to talk about this a bit more at our shareholder meeting next month.

As you know, we're proposing to change the name of the company to MGM Resorts International and really one of the major reasons for that is to better clarify who we are as a company, who we are to our customers and will coincide with the launch of our whole new loyalty program which we're extremely excited about here.

Players Club will encompass far more than it has in the past.

It will be a much more robust loyalty program.

It will speak to all of our customers in a much more transparent way, more aspirational, and it will recognize every customer's total spend, not just their slot or gaming spend, and it will be tiered.

It will be at a program as good if not better as any in the market and that has been a competitive disadvantage of this company for the past decade.

We know we have the best assets in the industry.

We know we have the best men and women running these beautiful resorts.

We need to provide the customers with the better understanding of the value proposition that they have and the experiences that they can achieve only with us that we can only deliver, given our assets and that's the goal of the loyalty program.

This we believe will have a tremendous impact over time on the productivity of our resorts.

Many of our competitors with far less quality in terms of their properties have done more with less and this is a time when this company that has the best properties will do more with the more property quality that we have.

We've also beefed up our inhouse marketing team and they have been working with a lot of outside folks that is are intelligent in the area to develop a very specialized guest service proposition, so we can truly on a one to one basis trigger our marketing programs.

We have been working more heavily in analytics using a lot of technology we have not used before but has been used by others and others in other industries to better analyze the data that we have with the over 60 million names in our database and be able to segment and predict customer activity in a more effective way.

We could be much better at this and we will be this year and into 2011.

This will have a financially impactful result to our bottom line.

We are building market share already in the gaming business.

As I mentioned, our market share so far this year is up if you even exclude the new properties that we manage, but we believe we can continue to grow that share in the gaming side, not only here in Las Vegas but we're also doing so in Mississippi and in Detroit where we have the market leading properties already.

We can stimulate much better cross property play throughout that great portfolio we own.

Finally, I want to talk a bit about CityCenter.

Bobby will get into it in more detail, but I want to give you a few of my takeaways and a sense of what we're seeing.

First off, CityCenter and ARIA is absolutely spectacular.

The quality is really as good as anyone could have hoped for.

We knew going into the severe recession that we were in that we were going to have a tough financial quarter, and certainly we did on a financial basis, but the trends have been moving sequentially in the right direction.

Occupancy in the first quarter which is inaugural quarter was clearly not at the level that we produce at our established resorts.

We had very little convention business early on at ARIA, but that of course has been changing and the customer awareness, which was quite low with the brand new property, has also been improving dramatically.

As the customer awareness improves and the convention business has been picking up at ARIA, the ancillary businesses and the restaurants, bars, night clubs, have started to improve.

We're seeing occupancy improve on a sequential basis.

We think it is going to continue here in the second quarter.

Bobby will give you detail on it, and the financial metrics are all pointing in the right direction and that's happening right now.

It is quite clear to us that CityCenter will become the major show piece, not only in our portfolio but a major driver as we had hoped to visitation to Las Vegas and it will enhance the earnings power of the entire portfolio of properties that we have.

In conclusion, before I turn it over to Dan, as we said before, we knew the first half of the year would be challenging.

We're on track to do better here in the second quarter.

We see signs of improvement both on a macro basis, on a Las Vegas market perspective, and certainly within our portfolio of properties.

We touch every customer from the economy to the luxury and we see the customer trends starting to improve.

We think the convention mix is going to improve in the second half of this year, and even more so next year, and we see rates that we're achieving on the convention side improving, both in the second half of this year and particularly in 2011.

We're running this company with much more precision than I think any company in this industry has been run before, certainly our company as recently as a year ago.

We fully intend to capture the lion's share of the revenue uplift by keeping our costs in check.

These loyalty programs and the customer marketing programs we have under way right now I cannot over emphasize how impactful we believe that will be to our financial performance on a going forward basis.

CityCenter, ARIA, and all of the components of that beautiful complex are building its brand awareness, increasing its customer reach, and those operating metrics are also improving.

We have the highest quality resorts in this industry.

We're more diverse than any company not only in the Las Vegas Strip but from a customer perspective in gaming.

Our presence overseas is growing.

Our MGM Grand Macau property had a fine quarter.

Our hospitality division is growing on a daily basis as we sign more deals around the world, and we have become a more efficient company through this great recession, and we believe we're better positioned than most to benefit from the market recovery.

With that, Dan, I will turn it over to you to get into your financial outlook.

