美高梅國際酒店集團 (MGM) 2010 Q4 法說會逐字稿

Good morning, and welcome to the MGM Resorts International fourth-quarter and full-year 2010 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; and 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 section.

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

Dan D'Arrigo.

Well, thank you, Concheta.

And good morning, everyone, and welcome to our 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 our website.

This morning, we furnished our earnings release on Form 8-K with the SEC, and all of its disclosures and relevant information are there as well.

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

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

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

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

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

Jim Murren.

Well, thank you, Dan, and good morning.

2010 was an important year.

As it began, we faced many challenges and we had to tackle many issues.

We had to do them all quite well.

We undertook several operating initiatives, which we began to see the benefits of in late 2010, and we believe we will continue to see benefits here in 2011.

We were very active last year in the capital markets, and we were able to significantly improve the balance sheet of the Company and transform the narrative on MGM from a liquidity story to a recovery story.

The fourth quarter was a little choppy operationally, but the foundations were laid to have a good year and we're off to a good start.

So let's hit some of the topics head-on.

First, let's talk about Las Vegas.

2010 for the City, visitor growth was about 3%.

And for this year, the LVCVA is predicting another 3% increase.

We think there is upside to those numbers, based on increased scheduled flights into Las Vegas; a stronger convention calendar; and the early booking pace that we are seeing already this year, particularly in the year for the year.

On the casino side, we continue to see strength in the international play.

In fact, we had another all-time record in the City and for our strip properties in 2010, including ARIA, in terms of international volume.

And as you know, we're in the tail-end of Chinese New Year's, and we've seen very strong volumes here in Las Vegas.

In fact, in one metric we're looking at, we flew about 15% more customers into Las Vegas this year than last.

All of our suite product has been fully occupied through the whole period, with high-volume and high-value guests.

On the convention side, that's another popular trend going into 2011.

During the downturn, if you recall, our strategy was to grow the convention mix so that we could yield our rates up across the other hotel segments and also improve customer spend mid-week.

That had been a consistent part of our strategy last year and we're already seeing the benefits of it here in 2011.

In January, for example, we were able to improve our convention mix by four percentage points and that all came out of the leisure segment.

As you know, historically, the convention segment has an average $50 to $70 ADR premium over our leisure segment.

This is exactly what happened in January.

As a result of our improved mix, we saw increased spending across all of our strip properties in January, with a 17% pickup in net non-casino revenues.

Looking at it for the full year, we have approximately 1.6 million convention room nights on the books, which is a double-digit increase from the same time leading into last year.

And we're still seeing strong bookings, as I said, for in the year, for the year.

In January, for example, we were up 33% in inquiries and 150% in bookings in our incentive business, as compared to the prior year.

So we're on a good pace for 2011.

We expect to see our overall casino mix to be about 14%.

As you know, we are a Las Vegas story -- about 70% of our cash flow comes from the Las Vegas market.

So looking at that 14% mix, that might seem small, but the mix amongst our luxury properties, which represent about 60% of our wholly-owned cash flow, that will be north of 20% this year -- the convention mix on our luxury properties.

And we have good experience as to what happens when our convention business grows.

We saw that in last October; we're seeing it right now.

The convention mix helps us drive much better revenue and [the] reason why we believe RevPAR will be up all year in 2011 for our Company.

One area that was challenging last year is customer spend.

But even there, we're seeing some improvements, at least in the luxury segments.

We're beginning to see convention customers actually renting out some of our other amenities, like nightclubs and restaurants, and the beach at Mandalay Bay and even the MGM Grand Garden.

That has not occurred since back in 2008.

In addition, we see that improved customer spend around our other special events, like fights and concerts, and holidays, which also bodes well for improvement this year.

And we're going to have a very active year this year on the event side.

Our arenas are quite busy, not only in the number of events we're having but the quality of the events.

We have 30% more events booked between the Events Center at Mandalay Bay and MGM Grand Garden -- 30% more this year than we even had last year, with some very good events coming up this quarter and in the second quarter -- with the big fight in the second quarter.

Over at CityCenter, Bobby will talk about it in detail, but just the point here is that we recently celebrated our one-year anniversary.

ARIA has been taking its rightful place amongst the premium properties here and continues to gain positive momentum.

In the fourth quarter, as you can see, resort operations cash flow were $36 million.

ARIA has captured a tremendous amount of our high-end market here in Las Vegas -- Baccarat market share is up at the upper end of resort properties in the town.

