美高梅國際酒店集團 (MGM) 2010 Q2 法說會逐字稿

Good morning and welcome to the MGM Resorts International second 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 Resorts International and President and CEO of CityCenter, Dan D'Arrigo, Executive Vice President, Chief Financial Officer and Treasurer.

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.

Sir, you may begin.

Thank you, Conchetta.

Good morning, everyone and welcome to our second quarter earnings call.

This call is being broadcast live on the internet at www.mgmresorts.com and a replay of the call will be made available on the Company's website.

This morning we furnished our press release and our Form 8-K with the SEC as well.

Before we get started, I would like to just read the Safe Harbor disclosures.

Information we provide on this call my 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 actual results to differ materially from estimates.

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

I would now like to turn it over to Mr.

Jim Murren.

Thank you, Dan.

Good morning, everyone.

First, I like to take a moment to recognize the passing of a Board member of MGM of Governor Kenny Guinn.

As you know, Governor Guinn made a tremendous contribution to our Board and to our state.

He will be very sorely missed here, but his legacy will live forever.

I also would like to welcome you to our first conference call as MGM Resorts International.

We have quite a bit of information to share with you today.

I would like to start with some general comments.

First, I think it is important to highlight the fact that despite the volatile financial markets, the twist and turns of the economy and economic indicators, the Las Vegas trends that we predicted in our last quarter call have come to pass.

The Las Vegas recovery seems to be well underway here.

Visitation continues to grow.

Our resorts properties are getting more than that its fair share in terms of both occupancy, ADR and gaming volume.

We thought that our REVPAR will be down less in the second quarter than it was in the first.

That was true.

REVPAR was down 2% in the second quarter versus a 8% decline in the first quarter.

Importantly, Bellagio and MGM Grand's REVPAR were actually up in the second quarter and that was driven by good convention business at those two properties.

Our other luxury properties were not far behind.

In fact, June was an important month for us because it was the first month since October of 2007 that our REVPAR Strip-wide was actually up year-over-year.

It was in June of this year.

We think that's important because typically when our luxury properties do well from a REVPAR perspective, that leads to improvement in our mid market properties.

We think that will happen on a going forward basis.

As our luxury properties improve, they will be able to lead the way for the rest of the properties we own on the Strip.

In the second quarter, our convention room mix was 13%, that was up two percentage points over the prior year and better than we did in the first quarter when we were flat year over year.

Getting our convention mix back to normalized levels is important to us and will help us yield up the rest of our portfolio and of course, it also helps us drive midweek revenue per occupied rooms.

And we saw some of that in the second quarter.

Our ADR on a same store basis also improved sequentially in the quarter, was essentially flat year-over-year and that's compared being down 6% year-over-year in the first quarter.

Actually in June, our ADR was up year-over-year for a month.

We've also seen an impact when we get the convention business coming into the properties some of our ancillary businesses also do well, an example would be catering.

Catering was actually up 27% year-over-year in revenue in the second quarter.

On conventions, that's an important part of our story, the pace continues to be quite strong.

In fact, in June, that was a second largest convention bookings month on record over at Mandalay Bay since the property opened June of this year, was its second best bookings month.

We continue to expect to see the second half of this year with better convention business than we saw last year.

We've been talking about the second half being better than first, and we're seeing convention room rates this year up about 5% or 10% versus our convention room rates last year.

The story looks even better in 2011.

Our forward-looking booking trends for 2011 in the convention segment continue to be up about 20% ahead of pace, the same time last year for example.

And the rates that we're achieving for 2011 -- our room rates are 15% to 20% above the rates that we're getting this year.

Based on these trends and what we're seeing in our business, we still believe that our REVPAR that we'll see for the second half of this year will be positive here in Las Vegas as we predicted on our last quarter call with you.

From a gaming perspective, Bacara really continues to be the main driver of growth and our international business remain quite robust.

If you take a look at the Strip data for April and May, you will see that Bacara grew about 13% in the first two months of the quarter.

We can actually give you the June numbers for our properties leased; MGM's Strip properties saw a 20% increase in Bacara growth in June.

The business there continues to be quite robust and we are quite encouraged by the international business and Bacara for the balance of the year.

On the other side of the coin, the domestic business remains quite challenged.

Those trends have not improved since we talked to you last quarter.

From a market share perspective based on all the data that we've seen and we have it through May, our marketshare in gaming is up year to date.

We believe there are many reasons for that.

We have the properties of choice, the best employees and staff, the best amenities, our hosts are quite outstanding and we've done a good job lately of cross promoting our properties.