Thank you, Jim.

This morning I would like to just touch on some of the operating metrics in the quarter's results as well as the improvements we made to the balance sheet and our plans going forward to continue to improve our balance sheet.

Our first quarter results were impacted by a gain on the extinguishment of debt of approximately $0.21 per share net of tax related to the statement and amendment of our senior credit facility back in March.

We also had about a $0.02 impact per share on our share of the forfeited residential deposits at CityCenter, a pretax noncash charge of $86 million or $0.13 per share related to our share of an impairment charge recognized at CityCenter related to its residential inventory.

As we previously announced last month, net revenue for the first quarter was approximately $1.46 billion, a decrease of 4% from 2009 levels after excluding $93 million of reimbursed cost revenue, mainly related to the company's management of CityCenter.

Adjusted property EBITDA attributed to our wholly-owned properties was approximately $267 million in the quarter, down 19% when you exclude the insurance recoveries related to Monte Carlo that were recorded last year.

Net revenue and RevPAR continue to improve.

Our net revenues excluding reimbursed costs as I mentioned were down 4% in the first quarter year-over-year and that improved versus a decline of 5% in the fourth quarter that we experienced.

Our Las Vegas strip RevPAR continued to improve as well, down 8% in the first quarter versus down 16% in the fourth quarter and this is consistent with our previous guidance of how we saw that sequential trend quarter to quarter and as Jim mentioned, we expect this trend to not only improve but to turn positive in the second half of the year.

Our table games volume excluding baccarat was down 4%.

Our baccarat volume though was up strong 17% in the quarter.

Our table games hold percentage decreased year-over-year to the mid-point of our historically normal range of 18 to 22% versus the prior year being at the top end of that range.

Our income from unconsolidated affiliates in the quarter included our operations from MGM Macau, which earned operating income of $49 million, including depreciation expense of 22 or from EBITDA standpoint, $71 million in the quarter as that property continues a terrific turn around story and gains more traction in the marketplace.

The Company's 50% share of Macau's operating results was approximately $23 million in the quarter.

Our loss from CityCenter was also included in our income from unconsolidated affiliate lines, and with Borgatta now being placed into trust late in the first quarter, it only contributed $7 million of operating income on a quarter and on a go-forward basis will not be contributing to this line item until such time as distributions are made from the trust.

As of March 31st , the Company had approximately $13 billion of indebtedness.

This includes approximately 3.6 billion of borrowings outstanding under our senior credit facility with available borrowing capacity of approximately $900 million.

The Company's cash balance was approximately $441 million as of March 31st.

During the first quarter we successfully amended and negotiated the extension of a significant portion of roughly $3.5 billion of our credit facility to February 2014 and that goes into effect once the non-extending portion of the facility is retired.

Shortly thereafter, we went back into the public markets and completed a senior secured note offering of $845 million at 9% that matures 2020.

Proceeds from this offering were used to reduce our credit facility from $5.5 billion to $4.7 billion, and both of these transactions greatly enhanced our liquidity position.

Following the quarter, March 31st, the Company received a tax refund of approximately $380 million and also completed a convertible bond offering, which netted proceeds of $1.12 billion.

The proceeds of both of these events temporarily reduced the outstanding amounts under our senior credit facility, and convertible notes were offered at a rate of 4.25% and at a conversion premium of approximately 27.5%.

In connection with this offering, we entered into a cap call transaction increasing the conversion premium to approximately 50% or $21.86 per share.

As of May 3rd this year, we have approximately $1.5 billion of availability under our credit facility inclusive of the proceeds received from the convert that are reserved for future debt retirements as well as excess invested cash of approximately $900 million.

We believe our liquidity position has improved significantly, thus providing us adequate liquidity to address our upcoming debt maturities.

Now I would like to give you a little help with your modeling and a little bit on the outlook.

Our stock compensation expense in the second quarter is estimated to be approximately $9 million to $10 million, depreciation expense in the quarter is estimated to be approximately $165 million to $175 million.

Our gross interest expense in the first quarter of 2010 was $264 million, roughly about $250 million of that was cash interest with no capitalized interest.

We estimate that our gross interest expense for the second quarter is in a range of approximately $280 million to $290 million, again with no capital interest expense expected in the quarter.

In conclusion, we made a great deal of progress on improving the balance sheet and feel that we have created ample liquidity.

However, we're not done.