We won all kinds of awards, accolades and, I think, more to come.

I'm also very pleased to say that January was a great month for CityCenter all around the campus, with strong profitability in every element of the business.

And as Dan will talk about in a little while, we recently completed the financing -- refinancing of CityCenter, which was done in very attractive rates, and provides long-term capital and significant flexibility in that venture in the future.

In Macau, you can see we had a strong quarter.

We've made significant strides in improving the operating performance there and we believe we have more to come.

These improvements began to take hold in the fourth quarter and really was reflected across the entire mix of business in Macau.

The Macau property made $142 million of cash flow in the fourth quarter, and in doing so, our main floor volumes were up 25% year-over-year in the fourth quarter.

VIP volumes were up almost 80% year-over-year and our slot handle was up 57% year-over-year.

We've worked hard throughout 2010 in managing this business and strategically managing the relationships we've had with room operators.

We have added a few new ones last year, some of which happened just in the fourth quarter; so we have not had the benefit of a year of that operation -- those operations.

And as our business continues to improve there, more high-quality room operators want to be a part of that, and we expect to add more room operators here in 2011.

As a result of the improved cash flows, we've been able to receive distributions from Macau, and in fact, we received $192 million from Macau during the fourth quarter.

That represents the full repayment of our interest and noninterest-bearing notes that we had long ago made to that entity.

And while still underway over there, as well, Chinese New Year's volumes are up significantly year-over-year across all of our segments.

As you know, we're continuing to work with our lead underwriters for Macau -- it's JPMorgan, Morgan Stanley, and Bank of America on the proposed IPO with the Hong Kong Stock Exchange.

And as you also know, we're in the quiet period there, and so unfortunately, that's about all we can say, given their constraints, but we're moving quite along there.

And finally, I'd like to make one note on a very important initiative that we deployed at the end of last year, and more importantly, even here early in 2011, and that is our new customer loyalty program, which we call M life.

It was launched in the fall in our regional properties and it was launched here in Las Vegas in January.

The first phase of M life is for our casino players, and we're already seeing a very big impact there; but that expands to a broad-based program recognizing and rewarding spend across most all of our channels of our business by the end of this year.

And so with M life, we'll be able to promote loyalty amongst not only our gaming customers, but all of our customers.

We believe we'll be able to capture a greater share of wallet from these guests, and cross-market our properties here in Las Vegas to and from our regional properties, and also increase frequency.

As I say, we're in the early stages here, but we've seen some very strong indications of its popularity in the regionals, and more recently, right here in Las Vegas.

And we're very excited about it.

So with that, I'd like to turn it over to Dan D'Arrigo to talk about our operating results and financial position.

Thank you, Jim.

As Jim mentioned, what I'd like to cover this morning is a recap of our operating results, hit the balance sheet and our liquidity, and wrap it up with some items to help you on the modeling front.

So just recapping some key operating results from the fourth quarter -- our net revenues were $1.5 billion in the quarter.

Revenues were impacted by a lower hold percentage, which was near the low end of our expected range.

Our strip RevPAR in the quarter was down 2%, excluding resort fees.

Had we included resort fees in the quarter, our RevPAR would have been up approximately 2% in the quarter.

Our wholly-owned property EBITDA was $267 million in the quarter.

And again, the whole impact on those results was roughly, dollar-wise impact, kind of low to mid-teens in terms of the impact to our EBITDA in the quarter.

Our wholly-owned Las Vegas strip EBITDA was $217 million in the fourth quarter, led by Bellagio, which produced approximately $76 million in property-level EBITDA.

Our regional properties were led by a strong performance in MGM Grand Detroit, where EBITDA increased approximately 18% year-over-year, resulting in one of their best quarters ever.

We're pleased with the operations of not just Detroit, but solid performance by Beau Rivage and Tunica, as well.

The contribution in the quarter from our joint ventures, which represents the Company's share of operating income from each of those joint ventures before pre-opening expense and adjusted for certain basis differences, was $27 million in the quarter, led by, as Jim mentioned, a strong operating performance by MGM Macau; a full quarter contribution from the CityCenter Resort operations; offset by a non-cash write-down related to residential at CityCenter; and also some development and administrative expenses at CityCenter, primarily related to the ongoing litigation matters.

For the year, net revenues were approximately $6 billion and property EBITDA was approximately $1.2 billion for the year.

Moving over to the balance sheet and liquidity, we've been busy improving our balance sheet, and currently have sufficient liquidity, we believe, to cover maturities into 2013.