We'll be doing more of that in the future.

To have market share up in the quarter again and for the year I think is valuable and significant because we didn't have many events in our Grand Garden arena or over at Mandalay.

There are quite a few more events in the second half of this year and that has always been a significant driver of play so we're encouraged about the back half the year.

We think our market share will also improve as we continue to roll out M life; that is our new and improved customer rewards program.

We developed this to improve our customer analytics.

We think that that will increase our market share as well.

On that point, as you know in June at our shareholder meeting, we not only changed the name of our Company, but we launched the concept and now the reality of M life.

We believe in this market, it's absolutely critical that we create the best possible value proposition to our customers.

We're starting to do that.

We did it beginning in Beau Rivage in July.

We rolled it out there.

The feedback has been tremendous, distributing an enormous number of cards.

We're rolling it in Tunica in Detroit soon and then in Las Vegas at our resorts here later this year.

We're very excited about this.

We think this will generate incremental cash flows and be a major driver of growth for us beginning next year.

And finally, and Bobby will get into this great detail, couple comments on CityCenter.

One, as you could see in the release, our occupancy has improved significantly.

And that has clearly been the result of great work by the CityCenter team and by MGM marketing to generate greater brand awareness.

We think that that brand awareness will only improve as we continue our marketing efforts.

From an ARIA perspective, it's ADR is the second highest within our portfolio and Bobby will speak to this.

But certainly, we're proud of not only the value proposition, but the pricing we're able to achieve at a brand new resort from a rooms perspective.

And it certainly has established itself as one of the major players in the high end.

It's attracting a tremendous amount of customer demand from a gaming perspective and that bodes well for the future.

Of course we didn't do well from a whole perspective there and though we don't typically give the kind of detail we will give today, we think in light of that particularly unusually whole situation at ARIA, we're going to give you some more information on hold there, as well as what it meant to our Company in the second quarter and both Bobby and Dan will help in that regard.

With that, Dan, can I turn it over to you to get into the detail?

Thank you.

As laid out in our earnings release, I'll just touch on a few highlights from the quarter.

Our net revenues, excluding reimbursed costs, include sequentially down 2% versus a decrease of 4% in the first quarter year-over-year.

Our adjusted property EBITDA attributed to our wholly owned operations was $305 million and was negatively impacted by a low hold percentage in the quarter.

Had we achieved a normal hold at our Las Vegas Strip properties, excluding ARIA, our EBITDA would have been higher by approximately $20 million in the quarter.

As part of our quarterly reporting requirements, we also undertook a analysis of our carrying value of our investment in CityCenter in the second quarter.

As a result of this analysis, we concluded that the total equity value of CityCenter is approximately $2.65 billion, of which as you know, we own 50%.

This was vetted by some of our outside consultants as well and this resulted in the $1.2 billion noncash charge in the quarter, reducing the carrying value of the Company's investment in CityCenter to $1.5 billion.

That $1.5 billion does include approximately $173 million due from CityCenter, related to amounts advanced under the completion guarantee of -- related to the condo sales proceeds aspect of that.

This charge also included the Company's share of an impairment charge at CityCenter, related to the residential inventory at Veer and this amounted to about $29 million in the quarter.

At MGM Grand Macau, we earned operating income of $40 million in the second quarter including depreciation expense of $21 million.

MGM Macau is pleased to have announced the successful refinancing of its credit facility.

The facility was over subscribed and upsized from $850 million to $950 million.

Proceeds from the new facility were use to repay the existing loans and provides us with added liquidity and a new five-year maturity date to July of 2015.

With this complete, we now focus our efforts on the IPO which we will continue to target for later this year and future expansion opportunity in Macau.

In Borgata, the process there continues.

We recently reached an agreement to sell four long-term leases which we announced last week, and they are respecting real property parcels -- two Vornado and Geyser Holdings for an approximately $73 million.

The underlying real property parcel subject to the transaction make up about 11.3 acres total land.

The sale process as it relates to our share of Borgata is underway with several interested parties and the recently announced financing plan is certainly constructed to our process as it puts a long-term capital structure in place for the property.

We're working with our advisers on the transaction and it is our expectation to finalize the sale of our share of Borgata with a negotiated 18-month time period, where we have the right to direct the trustee in that sale process.

Switching over to our liquidity and balance sheet.

As of June 30, the Company had over $2 billion of cash available between the $1.5 billion of availability under our revolving credit facility and approximately $570 million in excess cash.

This cash excludes any amounts required to operate our cages and any operating needs at the property level.