We still have many levers to continue to solidify our balance sheet going forward, and our focus now turns to refinancing and the possible IPO of our MGM Macau entity, as well as the process of selling our share of our stake in the Borgata Hotel Casino in Atlantic City as well as continuing to be opportunistic when the markets avail themselves.

With that I would like to turn it over to Bobby Baldwin for an update on

Thanks, Dan, and good morning, everyone.

For the first quarter, ARIA resort and casino generated net revenues of $160 million.

It had an EBITDA loss of $11.9 million, Vidara lost $4.1 million, and Mandarin lost $6 million in the first quarter.

Crystal's had an EBITDA gain of $1.1 million.

The total campus in terms of EBITDA was a loss of $20.9 million.

ARIA's net casino revenue was $75.9 million in its first full quarter of operations.

Year-to-date February, ARIA acquired 8.2% of the Las Vegas gaming market.

ARIA experienced strong rate gaming volumes throughout the quarter.

Table games drops was on par with Bellagio for the same period.

ARIA hosted the MGM Mirage Chinese News Years Gala of about 2900 attendees in February and experienced a strong baccarat play during that period of time and throughout the quarter.

Our high-end customers have enjoyed ARIA and were overwhelmed by the facility, the accommodations and of course the employees.

ARIA's non-casino revenue was $84.1 million for the quarter as ARIA builds its base of business.

Occupancy continues to grow and did throughout the quarter.

January was 56%, February 63%, and March was 70% in terms of hotel occupancy.

Combined occupancy for the quarter was 63% with an ADR of $194.

This compares to Bellagio's ADR for the same period of $199.

Maintaining hotel room rate integrity has been our objective as we establish brand awareness and market position within the highly competitive Las Vegas luxury market.

Booking trends have continuously improved in all market segments for ARIA, most notably in the transient, leisure and convention segments.

For May, we're forecasting occupancy of 80%.

Convention bookings looking forward continue to be positive, and in March, a definite convention room nights booked for future dates reached 23,000 room nights.

To compare this, this is higher than any month in Bellagio's history.

Bellagio's peak was 21,000 room nights in one month for convention.

ARIA's annual monthly convention lead volumes also increased by about 300% compared to a year ago.

For the quarter we ran about 670 leads for each month.

Maintaining the momentum of strong lead volume and conversions, we expect to meet our convention forecast for the very first year of operation for ARIA at 160,000 room nights.

Currently we have 102 of those room nights on the books.

For 2011, ARIA has over 46,000 room nights, convention room nights on the books, and this is 127% increase of what we had on the book this is time last year.

Advertising expense in the first quarter was $8.2 million.

This is a very high level of advertising expense associated with the opening of this brand new property and comparison for the same quarter Bellagio's advertising expense was 1.6 million.

As with all major resort openings, advertising and building brand awareness is a top priority.

A new ARIA television commercial is currently under development and will have a scheduled launch in June.

Everyday we become more efficient in ARIA.

During the quarter FTEs have been reduced from 7,500 to 6,000, a 20% decrease.

Also supplies expense for the quarter were higher than normal.

We had $2.5 million in amortization of small equipment and start up supplies.

For Vidara and Mandarin Oriental, we have seen positive trends throughout the quarter.

We've also reduced the losses in both of those properties in April.

For example, in March, the combined properties lost $2.7 million.

In April they lost about $300,000 on a combined basis.

This is primarily due to reduced expenses and increased brand awareness for both those properties, Mandarin and Vidara.

CityCenter's retail experience, Crystals, has been well received by the luxury retailers and all the shoppers.

Crystals is taking its position as the premier luxury retail experience in Las Vegas, as well as the western region of the United States.

By the end of the first quarter, 56% of Crystals' leasable area was occupied by tenants open for business.

Several tenants are scheduled to open over the next several months including such notables as Prada, Christian Dior, and Gucci.

This will result in Crystals being 76% occupied by the end of the third quarter and 82% occupied by year's end.

Residentially to date, we have closed on 109 units with closing revenues of $116 million.

This is made up of 31 closed units in the Mandarin Oriental for $66.5 million and 78 units in Vidara for $49.5 million.

We begun to closings in the near towers this month.

Dan, that concludes my report.

Thank you, Bobby.

With that, operator, I think we have about 30 minutes for calls.

We're happy to open the Q&A line.

(Operator Instructions)

Your first question is from Steven Kent with Goldman Sachs.

Hello.

Steven, your line is open.

Hello.