As of December 31, we had excess cash and credit facility availability of approximately $1.2 billion.

Since year-end, we utilize proceeds from our credit facility to retire approximately $326 million of bonds, which matured in early February.

This leaves us currently with roughly $840 million in current liquidity from excess cash and amounts available under our revolver.

Going forward for the remainder of this year and through the end of 2012, we have approximately $670 million of bond maturities; roughly $130 million remaining this year; and another $545 million next year in 2012.

On the Borgata front, our New Jersey trust account received proceeds of approximately $74 million in the fourth quarter, including $71 million related to the sale of our long-term land leases and associated real property parcels underlying Borgata.

The Trust balance as of December 31 is $188 million, of which approximately $150 million is invested in treasury securities with a maturity of over 90 days.

And just geographically, on the balance sheet, that's included in our prepaid expenses and other assets within the current asset section of our balance sheet.

Since October, we have continued working with our financial advisors to continue to negotiate with our prospective purchaser, as well as working with other interested parties who have expressed interest in this asset.

And although there can be no assurance that the transaction will be contemplated as proposed or at all, and what the final terms will be, we continue to make progress on the Borgata front.

From a covenant perspective, we were in compliance with our financial covenants contained in our credit facility at year-end.

Based on our current projections, we believe we'll remain in compliance going forward.

In 2010, we set out with some pretty lofty goals to address our liquidity in our balance sheet, and we're pleased to report that not only did we meet those goals, but exceeded them.

Throughout 2010, we raised over $3 billion of new liquidity and extended approximately $3.5 billion of our credit facility into 2014.

Not only were we focused on MGM Resorts' balance sheet, we also set the stage for MGM Macau with a new $950 million credit facility, which now matures in 2015.

And last we spoke, our goal focused on refinancing CityCenter, and we are gratified to report that we've completed this financing, as Jim mentioned, on very attractive terms, thereby putting this enterprise on a strong financial footing.

This financing now allows our CityCenter team to devote their full attention on continuing to drive profitability throughout the entire campus.

Under the terms of the financing, the partners contributed a total of approximately $73 million in equity contributions.

That, in conjunction with the proceeds from the financing, established an interest reserve of approximately $159 million related to its first lien interest.

We estimate that this reserve will cover approximately the first 18 months of that financing, and put us into late 2012 with the second lien notes' interests picking, that provides CityCenter with a good liquidity runway into late 2012.

There are no financial covenants during this interest reserve period, and until such time as the reserve is exhausted.

Now I'd like to give you a little help and finish up with your modeling, and a little bit on the outlook.

Our total stock compensation expense in the first quarter is estimated to be approximately $9 million to $10 million.

Depreciation expense in the first quarter is estimated to be in a range of $160 million to $165 million.

Our gross interest expense in the fourth quarter of 2010 was $273 million, of which $249 million was cash interest, and we had no capitalized interest in the fourth quarter.

We estimate gross interest expense in a range of approximately $260 million to $270 million in the first quarter -- again, with no capitalized interest expected.

Beginning in the first quarter, we will be including resort revenue -- which is a change for us -- in our hotel revenues, ADRs, and RevPAR, to be consistent with industry practice.

And to give you a sense for where we are forecasting our RevPAR for the first quarter, we believe that RevPAR will be up at least 10% in the first quarter, including resort fees.

Our CapEx for Q4 was approximately $76 million, bringing our full-year 2010 to $208 million -- two-zero-eight for the full-year of 2010.

We expect to spend approximately $250 million to $275 million in 2011, largely all related to growth and refurbishments taking place at our properties.

This year, we're planning a refresh of all of the rooms here at Bellagio in the main Tower.

That's going to start here in June, finish up in December of this year.

And we're also going to begin a multi-phase room remodel at MGM Grand Las Vegas this year as well.

Our budget also includes updates of our slot floors as well as general maintenance items throughout all of our resorts.

And with that, I'd like to turn it over to Bobby Baldwin to talk about CityCenter.

Thank you, Dan.

CityCenter's resort operations reported adjusted operating EBITDA of $36 million in the fourth quarter.

ARIA reported adjusted property EBITDA of $30 million; Crystals, $6 million; Vdara, about $950,000; and Mandarin reported a loss of $1 million.

ARIA results -- ARIA's net casino revenue was $99 million in the fourth quarter.

ARIA's fourth quarter table games hold percentage was in -- near the high end of its expected range.