During the quarter, the Company repurchased $211 million principle amount of senior notes with near term maturities; $136 million of that consisted of our 8.5% note due in September 2010 and $75 million related to our 8.375% note due February 2011.

These transactions resulted in cash interest savings of approximately $5 million.

We were opportunistic with the timing of our convertible bond offering in the second quarter, where we raised $1.15 billion of 4.25% senior unsecured notes through 2015.

Our focus remains on the Macau IPO.

Earlier this year, the sale of our interest in Borgata, and as well as being opportunistic in looking at noncore asset sales, such as land leases in Atlantic City more recently the sale of our former temporary Detroit facility, which collectively those two transactions raised approximately $80 million.

Now I like to give you some help with your modeling and talk about our outlook.

Our total stock compensation expense in the third quarter is estimated to be approximately $8 million to $9 million.

Depreciation expense in the third quarter is estimated to be in a range of $165 million to $175 million.

Our gross interest expense was $291 million, of which $267 million was related to cash interest.

We had no capitalized interest in the quarter.

We estimate that our gross interest expense for the third quarter is in a range of $285 million to $295 million with no capitalized interest in the third quarter.

As far as an update on our capital spending, we continue to expect to spend approximately $200 million in capital this year, of which approximately $80 million has been spent through the second quarter.

The monies we are spending include suite and building remodels at The Mirage, the start of a room remodel program at MGM Grand later this year, as well as the purchase of new slot products and improvements to our public areas.

Our properties are and will continue to be best-in-class in every segment of our business.

The partners at the CityCenter level have demonstrated their continued commitment to the project here in July, completing a capital call in an amount of $65 million or $32.5 million by each partner.

The partners will continue to analyze the operations and the requirements going forward as CityCenter continues its ramp up.

MGM's funding of the capital call came from a conversion of a portion of its receivable balance due from CityCenter here in July.

And just to remind everyone on the call, CityCenter has no financial covenants until the quarter ending June of 2011.

Now with that, I would like to turn it over to Bobby Baldwin to talk more about CityCenter.

Thank you, Dan and good morning, everyone.

CityCenter reported adjusted EBITDA of $8.8 million.

ARIA lost $17.1 million in adjusted EBITDA.

And Crystals, Vdara, Mandarin combined just about broke even.

CityCenter residential reported $34.5 million in adjusted EBITDA and project costs were $8.3 million for the quarter.

ARIA's net casino revenue was $48.7 million in the second quarter compared to about $76 million in the first quarter of this year.

Casino revenue was negatively impacted by a much lower than normal table being hold percentage of 11%.

This amounted to an impact of approximately $24 million in EBITDA had we achieved a normalized hold percentage at ARIA.

One of the reasons for the volatility in this quarter in hold is that ARIA continues to experience strong rate of play, particularly in the international and [baccarat] tables being business.

Year-to-date through May, ARIA achieved a 14.1% of the Las Vegas Strip baccarat volume, up from 13.9% in the first quarter so baccarat business is good.

During the quarter, ARIA hosted many casino events and promotions to expand the brand.

Advertising and building brand awareness has been our top priority and we have begun to see the impact of our advertising marketing campaigns.

ARIA's casino revenues was $140.4 million for the quarter.

This was a 19% increase over the first quarter.

As ARIA builds its base of business, occupancy continues to grow.

Second quarter occupancy was 80% versus 63% in the first quarter with an ADR of $178.

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

Convention bookings looking forward continue to be positive.

In June, ARIA booked 44,000 convention room nights for future dates.

These bookings represent a new all time high for a single month in the history of ARIA and even higher than in any single month Bellagio has achieved in its history as an operating company.

A significant amount of these bookings are for this year and next year.

The ARIA convention sales team continues to increase lead volume and conversions each month while groups are starting to book further out.

2011 convention bookings pace continue to gain momentum along with other MGM Resort properties.

We continue to strive to become more efficient in ARIA and the second quarter FTE counts averaged 6,083 compared to 6,300 in the first quarter.

This 217 decrease came even though we had 64,000 additional occupied rooms quarter to quarter.

At Vdara -- Vdara occupancy is improving as well, reaching 75% in the second quarter with an ADR of $128.

Hotel room inventory also increased from 845 units in the quarter -- the first quarter to 910 units in this quarter.

Revenue enhancement and cost reduction initiatives continue to be implemented at Vdara in the second quarter.

Additional staffing consolidations with ARIA were implemented, as well as staffing reductions and the elimination of several management positions.

Future cost saving initiatives for the third quarter have already begun, including streamlining the in-room amenity program at Vdara.