Operator, why don't we go to the next one and bring Steve back in.

Your next question comes from the line of Bill Lerner with Union Gaming Group.

Hey, guys.

Hey, Bill.

A few questions for you.

Can you talk a little about the sustainability of the cost cuts?

You're able to run relatively high occupancy with a lot less FTEs.

What's sustainable on the labor side as you recover and I have a couple of follow-ups.

Do you want me to go ahead?

Hi, Bill, it is Jim.

Most of the cost cuts we made on a labor side are permanent, so we will be bringing people back on a volume related basis, but our FTEs were down 4% in the quarter, I believe, versus the first quarter of a year ago, and our occupancies as you see are relatively high, so we don't expect that labor of course, which is the biggest component of our expense structure will move up materially.

There will be some as it relates to convention business, the FTEs around catering and conventions, but that will be minimal relative to the base FTEs we have.

The FTE component will be flat to down for the balance of this year.

Our other controllable costs are in very good shape, so we believe that as the revenues are starting to pick up here, that a very, very high margin of the of that revenue will come down to profits.

Okay.

Great.

Let me just in the interest of time ask one more then, a balance sheet question.

The banks that didn't opt in to extend their portion of the credit facility 2014, I think it was around $1.2 billion or in that range, what -- I don't know whether this is for Dan or Jim.

What has changed since then?

What might change that will allow to you have another conversation?

I don't know whether it is dynamics at those specific banks or some variables, economic variables nationally or locally, but I think that's a concept that folks don't particularly focus on.

Bill, this is Dan.

It is just inside of about $1.2 billion that will mature in October of next year that did not extend, and I think it is just an individual bank decision, can't speak for each of those institutions, but that's clearly just their individual decision and I think it is just a difference in where the banking world is today vis-a-vis over the past decade.

Dan, we don't expect to change the decision.

No.

It is what it is, and that's why we're so pleased doing the convert deal we did and have more than ample funds to pay them off when they are due their money next year.

Thanks, guys.

Your next question comes from the line of Joe Greff with JPMorgan.

Hey, guys, can you hear me okay?

Hi, Joe.

Good morning.

Bobby, Jim or Dan, a couple of questions for you on CityCenter ARIA.

How many room nights were available in the first quarter for ARIA and CityCenter?

Bobby is taking a look at that, Joe.

Looks like -- He's got it, Joe.

It looks like 358,000 room nights for the first quarter.

And that's ARIA or all in CityCenter?

That's ARIA.

Okay.

And do you have what sort of the mid-week occupancy versus weekend occupancy was during the quarter and then if you can comment on any kind of sequential trends throughout the first quarter?

Joe, we don't actually look at it that way.

We have that information.

We can give it to you if you will call us later, but we don't typically have that for the earnings call.

It is dramatically lower mid-week, dramatically lower.

I would say that we run ARIA in May, for example, might run in the mid-70s midweek and in the low 90s on weekends.

Great.

And when you think about yielding the rooms at ARIA and I think the answer to this or what you will say, but I would like to hear you talk about it, do you think the property is being run more for rate or occupancy and as you look out where do you see the rate of improvement greater on occupancy or on the rate side?

When you try to balance a new operating company, you're trying to establish its personality long-term and to do that we not only try to set the optimal rate, but the optimal hotel mix in terms of the mix of customers, and of course we try to drive the occupancy within those two parameters.

Obviously, there is room for improvement in all three of those categories.

We have been able to hold the rate more or less in spite of lower demand levels that we experienced in the first couple of months, but it is ramping up very strongly and very nicely currently, as I pointed out, it looks like we'll be 80% or better in May as opposed to 53% in January.

56% in January.

And, Joe, point that Bobby always makes, of course, we can run 100% occupancy of ARIA if that were our overarching objective.

It is not.

Because in the mix issue, Bobby, that you're talking about, so if you were to simply look at ARIA in the first quarter, the gaming business was very gratifying in terms of its market share it established, its table drop, its slot handle and the non-gaming side was where we need to make improvement and that's improving now and one of the major issues was the lack of convention business in the first quarter which is starting to build.

Jim, can you give us a comment on the degree to which there is interest either from traditional casino buyers or financial buyers on your interest in Borgata?

I know it is early but if you can give us any color, that would be helpful.

Yes.

If I get in trouble, Dan, if I say too too much, reel me in.

We hired a bank.

The bank is put together the offering document.

We have been working with the DGE and Boyd to do that.