Overall, ARIA's 2010 second-half casino revenue was $225 million compared to $125 million in the first half of the year.

ARIA continues to experience exceptionally strong rate to play in baccarat.

Year-to-date through December, ARIA has captured 23% of the Las Vegas Strip's baccarat market share.

In October, ARIA introduced a re-modeled high limit slot area.

As a result, ARIA experienced the highest quarterly slot volume since opening.

ARIA's non-casino revenue was $139 million in the fourth quarter, up 6% from $131 million in the third quarter.

The increase in revenue was in large part due to an ADR of $190 compared to an ADR of $175 in the third quarter.

Fourth-quarter occupancy was 80% compared to 82% in the third quarter.

January 2011 RevPAR at ARIA was the highest since opening and exceeded expectations.

The strong performance is attributed to the strength of the CES and overall convention business in Las Vegas.

Also in January, the Sales Department achieved a property record by generating the highest number of convention leads for future bookings.

ARIA has more than 170,000 convention room nights on the books.

This is triple the convention room nights on the books we had going into 2010, which we believe will significantly allow the property to yield up its rates.

This represents close to 93% of our forecasted convention room nights for all of 2011 at ARIA.

It was announced during the quarter that ARIA's impeccable service, accommodations, and fine dining, earned the property the AAA Five Diamond Award.

This is an exceptional feat only accomplished by a small group of distinguished hotels, and of these, only a select few receive the honor within the first year of operations.

In conjunction with the opening of Cosmopolitan and the adjacent pedestrian bridge just off the CityCenter's footprint, we've seen a noticeable increase in foot traffic.

We've enhanced the size to capture additional foot traffic and increase awareness of ARIA and the other components of CityCenter from Las Vegas pedestrian traffic.

We continue to move more efficient with managing our labor costs while maintaining the level of service to our guests.

ARIA's full-time equivalents in the fourth quarter were the lowest levels this year -- or lowest levels of the year -- approximately 4% lower than the third quarter.

Recently, ARIA began airing a new TV commercial.

The new spot captures the spectacular beauty of the property and conveys the fun and excitement of a resort experience.

It will further increase ARIA's brand awareness as a premier destination in Las Vegas.

The television spots are one step in a broad marketing campaign that also includes print and outdoor that is rolling out later in the first quarter.

Vdara's fourth quarter occupancy was 75%, up from 70% in the third quarter.

ADR also increased to $140 in the fourth quarter compared to $129 in Q3.

Convention room nights were up 55% sequentially.

Vdara's net revenue for the quarter was $13 million, an increase of 15% from the third quarter, while expenses remained flat in the fourth quarter.

In March, we're opening the Market Cafe, a gourmet grocery and coffee bar located in the lobby at Vdara.

At Crystals, as of December 31, 2010, 80% of the leaseable area was occupied by tenants open for business, up from 70% at the end of the third quarter, following the openings of Prada, Yves Saint Laurent, Pucci, Donna Karan, Harry Winston, and Stella McCarthy, all of which opened in the fourth quarter.

TAG Heuer is scheduled to open this March, and at that time will have approximately 82% of the leaseable space at Crystals open for business.

Given that we've made significant progress in leasing this facility throughout 2010, we begin 2011 at higher occupancy levels and co-tenancy clauses have now expired.

We believe the fourth quarter is more reflective of Crystals' true potential from a profitability standpoint.

Residentially, to date, we've closed 436 units at CityCenter, comprised of 61 units at The Residences at Mandarin Oriental, 156 units in the Vdara Condo Hotel, and finally, 219 units in the Veer Towers.

In the fourth quarter of 2010, we closed 26 units, including one new sold at Mandarin Oriental, as well as one new sold unit at Veer Towers.

Total sales revenue for the quarter was $19 million.

In September 2010, we commenced our CityCenter leasing program.

To date, we've leased 39 units of Mandarin Oriental and another 46 units in the Veer Towers.

And with that, I'll turn it back to you, Dan.

Thank you, Bobby.

And, Concheta, that concludes our prepared remarks.

We'd now entertain questions.

(Operator Instructions).

Felicia Hendrix, Barclays Capital.

It's actually Anthony Powell for Felicia.

How are you?

A quick question on the table games volumes in the fourth quarter.

They're down 13%, and we thought they would be even higher, given one of your competitors had a baccarat room closed.

What was the split between, I guess, the high-end properties and the mid-end properties, as far as table games volume?

And how can you increase that number going forward?