As it relates to Mandarin Oriental, total revenue in the second quarter reached $8 million, compared to $6 million in the first quarter.

$1.3 million of the $2 million increase was attributable to the hotel division who marketed to a stronger leisure-based guest.

Expenses were also reduced from $12 million in the quarter -- the first quarter to $10 million in the second quarter.

At Crystals, Crystals continues to add new tenants and finalize spaces.

Approximately 80% of leasable space at Crystals is currently under lease.

By the end of the second quarter, 62% of Crystals leasable area was occupied by tenants open for business, up from 54% in the first quarter.

We had openings of several high end stores, Miu Miu, Zegna and the Social House restaurants, just to mention a few, and Christian Dior also opened July 1.

Several tenants are schedule to open over the next few months, including some notable brands such as Prada, Gucci, Yves Saint Laurent and Balenciaga.

This will result in Crystals being 72% occupied by the end of the third quarter and on schedule to be about 80% by years end.

As you know, we commenced the closings of the units at CityCenter residential in January of this year.

In the second quarter, we closed a total of 196 units for $160.7 million in gross revenues at CityCenter.

Specifically, we closed 18 units at Mandarin Oriental, 105 at Vdara and 73 at Veer.

To date we've closed 53 units at Mandarin, representing $123 million in revenues, 142 units total in Vdara, representing $86 million in revenues and 105 units in the Veer towers or about $57 million in revenues at Veer.

As it relates to the subcontractor close out at CityCenter, we've been in contact with 177 of the 232 contractors yet to be closed out with the construction project.

We closed 33 of the 232 subcontractors so far in the last few weeks and we have 43 other subcontractors in final stages of negotiations in clearing out the information.

We anticipate the subcontractor close out process to be completed sometime in the fourth quarter of this year, as the team works very hard to finalize all of the construction payments associated with these subcontractors.

And Dan, this is my report and I will turn it back to you.

Thank you, Bobby.

Operator, we would be happy to entertain questions.

(Operator Instructions).

Your first question comes from the line of Steven Kent of Goldman Sachs.

Good morning.

Jim or Bobby, could you talk a little bit about the hold on Aria?

Maybe just give us a little bit more color on how that will normalize over the next 6 to 12 months.

Is it customers?

Is it training employees?

May be you could just give us some color there.

And whether -- in particular, I'm focused on whether those customers are leaving to go to competitive properties or staying within your system or whether it was just pure luck.

And secondarily, on Macau, can you talk about the some of the marketshare issues and what you are doing to address that?

When you say later this year for Macau IPO, does that you're moving from maybe September to something a little bit later?

I'll do the whole percentage.

This is Bobby.

First of all as it relates to Aria, it has nothing to do with training the employees.

Most of this whole percentage related to Bacara in particular, as you know we have extensive controls as it relates to the management of the gaming and the training of employees.

I would say that it's 100% luck.

We analyzed all the play that we have, particularly at high level of Baccarat.

And although unusual, I don't remember ever having 11% whole percentage in a quarter -- the whole percentage related to high end play, primarily in baccarat.

It was not a function of short plays where we people were bouncing at various properties in Las Vegas.

We didn't have any of that.

This was related to high level baccarat.

There was nothing abnormal in the quarter.

We did look at this from a regression analysis point of view, analyzing it from a standard deviation and it looks like we might be as far -- as wide as standard deviation three as it related to this particular quarter's whole percentage.

It is unusual.

We have had some 30% quarters on the other side of it although it's been some time, but that's the situation with the hold.

Was there another part of that Steve for me?

Just maybe -- you have answered it because I was going to ask what programs are in place over the next couple of months to maybe smooth that out.

Do you think you can start to target more of the slot player and maybe some the lower hold customers to maybe smooth some of this out, without losing some of the high end players?

In order to smooth it out, we're always looking to moderate our business.

Unfortunately, the slot whole percentage, the slot activity doesn't really relate to the table game's whole percentage.

Although the slot business continues to grow, it won't help us in moderating the whole percentage in tables.

When you're in the high end baccarat business as MGM Resorts is and has been for many, many years occasionally this sort of quarter comes up and it did come up at Aria.

We expect this to normalize as we do with all of our table games operation and historically, that has been the case.

Maybe, Bobby, I would add to that.

I think Aria's market share is already about 14% in the high end.

That's right up there with Bellagio.

In fact, it is a touch above Bellagio, Steve, in terms of market share.

The customers that were happy in the second quarter are customers that we know quite well.

Some which are exclusive to us.