There are very rigid requirement that we have in terms of what we're allowed to do and limits to which we can personally as a company communicate, and that's why we have a bank working on this and that document has gone out to qualified buyers.

We have had about a dozen signed NDAs that have expressed -- real buyers that have expressed an interest and it is a process with a timetable I don't think we would be comfortable disclosing just because we want to work on our own time schedule.

We have plenty of time here as you know, and we want to do it in a thoughtful manner, so the good news is that it is being professionally managed by Boyd.

We think the process is being professionally organized by the investment bank.

There has been real interest in the asset, and it is moving forward, and clearly it is our intention to dispose of this interest in an orderly fashion, and not in a fire sale, and in a way that maximizes the value to the MGM shareholders.

Thank you.

Your next question comes from the line of Larry Klatzkin with Chapdelaine.

A couple quick questions.

The occupancy rate at CityCenter in April, do you have that so I can fill in the sequential?

It is a little -- right at 69%.

And I think you meant ARIA, Larry, right?

I meant ARIA.

Sorry about that.

Second question.

As far as the IPO goes, timing, Jim, you still think September?

Yes, this is Dan.

I think that's fair, kind of late third quarter, early fourth quarter.

Okay .

And did CityCenter have a little hold hit?

Could we do better than we

In which month, April or the first quarter?

First quarter.

When Larry, when you look at ARIA and compare it to the historical norms of Bellagio, it was outside and the normal Bellagio range from an historical perspective, so it was impacted by some hold.

I appreciate that.

Lastly, Jim, can you update us on the hospitality contract, new contract, what's getting under way and when we can start seeing real money coming in and what new projecting you're hoping to get in, and I understand with Vietnam with Boyd I assume that funding looks pretty good for happening?

I will tackle that.

We just had a presentation by Gamal earlier this week at a board meeting.

Tremendous job by that team.

They have 11 management agreements already signed around the world.

There is six more letters of intent that have been signed, and they represented in total about 17 hotels and over 6,000 hotel rooms and resorts in terms of residential product.

The fairly newer ones are in Egypt, New Giza and Sharma Shake, we have one in Mumbai, India, a couple more that have been developed in terms of an LOI in China with our partner there, [Diatai], the hospitality arm of the central government, so that's moving a long nicely.

Hospitality has been a profitable enterprise unlike a lot of start ups it has made money right from the beginning, and through its development fees and technical services fees, and Gamal has, and we believe it to be the case very ambitious goals for it to be achieving over $100 million of revenue over the next five years I think was the goal he said, Bobby in the board meeting.

That's right.

$100 million revenue a year or total?

Annualized.

Okay.

And any attention you might take that public some day?

Sure.

When it gets to a critical size that would be something that we clearly would entertain,the valuations would likely be higher than a capital rich gaming company, so it is something we look at down the road.

In terms of Vietnam, we're going over there in about a month or so.

There has been progress on that front.

There needs to be continued progress there, but as you know, we have a 50 year agreement there, and we have been working on that and looking at evaluating that market further, and we'll be over there and have more to report on that after we're back from there.

There is nothing against you putting in an MGM Casino Host in any of these luxury hotels around the world that are non-gaming?

There is nothing against that, no.

All right.

Thanks, guys.

Your next question comes from the line of Felicia Hendrix with Barclays Capital.

Good morning, guys.

Good morning.

Dan, on the balance sheet, the receivables, they were you were slightly over 50% since year end.

I was hoping you could walk us through that.

The change there in difference from year end is the receivables due from CityCenter, the largest component being the residential component as you recall under the completion guarantee.

We fund up to 244 of condo proceeds so as the condo proceeds close, that balance works down and as we work that also, the biggest component there is the condo element, which to date we have a little over $200 million outstanding to date under the condo proceeds element of the completion guarantee, and we do have a receivable balance for items under the management contract as well, due from CityCenter that are accrued as of March.

Okay.

But in addition to that, there is nothing gaming oriented that would be out of the ordinary?

No.

Gaming is pretty much -- gaming and hotel side of receivables is normal and consistent with prior year.

Okay.

Great.

And then just moving to Macau, we estimate that revenues in the quarter were about $400 million.

Is that correct?

I don't think we have any right here, Felicia.

We don't usually disclose properties although there they seem to disclose it every week.

We don't have that available.

I will have to give that to you off line.