Let's understand the question -- the volume being down, how can we increase the volume going forward?

Yes, and just what kind of drove table game volumes in the fourth quarter?

We thought maybe it'd be a bit better, given you had a competitor close in the quarter.

Well, one event is we had a very big fight in the year-ago fourth quarter, so that had a negative impact on the comparability of the quarters.

We weren't as active on the events side in the fourth quarter this year.

So I would say point one is, to try to occupy the MGM Grand Garden Arena and the Events Center with high casino-oriented events.

We're doing that this year.

I think that was the major issue.

And also our hold issue had an impact as well, and, of course, that's volatile.

Anything else, Dan?

I think the whole impact was the key.

Sometimes when you're not holding as well, we're not getting the level of play out of customers.

And they're leaving us quicker than we'd like.

Right.

I guess second question on -- you mentioned that 2011 is looking very good for convention bookings.

Any specific metrics so far this year in January or February that you'd like to highlight?

Well, I think that -- it's an old data point.

You've heard it before in terms of CES, but that was up significantly in January, up I think about 11% -- I think it was - right, Corey?

(multiple speakers) Yes, it was.

And then we're going to be a pretty significantly for the first quarter as well.

The January increase on the convention side led to a very strong RevPAR for our strip properties -- we're up in the teens in RevPAR in January, largely due to a very good convention calendar.

We have several city-wides coming right now.

We have the [Circus's] show, we have Magic, ConAgra, and then we have, particularly for Mandalay Bay, some good events in the second quarter where we've moved business from other folks into our property.

So I would say the convention calendar in general is very strong relative to what it was.

I gave some booking numbers in terms of our booking room nights for this year, which were up double digits from last year.

And some of these major city-wides are happening in the second -- in the balance of this quarter but happened in the second and third quarter.

Anything else, Dan?

Okay.

Next question.

Shaun Kelley, Bank of America.

Just wanted to walk through a little bit more on the hotel side.

I guess, first of all, could you give us a little bit better sense as -- Jim, you mentioned a piece of it about the trends you were seeing in RevPAR, either by month-end, specifically, what are you looking for, for the second quarter versus the first quarter?

Do you think that these kinds of magnitudes or some of the gains are sustainable?

Because we're getting a lot of questions in terms of second quarter, you're probably going to see some -- you might be seeing some increased competition from your recently-opened neighbor.

Well, as you know, seasonally, we do better here in Las Vegas in the first quarter than into the third and fourth quarter.

The second quarter typically is not a very strong convention quarter.

And that's why you hear some of that concern about the second quarter -- at least we've heard it.

Our mix just changes.

We still believe -- it always does in the second quarter.

But we believe we'll be able to have good pricing strength going into the second quarter as well.

As it relates to how we drive business into the second quarter, when you don't have as much convention business seasonally out here, you use events.

And I indicated, the Grand Garden is actually quite active in the second quarter and we'll see, I think, some good FIT business as well.

So without getting into month-to-month RevPAR changes, I would say a couple things.

Number one is, the resort fees that we instituted in late '09 and into '10 are clearly working.

And we would have been up in RevPAR in the fourth quarter if you'd just include resort fees, as most every hotel company does.

And we will now; on a going forward basis, we would have been up, I think, 2% in the fourth quarter in RevPAR.

And that, of course, have carried into 2011 and we'll have the full-year impact of that this year, which will benefit RevPAR.

Number two, we're up, as I say, pretty significantly, in the teens, in RevPAR in January.

And we'll be up, as Dan said, double-digit in the quarter.

And we'll be up all year in terms of RevPAR.

In terms of giving month-to-month numbers, we don't have that available for you.

And the third point is, we manage our mix so as to see in our luxury properties where there will be over 20% convention, and in the higher convention periods, we bring in more FIT business in the lower convention periods.

And you're going to certainly see that here at Bellagio and at ARIA, and at MGM and at Mandalay.

So I would say that to the operating leverage, when you have as many rooms as we do, is significant.

And we'll be driving overall hotel revenue for the balance of this year.

And we think, overall, the convention business here, as indicated by our competitors as well as what we see, will be up nicely.

That's helpful.

And then could you just give us maybe a little bit of a breakdown in terms of the mix that you guys are seeing in the fourth quarter?

We noticed the occupancy was down -- was actually down year-on-year, but you held rate?

We've seen some differing trends from some of your big Strip competitors.

So what explains that?

And then, how do you think that mix looks as you think about the composition of that plus 10?