And some of which have already been back here in the third quarter.

These aren't customers that are aren't familiar to us.

They're quite well known customers to us and had a good time in the second quarter.

In terms of Macau, the second part of your question, in terms of time of the IPO, we really can't be specific given the Hong Kong rules there.

You can see a couple points that I think are relevant.

One is we're building off a strong base.

I think our LTM cash flows are about $250 million, Dan?

Correct.

EBITDA of about $250 on a LTM basis.

We'll continue to pick up business.

We've added some operators to that market.

We think we are going to continue to grow our business there.

We're obviously very interested and have been very committed to expanding our footprint in Macau with another property over time.

That certainly would benefit an IPO of Macau and that's something that we're looking at from a timing perspective as well, in terms of how we can articulate a more rapid growth story in Macau and that is something we have been working on.

At this point in time, the final table is fairly consistent with what we have said, in terms of toward the end of the year, but we cannot be specific because of the Hong Kong rules, number one.

And number two, we're managing the timing based on our expectation of further growth in Macau.

Okay.

Thank you very much.

Thanks, Steve.

Our next question comes from the line of Joe Greff of JPMorgan.

Good morning, everybody.

I have a convention group related question.

Jim, the data point that you gave us on convention bookings, I thought was quite encouraging.

Based in the pace right now and what you on the books, when you look at your wholly owned Strip properties, where do you think that mix of room ex related to convention group can go next year?

Bobby, on that topic of group and convention, where do you think Aria's mix can go next year?

I will take the first part, Joe, and maybe Bobby can take a look at that.

As I said, we were 13% in the second quarter.

We'll end up the year about that for the year.

Next year, we think that that's going to be closer to 14%, but it's really property specific.

For example, look at Mandalay Bay, our big convention resort, it's a great year with 2007, its mix with 40.5% in that year.

It fell to 36.7% in '08, 31.1% in '09.

But year to date this year, it's 34.9% and in the second quarter alone it was 36.6%.

Mandalay has turned the corner and we'd expect that to continue to rise.

We want to get it back into the 40% range if not next year, then certainly the following year.

But it's well on its way.

Similar story would be at Bellagio, for example where in 2007 it was 15.7%, down to 14.8% in '08.

In 2009, it was only 12%, but year to date this year it's 14.2%.

Was actually 15.2% in the second quarter so Bellagio like Mandalay is moving up.

The same would be true basically at MGM Grand as well.

In 2009, it was 11.5% year to date.

MGM's mix is 18.9%, not to hit you with too many numbers.

But clearly on a Company-wide basis, we expect that mix to improve next year.

As I said, the room rates that we're getting, this year above last year by 5% to 10%, depending on the group.

But the rates we are getting in 2011 are materially higher than this year.

They are 15% to 20% higher than we're getting in 2010.

As that mix improves, the rate or the profitability of that mix also improves.

Obviously the benefit to the rest of the mix is obvious, as we're able to yield the other segments more effectively.

That is very encouraging for us.

As it relates to Aria, Bobby?

Joe, it looks like for 2010 for the first year of operation at Aria, the convention component is going to be the 11% to 12% range of our total occupancy.

Next year, we're pacing to do about 15% which is about what we scheduled before we even opened.

That's what we're targeting 15% for next year and beyond.

Jim, in your opening comments was that June Strip-wide room REVPAR was up year-over-year.

I think you said that was convention group driven.

Did you see a corresponding spend to your -- your increase in spend occupied room for the month?

It improved a little bit, but not much, Joe.

Our operators here are feeling that the spend per occupied room, the total REVPAR is going to lag.

The growth of that is going to lag the growth of REVPAR.

In other words, we'll be able to yield the rooms better, get better REVPAR growth -- as I said, we think we will be positive in the second half of this year.

That's the first step.

And then getting people to spend a bit more money while they're here has typically been a lag in Las Vegas.

We think that will also occur here, although we think it will follow the growth of REVPAR.

Great.

That's all for me.

Thanks.

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

Bernstein.

Thank you.

Jim, you just said earlier that you're managing the timing of the Macau IPO, based on growth expectations and you also said that you want it to happen this year.

Does that mean sometime in the balance of the year you would expect the environment in Macau to change and be more pro growth than it is now, whether it is a function of table caps or something else?

Again, I can't be specific on the timing, although I would love to be.

We certainly have aspirations to have more than one casino in Macau and we also expect to be able to grow the existing resort that we have.

As we are able to succeed on those two fronts and we expect that we will, we cannot speak for the government nor would we try.