That gets into my next question there in terms of let's say our estimate is correct, you can back into margins, and I wanted to talk a little bit about your EBITDA margins at that property and it goes with my other question which is is it fair to use the first quarter results as a run rate or do you expect your cost structure to improve there, revenues to grow, how should we think about the full year and going forward at that property?

Do you want me to tackle that?

Sure.

Chime in.

Hi, Felicia.

We had a pretty solid quarter as you saw in the first quarter.

We believe that that trend can be continued.

We certainly have a very attractive asset there, and an asset in a neighborhood that has improved dramatically from an infrastructure perspective than where it was in the beginning of the quarter.

We made a lot of changes from a marketing perspective.

We have lowered some costs there.

We have enhanced our marketing relationships locally and in the region, and our competitors have opened up which is increased traffic in the general neighborhood which we think is a benefit to us.

From a standpoint of the market as you know it is volatile in terms of whole percentages, and it is hard to predict what we're going to make on a quarterly basis there, hard for anyone.

You can have tremendous quarters or disappointing ones.

We had a pretty solid one.

I guess the way I characterize it in the first quarter.

As Dan said, we're shooting to get the IPO done hopefully late in the third quarter and might bleed into the fourth and we're still shooting for the third quarter.

And we'll have a couple of quarters of we hope good results to base the IPO on.

As it relates to future growth in that property as you know we have the considerable amount of expandable space there.

I think it is over 60,000, 70,000 square feet of space shelled out and ready for future development and plans are under way right now to enhance the main gaming floor with a bunch of ideas that the Board is looking at right now will be over in Macau later this month to finalize those, and then to expand the facility, so the earning potential is certainly greater.

It is certainly is not making nearly as much as our competitor next door, which is something very visible to us, and something that we think we can improve upon and we think we will next year.

And, Felicia, to follow up on your net revenue question in the first quarter roughly about $412 million versus prior year of $262 million.

Great.

And then just final question, can you guys give us some kind of update on the situation where Perini and the mechanics lien?

I can, Felicia.

As you know we have the mechanic lien filed by Perini in the amount of about $491 million.

There is also about $25 million in mechanic liens filed in associate with other aspects of CityCenter.

Perini also filed suit against us primarily stating we owe them $492 million and we haven't paid them.

We're going to answer that particular complaint in the next couple of weeks and of course have our own cross complaint with Perini.

Primarily it is a legal matter.

We have two differences of opinion as to what's owed in terms of the final billing for CityCenter.

They think it is around $500 million.

I think it is much less than that, and of course that's going to be adjudicated over a period of time in the court systems, but it is a lot of money to be arguing about, but if you look at it on a relative basis, the project had about $6.6 billion in total of construction contracts, and we're arguing about the last five or six or 7% as to what the value of all the billings actually are net.

So, we're working through it, and we hope to get it resolved as quickly as possible.

We have been -- we have a judge in town, three business judges I guess and we have one that's going to hear this case and considering both sides and both points of view and we look to resolve this as quickly as possible.

That's good.

Does this case have any bearing on the rating agencies and how they're viewing CityCenter?

I know that is a goal of yours to get their credit rated.

Well, I can't speak on behalf of the rating agencies, but clearly our guidance and our range of the impact on the MGM completion guarantees remains the same, original range as you recall was $150 million at the low end and $300 million at the high-end, and that range is still consistent with our guidance so that is factored into their analysis as well, but I can't speak for the agencies themselves.

Okay.

All right.

Thanks, guys.

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

Thank you.

If I could follow up relative to the liens on the condo closings.

Are the fact that the liens existing now affecting your ability to close in the condos?

In other words, are there buyers who are worried the titles will be encumbered and is that slowing the closings?

It doesn't slow the closings.

Obviously everybody is concerned about the liens.

They have to be explained in great detail to our residential buyers.

They are protected through a title insurance policy that protects them from any consequences as it relates to these liens or the final disposition of these liens, so all the residential buyers are protected in that regard.

Talking about the closings, could you give us a little more insight as to the pace at which you expect the remaining units to be closed, and how that influences your decision of how many Vidara rooms go into inventory?

Maybe you can tell us how many are in inventory now and how you see that ramping up during the year.

I can start with Vidara, I think there is 864 rooms of 1,525 or so at Vidara currently being operated as the hotel.

The remaining 600 and some odd rooms are all under contract or these apartments are all under contracts.

As we process through those, which will be somewhere mid-summer, we suspect that we're going to close about 175 of the Vidara 600 units and the rest will be returned to Vidara for hotel inventory, so that will make the hotel size approximately 1,350 rooms, and about 175 residences.