Well, the -- October was a very strong month for us from a mix perspective and that drove really good pricing in our rooms in October.

November, December, we don't do historically, and I doubt we will going forward, either, as much convention business.

We were up in mix overall.

And we believe we'll continue to be up in mix on a going-forward basis.

In terms of -- the reason why I tried to separate luxury from overall is that we have so many rooms here; when we say our convention mix is 14%, that might not sound like a good number relative to other companies, but remember, that's our whole Strip portfolio.

If you take our luxury properties, they run north of 20% and some of them manage the mix down.

For example, here at Bellagio, we could have a much higher convention mix if we wanted to, if we needed to fill the rooms that way, but we get higher ADR on the FIT side here and better RevPORs on the FIT side at many of our high-end customers here at Bellagio.

So, I don't have that in front of me -- unless someone else does.

But I can say that we were up in the fourth quarter, we were up dramatically here in the first quarter; we'll be up for the year.

We've been increasing our market share on the convention side.

And we believe that the convention side, along with other programs like M life and other yielding programs, will drive higher RevPARs all year.

That's helpful.

And then maybe just one last one on Macau, if you can answer it.

Just trying to kind of get a sense of the kind of latest timing there and whether or not a hold -- actually, the last thing was really can you talk a little bit about some of the -- there's been some chatter about some of the junket side there, particularly, I believe, one that they may have gone out of business recently.

If you can give us your thoughts on that.

And I'll leave it there.

Thanks.

Okay.

I'll start and then I'll turn it over to Dan.

It's frustrating to us, and I'm sure to you, as to the level of communication we can have as it relates to the IPO.

The Hong Kong listing rules are different and more restrictive than they are on the New York Stock Exchange.

And we just can't give you the type of information I know you need.

I can say that we're moving along.

We have worked very well with our underwriters, our lawyers, and the process is progressing at a pace that we're very satisfied with.

As it relates to a junket operator that went out of business, it's not the case.

It's not true.

It's actually not the case.

And it was rumors that seem to be fun and distracting in Macau, but not the case.

Customers typically can lose money and we have that happen here in Las Vegas.

And we have it over there occasionally, but no junket operator did.

And when customers do lose money and can't pay, we make sure we're reserved for that.

And we were and are reserved for that, and that was reflected in the fourth quarter.

Anything else, Dan?

No, I think that's pretty accurate.

We're very comfortable with where our reserves and where our receivables are in -- as it relates to Macau operations.

In fact, we're very satisfied with that.

That's another data point that we are very adequately, very appropriately reserved in that market as we are here.

Great.

Thanks, guys.

Joe Greff, JPMorgan.

Dan, you had mentioned that you're expecting first-quarter 2011 RevPAR to be up 10% or so, including the resort fees.

If we were to exclude resort fees, could you help us out, what that year-over-year change would be?

Is it similar to that delta that you guys talked about in the press release with regard to the fourth quarter?

And then my second question, Jim, you intrigued me with it earlier in the call -- with respect to CityCenter, you said January was a great month for that property with strong profitability.

I was hoping you can give us a little bit more details, I guess, how widespread was that grayness of the month, between high-end, non-high-end, retail rooms?

And if you can share any kind of margin trend, that would be helpful.

Thank you.

Sure, Joe, I'll take the RevPAR question.

That is, we're expecting RevPAR to be up at least 10% in the first quarter inclusive of the resort fees.

Excluding resort fees, we would expect it to be up at least in the high single digits as a percentage.

Joe, I'll turn it over to Bobby, if you have the -- I mean, I know, generally speaking, we were up in every segment in January, but I'll turn it over to Bobby.

I'm just listening to [Chris Doering] -- he said the first time in the one year that we've been open, and all the enterprise at CityCenter made money; which is, of course, the fact -- we had an easy comparison -- we lost about $8.5 million in last January and we made about [$18 million or $19 million] or so, if you would total the campus.

And it was across -- ARIA had a very strong January, as did the other components of CityCenter.

And just about every measurement was up nicely, compared to the weak January of 2010.

Did we answer all your questions, Joe?

I'm all set, thank you.

Harry Curtis, Nomura Securities.

Quick question on M life.

You've had some time to study the results in the regions, and if you could give us an indication of its impact on casino spend, spend per customer.

It's early yet, but to what degree are you seeing similar results in Las Vegas and what are your expectations going forward?