That would be a determinant factor when we would decide to go public in Macau.

As you know, the timing is not necessarily ours, specifically in terms of the week and month, but the timing certainly ours, in terms of whether or not we want to go public.

We certainly believe that a growth story would be enhanced by having more than one resort there and that is something that we are monitoring and something we've been working on.

Can I follow up with Macau just a little bit?

You've been talking about a new junket strategy and you mentioned on this call that you have been adding new operators.

Could you talk a little bit more about what your junket strategy is there?

We have expanded the footprint of one major operator and we brought in another one as well.

We're not prepared to give the names of those, but these are well known operators in the market.

In terms of the strategy, we have a quite of bit of unused space in the Grand, in the MGM property there.

We're expanding some of that shelled out space right now and we're changing the mix of our tables to accommodate that fact that our junkets and our VIP business continue to increase.

There are many aspects to the strategy.

Number one, we're exerting ourselves from a MGM Resorts perspective, meaning that our marketing offices of MGM Resorts and our marking personnel are more active in driving business into the MGM Macau property.

That's number.

Number two, our team there has been adding hosts and other marketing representatives, not only in Macau, but in the region to increase our gaming business, both on the high end and on the mass market.

And number three, we've hired a couple of significant people in the marketing world there.

As I said earlier, we're bringing on more operators because we do have the space to accommodate them.

In terms of the value proposition to the operators, that has not changed.

In terms of the economics of bringing on these operators, they are very similar, in fact almost identical to the value deals we have been doing for the past couple years with our operators.

The shift is an expansion shift of personnel and of people into property.

It is not a shift of financial strategy.

Thank you.

Thank you.

And your next question come from the line of Felicia Hendrix with Barclays Capital.

Good morning, guys.

I just want to take it back to some of the convention booking discussion and -- for a moment.

Bobby, at CityCenter, I was just wondering if you could give us some color on what the convention bookings look like in the second half of the year versus what they were for the first half the year.

And then also in that answer to the question, maybe you can discuss any expectation for improvement in pricing and volumes midweek at CityCenter.

The convention component of it, obviously convention bookings have accelerated in the second quarter relative to the first quarter.

As you know, we got off to a slow start in the beginning because a lot of our convention bookings fell away about a year ago when people were uncertain as to when or if we were going to open CityCenter.

Bookings continue to strengthen.

We saw some of that trend at the end of last quarter and we've seen it throughout the second quarter.

As it relates to the occupancy midweek versus weekend, you're talking about in total right?

Well you could do in total or I was -- specifically, asking CityCenter, but I wanted to discuss total as well.

Also just really -- the answer -- the question was second half versus second half, and you might have heard me say second quarter for CityCenter.

I just wanted to see if you would give us some specific numbers maybe to work with as well.

I can tell you about total occupancy as it relates to midweek for the first quarter was 57.4%.

Those are all rooms and we ran 74.3% in the second quarter, much stronger.

Weekend occupancy was 75.7% in the first quarter and weekend occupancy was 92.8% in the second quarter.

I don't have any further detail necessarily on conventions, but as you know most of conventions business is midweek.

Right.

And then just -- Jim, in your prepared remarks, you were talking about the forward bookings for 2011 being 20% ahead.

That is the same pace we were -- you were discussing in the first quarter.

You did give us color this time on the rates.

They are up 15% to 20%.

I'm just wondering as we -- as you progress from the first quarter to the second quarter, and may be even now, what progress have you made on 2011 bookings?

Is it just better pricing or are you also seeing higher -- more actual rooms being booked because 20% is still the same?

Yes, it's the quality of the booking and the timing of it, Felicia.

Because a year ago we had, sadly, we had quite a bit of a available space at almost any day you like to book something on a going forward basis.

And now we have occupied our conference and convention facilities in the many of the peak periods already in 2011.

The business that we're booking right now is a lot of fill-in business where we do have openings property specific or whether we can accommodate a group.

Where we can be a little bit creative, we can accommodate a group using multiple properties.

Although the booking pace remains constant, the quality of the bookings are high because we're able to put them in times that are available which are not typically the peak times.

Also, we're able to use some properties that we haven't been able to use in a while.

In other words, we book into Mandalay, Bellagio, MGM and that's -- we can do that.

We did that even last year.

We're doing that again in those periods of time when we have availability, but we're also booking into Mirage, Luxor, Excaliber and the other core properties.

And that obviously helps the whole portfolio.

That also helped us a little bit on rate, too because our rates on the convention side are moving up.

That's why we're comfortable giving you the number we just have you today.