Janet, what was the other question?

That was it.

I think you got it.

I do have one more follow-up on Macau.

You talked about the additional capacity that you have available there, and I am wondering how that can be handled given the table cap situation there and if that affects your timing and ability to open that capacity?

As I say, we're going to be over there later this month.

We don't feel like what we want to do will impact -- will be restricted by the table caps policy that's currently in place, Janet.

Okay.

Thank you.

You're welcome.

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

Thanks.

Just circling back to your expectations about RevPAR and Las Vegas and the rate of recovery.

I think in the last call you talked about your expectation for RevPAR to be positive on the full year basis, and just wondering if you still feel that's the case and also if you could clarify if that's including or excluding ARIA and I assume that your commentary is mostly on a same-store basis and then a follow-up after that.

Okay.

That's as good a forecast as we can have at this point in time, so that hasn't changed, Robin.

In terms of a little more granularity to our RevPAR forecast, as I said, in this current quarter we think it will be down mid-to low single digits.

We could even be up in RevPAR in one of these months in the quarter.

We'll see.

We think we'll be positive in the second half of the year.

The degree of how positive we are in RevPAR will be determined by the convention business, particularly in the fourth quarter, so we are down 8% in the first quarter.

We're going to be down a lot less than that here in the second quarter.

We think we're turning the corner in the second half of the year and given the short booking window, it is really hard to be very precise, but the trend pointed to the fact that is very possible still.

And then given the importance of the convention that's booked to getting RevPAR to turn positive, you mentioned convention room nights on the books being up significantly for everything in future periods.

Can you give us more specific color on Q3 and Q4?

Are convention room nights that would take place in those quarters, are they up year-over-year and also I was going to ask about the rate.

When you talked about rate improving, did you just mean sequentially or did you mean that the rates are actually up year-over-year for the convention room night?

Let me try to do a couple of those and then I will turn it over to anyone that can jump it.

We to want get to a point of as much as we have.

I am looking at the end of the first quarter of this year we had 865,000 net rooms on the books for next year, right, Dan, 865,000 rooms.

So far we booked through the first quarter of this year for conventions for next year.

That compares to a year ago we had about 700,000 rooms on the books for what is now 2010, and that compares -- it is the highest number, 865,000, the highest number we have had since we have been tracking this data.

If you looked way back in 2006, we had about 800 -- I am sorry, about 580,000 rooms the books for the following year, 2007, so we have a lot more rooms the books for next year than we've ever had at any point in time, since we have been tracking that.

That's for conventions that is take place in 2011, so not 2010.

Yes, yes, this is just -- by the way, apples-to-apples of course excluding all of CityCenter, it is the same store number of rooms we have on the books for the calendar year 2011 versus the prior year.

That's what we're talking about.

In terms of how it looks in the second half of this year looks like we're going to have more rooms the book in the third quarter for sure versus the third quarter of last year.

The fourth quarter is unclear.

We might be down a bit in the fourth quarter because of some city wides moving in and out, but in general sense, it looks like at least for the third quarter we can say we think we're going to be up -- looks like we will be up in the second quarter as well, by the way in terms of convention room revenue and in terms of room nights so second quarter up, third quarter looks like it will be up and it is harder to determine in the fourth quarter.

In terms of rates you talked about that.

Room rates right now were achieving is about for this year about what we were doing back in 2004, right?

Yes.

And then the room rate that we're achieving for next year look like they're around 2007 levels which, right.

That's right.

The room rates we're getting and in the convention block about what we're doing back in 2004 and 2005, and the room pricing on conventions for next year is very comparable to what we achieved in a really good year of 2007.

That's really helpful.

Thank you.

Just last question.

Just in terms of what we should expect for CityCenter and you tried to put ARIA's room rates improving and all of that, but looking at CityCenter as a whole and there were a lot of adjustments, but it looks like CityCenter overall the EBITDA was $33 million loss versus the 12 million for ARIA, so is that sort of $20 million per quarter that drag from the rest of CityCenter outside of ARIA?

How should we expect that to trend for the rest of the year?

If it trends like the first quarter I won't be on the next call.

Obviously we look at this as kind of a one-time event for opening all of these properties at CityCenter.

We can't forecast as you might suspect, a brand new operating company.

We're looking at it month by month.

I don't expect we're going to have any result that is are similar to the first quarter going forward.