Well, I can give you a couple of numbers there, Harry -- it's Jim -- that maybe doesn't answer your question directly, and then I'll ask Corey if he has more direct ones; but I'm looking at some stats here that I think are interesting.

We've had almost 700,000 enrollments in CityCenters -- I'm sorry, in M life since the launch, and approximately 150,000 of our customers have become re-engaged.

That means we haven't seen their activity for over a year, and they have come back to us and got their new M life cards -- 150,000 of those customers.

And as I said, 700,000-plus enrollments since we launched in the regionals and then here.

Our market share has largely gone up in both markets, both in Detroit and in Mississippi, and we are seeing good slot but overall casino spend in both of those markets.

We, obviously, dominate the market in Detroit and we have a very strong share in Mississippi, as well.

The early results here are more in the enrollment side.

I can't say that we have any specific numbers in terms of higher slots spent or higher gaming spent, unless anyone has (multiple speakers) -- no.

I think because it was January 11 only when we rolled it out here, the focus of the Las Vegas rollout has been educating our employees, which was -- has many benefits, by the way, in addition to educating them on the tiering and the aspirational nature of the card, which means people are moving up the cards.

We've had tens of thousands of people move up tiers already, even here, but it's also to educate our employees as to the benefits of being part of a bigger Company.

So to cross-market Excalibur with Luxor, Luxor to Mandalay, Mandalay to Mirage, has revenue benefits beyond M life.

And it's been a big morale boost, I can say, internally here.

On the external side, the effort has been to educate what M life is.

You'll see a lot of -- when you're out here next, a lot of collateral material in the market -- billboards, signage, car tops, et cetera; a lot of collateral in the properties.

And if the regionals are any indicator of what we'll see here, you're going to see a pretty rapid increase in our gaming revenue.

So are you looking at metrics like time-on-device or length of play on the tables in the regions?

And have you got any specific data on that?

Or is that something we should check out with you guys offline?

Well, I think -- give us another quarter, I think, and then we'll have, at the next quarter call, a very good snapshot.

Because we'll be two quarters into the regionals and a full quarter here -- at least almost a full quarter -- and I think you'll have all the information you need.

Bill Lerner, Union Gaming Group.

A couple of questions.

One, global inflation is obviously a concern; understanding you can't comment about Macau in a forward-looking way -- is it pinching inbound volume to Vegas?

You know, i.e.

-- or volume, length of settlement, et cetera, et cetera?

And then I've got a follow-up.

(multiple speakers) You talked about Chinese New Year's strength, so I doubt it is, but just want to get some color.

Yes, inflation is predominately a good story for us in the hotel and gaming business, in the sense that it gives us a better framework to raise prices.

And we're seeing that.

I don't think, for example, we could have deployed the resort fee strategy two years ago and be as successful as we are right now.

That, effectively, is a price increase, and it has been very well-received, and has had a big impact on revenue for us and will this year.

Overall pricing in our convention business, as we're contracting that out, pricing in rooms in general, all have, I think, benefited and should benefit from a rising inflationary environment.

We've seen no negative impact to date on the revenue side.

As I say, we've been flying more people in.

It's not because we changed or lowered the criteria of those customers; so we've actually been tighter on criteria.

So the fact, as a metric of international travelers coming here to Las Vegas or coming to our property specifically, that's increasing, not decreasing.

Now on the expense side, we're able to keep our expenses pretty in check.

We're half a union shop, as you know, and we're in the middle of a union contract, so our labor costs are fairly fixed and at low single digit rates.

And our FTEs, which we monitor literally every day, full-time equivalents, are flat year-over-year.

So, there will be some expenses that will move, whether it's food or energy-related expenses, that will move in an inflationary environment.

We'll manage those as best we can, but predominately, we benefit from a rising price environment.

Okay, thanks, Jim.

And then just a follow-up.

Can you remark maybe about booking window across segments?

I would suspect it's, in some cases, widening marginally, but I don't know for sure.

The booking window is widening, although on the convention side, we're still getting a tremendous amount of in the year/for the year.

A year ago, we got a lot of that as well, but we didn't book as many rooms for the year.

In other words, the in the year/for the year would be conventions that would start in that year but would be multi-year conventions.

Now we're getting a lot of fill-in in the yea/for the year that will completely happen this year, if we had space.

Unfortunately for us, we're running out of space.

And so what that has done is enabled us to push out, help to push out the booking window further.

It's still smaller than we'd like, tighter than we'd like, but it is moving out and it's allowing us to manage our pricing better, and also manage our expenses from an FTE labor standpoint going forward.