Great.

And then just on CityCenter, are there any other levers you can pull in terms of improving cost besides lowering at the FTEs?

FTEs represent about [60%] of the cost space.

We think we can get the cost even lower in Q3 and Q4.

We have a program for each cost category.

There's a lot of work being done as it relates to entire cost structure for Aria and CityCenter and total.

Yes, we're ought to get it down even lower going forward, besides FTEs.

We think the FTEs are pretty much normalized at this point, relative to business volumes.

Okay.

Great.

Thanks a lot.

Thank you.

Your next question come from the line of Larry [Claskin with Tevlin].

Hi, guys.

Couple things, one, CityCenter interest, Dan, seems a little on the high side from what I was expecting.

How much of that is cash and how much might be internal from the obligations to the two partners?

About half of that is cash to third parties under the bank credit facility and the other half, Larry, is pretty much noncash between the joint venture partners and CityCenter.

It's almost like an equity return money?

There's some shareholder notes between the two parties and CityCenter, but it's much like equity and flash of subnote.

Okay, second thing is can you guys talk at all about the hotel side?

I know you have a number of projects opening next year.

Any new things on the horizon for that?

You're talking about our hospitality division, Larry?

Exactly, Jim.

We have two opening next year both in China, one in Beijing which opens mid-year, Dan?

Third quarter-ish.

Is it third quarter?

And the other is later in the year, a much larger property.

Those two will be the two first MGM properties and they're both obviously nongaming hotels in China, which we believe is really great for a number of reasons -- from a marketing perspective, brand awareness and otherwise.

Those are the first two of -- we expect to be about half a dozen or so in mainland China over the next several years.

We just signed a couple more.

We signed one in India and Mumbai.

We had another one in Egypt earlier this year that we had announced.

We're feeling like we're getting to a point where we can articulate that division.

We will probably work on that for the next quarter call, in terms of the openings the properties and what we expect to be able to do there over time as we build up our revenue streams, not only from the development income we're getting right now, but also the management fee income which begins next year on that property.

I think we've signed and have under development about a dozen in total.

I think we have another dozen or so that are close to an LOI perspective -- close to being signed (inaudible) and the team have been working very rapidly in this area.

I think it's getting close to a time -- why don't we do that, Dan, talk about next quarter about the what the growth strategy will be for that.

How much did you get in development fee this quarter?

(multiple speakers) I don't have the number in front of us.

Okay, Jim, once you get it going and you have a real stream going, is it the thought -- is such a higher multiple than gaming that you might book it steady -- part of that off to get a public valuation?

That has always been the idea, Larry.

It's probably a couple years away because we want to build up enough cash flow there, but that is an expectation that we have.

Steve [Wynn] mentioned on the call that you had a specific site [co ties] across the street from his.

Can you -- I know Chinese government never likes people to announce before them, but can you talk a little bit about the site and the timing?

No.

All right.

We don't speak for the government or comment on competitors.

I understand.

He can say about you guys, but I know the government doesn't like that.

And then as far as July results, I know that you don't -- any indication how Vegas is doing for July.

I'm sorry, how Vegas is doing in July?

Yes.

I feel like it's predictable.

We're occupying these buildings which is wonderful.

I don't think it's going to be 105 today, but may be close.

The buildings are -- our buildings are occupied at or above where we thought we'd be.

The rates are about what we thought will be.

There isn't any extraordinary promotional activity other than the normal summer promotions that are always ongoing.

The gaming numbers, we continue to have high end play all year so I don't want to be more specific than that.

But I think it's pretty much as advertised.

All right.

That's fair.

Thank you very much, guys.

Thanks, Larry.

Your next question come from the line of [Bill Lerner with Union Gaming Group].

Hey, guys.

What EBITDA -- Dan, what EBITDA are you using or should we use for the covenant calc?

Our covenant calc, Bill, is based on a trailing 12 months this year of $1 billion -- is the number for the calc.

We're compliance with that in the second quarter and our forecasts show that we would remain in compliance with that through the remainder of the year.

Okay.

That is $900 million covenant through 2011?

It was 900 merchandise through 2010 and it stepped up to a billion dollars in year.

Okay.

Great.

And then earlier this year, obviously you guy received a helpful tax refund.

Should we be thinking about any surprises like that in 2011 and if so, can you give us some color?

I think your question was on a tax refund next year?

Is there anything helpful this year?

It will be helpful next year, too.

I think we have a receivable on the balance sheet of about $180 million?

$190 million between federal and state.

Okay, in 2011.

Great.