The pushing the rate at CityCenter primarily ARIA but secondarily Vidara and Mandarin is a process we handle very carefully because we're trying to get the full occupancy in a holdover rate.

Until you get the full occupancy, you're not going to be able to push the rate.

As we get closer and closer to what we consider to be full occupancy, which will be in the low 90s, given the marketplace currently, we're not going to be able to drive the rate beyond what it is now and it runs $180 to $190 range at ARIA, a little bit more at Mandarin and a little less at Vidara.

I think -- I am sorry, Robin, I was going to add and you can follow up, I think you mention Bobby, but to be clear on this the losses of Mandarin and Vidara of course have abated dramatically, and we think we're going to turn the corner on those.

That can be dragging down ARIA and therefore the whole CityCenter complex, and obviously, as the operating performance improves there, that's going to help, but the occupancies are already improving at ARIA which will have the resulting impact on being positive in EBITDA there as well.

Crystals was already positive.

That's true.

We look to make money in the second quarter and all of the various components at CityCenter are going to be at least break even or making money by the end of the second quarter.

It is helpful.

Just to clarify, when you said that you can't push a rate until full occupancy, you mention Vidara and Mandarin, does that mean for ARIA when your yield managing ARIA that you think of the rooms at Vidara and Mandarin being in the same pool, in other words, we won't see rate go up at ARIA until occupancies are in the 90% range for the other properties as well?

They're not really connected in that way.

Vidara and Mandarin have their different challenges.

ARIA is obviously the largest property of the three, but they're all trying to push their occupancy up and hold their rate integrity, and until such time as Mandarin and Vidara and ARIA get up into the 85 to 95% range, it is difficult to drive the rate.

Of course Mandarin is managed separately, and they have their own business model as the four seasons does down the road at the Mandalay property and really ARIA is establishing itself as one of the preeminent luxury casino hotels and so it is peer group is Wynn and Venetian and Bellagio and properties in that area, and that's how we're pricing the ARIA property.

We have actually walked people over to Vidara and we had the fight I know this happened last weekend when the Mayweather and Mosley fight, the place was packed around here and moved people into Vidara, we were sold out at ARIA and sold out at MGM, Bellagio and Mandalay and Vidara becomes an opportunity to walk people into properties we own, control rather than to our competitors.

That's helpful.

Thank you.

Operator, we'll take one more question, please.

Your last question is from the line of Shaun Kelley with Banc of America.

Thanks.

I think most of my questions were answered in the last exchange there, but just to be clear quickly, it doesn't sound like you need to actually increase rate at CityCenter in order to reach break even.

Is that fair?

That's correct.

CityCenter when you look at it, in totality it doesn't make much money at 65%, but it starts to make money around 75% and the courses you pull, the closer you get to 90 and started to make a lot of money.

We need to drive the occupancy.

It is taking care of itself.

There is a lot more brand awareness now than there was in the first quarter, and it is gaining its momentum.

So we're going to get all the components of CityCenter substantially occupied within the next several months, and then improve the rate as we go forward.

That's helpful.

My second question was just on the baccarat business broadly speaking, for your core Vegas properties.

How much of the gaming mix is that at this point and how should we think about the margins in that business as it compares to the general gaming mix?

I don't have the mix.

I don't have the percentage, but clearly, Shaun, given the level of baccarat play we're seeing, clearly the mix is higher than it has been over the last several years related to baccarat.

In terms of our market, shares moved up.

I alluded to it, but it was important for us to track, Sean, how we were doing both with and without ARIA, and our market share in baccarat you pull ARIA out was I think like 36%, up versus a year ago, and of course when you add ARIA to it, ARIA's share was about 8%, a little over 8%, so our baccarat market share is moving up even better, 38%, so we're at 38% market share without ARIA, about 44, -- I am sorry, 46, 47% with ARIA in terms of market share and a year ago our baccarat market share was 37.5%, so market share is moved up without ARIA, it's moved up more obviously with ARIA.

The profitability of that segment has not regressed.

It is profitable as it has been before, and it is increased in terms of its size of our gaming business which has had a positive impact on our overall gaming margins.

Got it.

Thank you.

That's very helpful.

Great.

With that, operator, we'll end the call, and we clearly are available all day today for any follow-up questions.

Feel free to call my office or Dan or Sara's, and we will be happy to answer your questions.

Thank you for participating today.

This concludes today's conference call.

You may now disconnect.