That should be around April we should get that, Bill.

On the FTE front, obviously heard what Bobby said about the change in occupancy and the reduction in FTEs obviously and that is materially helpful.

You guys saw a sequential improvement in occupancy in the quarter of I think 800 basis points.

What happened with FTE as I suspect they certainly didn't increase?

They did not increase much nor will they increase much going forward, Bill, with the exception of couple departments, most like in banqueting and catering.

As our convention mix improves, we'll be bringing more people back in that regard.

But our FTE is actually down year-over-year.

Company-wide, they're down a couple percent, 2% to 3% and occupancy is improving.

We expect our FTE in general to be flat to down with the exception of a couple areas that are convention specific and we'll be adding selectively in those areas.

Dan and Jim, why do you think are down from the peak?

Obviously what I'm getting at is when you're running at -- even higher 90% occupancy where they will level out and then it is all incremental rate?

We're looking at that, Bill, but from peak to trough -- peak to where we are right now, we're down well over 14% in terms of FTEs.

Okay.

Great.

And the last one, guys.

On the convention side, can you give us a sense, even if it's directional, of what's going on with room nights booked for conventions and then actual delegate counts that show up.

Is that improving?

Dramatically.

First off, attrition rate are improving a lot.

For the month of -- June is first time we've ever been in the single digits in a couple years.

We're under 10% attrition in the month of June.

We're getting much more specific, both in terms of our partners that are bringing delegates here and also our analysis of who's coming.

The attrition rates have improved significantly, number one.

Number two, you are exactly right, is that the conventions that are being booked are being booked with far less excess room count than we saw in 2006, 2007, or even beginning in '08.

We have greater clarity as to who's actually is going to show up when the convention actually shows up in town.

That helps up plan our mix much better than we could even in our -- the great years of '06 and '07.

Thanks, guys.

Thank you, Bill.

Operator, we'll take bun more question.

Your next question comes from the line of Shaun Kelley with Bank of America.

Good morning.

One more question on the pricing side on the Strip as we think about the fall.

We talked a lot about the conventions side, that you guys are back up to over 90% occupancy.

Have be been raise your [transient] or leisure rates at all?

What's your expectation for that in the backhalf?

Convention side helps and that has helped us a bit on the transient side a little bit.

Our casino rates are down year-over-year which actually has hurt REVPAR to a degree because we yield our casino block like we yield every other block.

From a REVPAR perspective, our casino mix is about the same.

I think it's around 14%, right, Dan?

But the inter Company ADR is a bit lower this year than last year which dampened REVPAR a little bit.

In terms of -- and that will remain probably about where it is right now though as I said, we yield it.

If the national business improves, you'll see our casino rate improve, but for right now it's down year-over-year.

The growth in REVPAR is happening primarily on the convention and secondarily on the transient side.

I think the leisure is about flat.

Do you have that?

It's up a small percent.

Leisure is up a little bit as well, but you would expect to see it in convention first, then transient, then leisure.

Got it and then just -- on the baccarat business broadly.

As you guys think about the mix coming from that business -- your share numbers are impressive.

How much of that -- how much of your gaming volume across the portfolio is coming from baccarat today?

Do you have a sense of the percentage total there?

And specifically for CityCenter, I think if I got the casino revenue right, it would imply something like 70% of the volume of the gaming revenue at CityCenter or Aria is coming from baccarat.

Is that correct?

First, Company-wide and then we'll look at Aria.

For many years, our baccarat volume was around 20% of our table volume.

But over the last couple of years -- last year and this year as well, it has moved up to around 35%.

And ultimately, obviously that would have a positive impact on our table hold as well because typically, we and our competitors hold higher on baccarat than we do on non baccarat table games.

Our baccarat business is improving.

Our mix of baccarat volume as a percentage of our total table volume is up, as I said.

We think that that is probably going to continue as we're cross marketing these properties and building our business through M life and through other programs.

From a standpoint of Aria, I don't think it's anywhere near 70% in terms of --

Aria's baccarat represents about 44% of the table games year to date.

That's helpful.

Just to reiterate what Bobby said earlier, as we build up our non baccarat business at Aria through our slot programs, through our national marketing programs, cross marketing, that mix will probably come down baccarat as a percent of total table games.

Not because we expect baccarat volume to decline at Aria, we expect the other segments to increase.

Got it.

Thank you very much.

Thank you.

Thanks, Shaun.

With that, operator, we'll conclude our call and we're around all day if anyone has any follow-up questions.

Thank you.

Thank you for participating in today's teleconference.

You may now disconnect.