So it's a positive development that the booking window is gradually expanding.

Steven Kent, Goldman Sachs.

Jim or Dan, could you speak to a little bit about the margins at the individual properties?

Year-over-year, I think five out of the seven we were looking at were down.

And I'm especially wondering why that would be if your FTEs were flat.

So could you just talk to maybe what you're doing on the expense front to improve the margin outlook going forward?

Okay, Dan?

Yes, I think when you look at it, Steve, obviously, the impact from hold across it -- particularly the four properties here in Las Vegas and the luxury segment impacted the [hold] percentages, is impacting the margins from that perspective.

On the core properties and our mid-tier properties, they're still not getting that pricing power, that the luxury properties are being able to kind of pick their spots on, and drive pricing power in terms of rate in restaurant and entertainment.

So those are areas that they're not seeing the uplift that the luxury properties such as Bellagio are, in terms of driving that pricing power.

So that's -- those are two areas that have impacted the properties here in Las Vegas.

So expenses are flat.

Expenses are roughly flat.

(multiple speakers)

(multiple speakers) And our promo expenses haven't gone up.

No, they're actually down.

Our promo expense is actually down year-over-year.

So it's predominately a hold-related issue, and the fact, as Dan mentioned, the mid-market properties are not getting the RevPOR, the total revenue per occupied room, and still have been struggling in the mid-market properties -- not so, fortunately, in the luxury properties.

Next question?

Robin Farley, UBS.

I wanted to clarify a couple of things in Vegas and then I do have a Macau question that, hopefully, you'll be able to answer.

First, just on the 10% RevPAR in Q1, that's including resort fees in 2011; is that also including resort fees in 2010 base or excluding?

I just want to clarify that.

No, it includes those properties that obviously had the resort fee in place in the first quarter.

For instance, Bellagio just recently here in January introduced the resort fee.

So for those properties that had it, it's in place in the comparable period.

Okay.

That's helpful, thanks.

And then your convention bookings so far that you mentioned, can you give us a sense of what percent of that is of what you've forecast for the year?

I think that Bobby said it for CityCenter, but I don't know if we heard that from the Company overall.

And then I have a Macau question.

Okay, Robin, we're getting that for you.

I think we're over -- we're well over 100% of what we had forecasted right now.

We're at about -- well, specifically -- it's 107% so far.

And we do -- that excludes what we expect to be able to do in the year for the year.

So, we're off to a great start.

And on the -- just back to the RevPAR, for the apples-to-apples number, I think Dan mentioned, if you strip resort fees out of both quarter periods, is up in the mid- to high-single digits.

Right?

Yes, at least.

At least -- like, 7%, 8% or something.

Okay, great.

And then the Macau question I had is, I wonder if you can -- since it's historical, not forward-looking -- if you can tell us what your hold percentage was in Macau?

Because your -- it was a very strong number; even though we were expecting a strong one, it was even stronger than expected.

Just if you could share the mathematical hold percent with us?

Yes, we -- Robin, for the year, we're pretty much in the normal range in Macau.

And as you know, that range is roughly about 2.7% to 3% in the VIP segment.

David Katz, Jefferies.

Wanted to ask about Macao also.

I'm not sure if you gave us and/or could you give us net revenue for the quarter?

I'm just trying to get a sense for what the profitability there was and how the flowthrough is running.

And then I have one quick Las Vegas question, please.

Okay, we're getting that.

Should we do the other one and come back to it or --?

Sure, okay.

We're looking for that for you.

What was the second question?

Well, I think you gave out, in your initial comments, a convention mix.

And you said 14% overall and then 20% on the luxury properties.

Does that include or exclude CityCenter?

Just trying to get a sense for what that reflects within that mix.

Sure.

That excludes -- that's apples-to-apples -- that excludes ARIA and all of CityCenter.

And maybe Bobby has what ARIA might be --?

Well, the convention forecast for ARIA is about 14.5% for convention.

So we'll get back to you on the Macau one.

Does that answer your question on the convention side?

That will get me there.

When we get somebody else in and I'll listen for the answer.

Thanks.

Okay.

Thank you.

[Larry Fratson, Claritson Advisors].

A couple of things.

One, can you talk about some of the proposed changing laws?

I know they're proposing a bunch of more casinos in Michigan; also some changes in Illinois.

Can you just talk about those?

Well, Larry, they're always trying.

We have very strong opposition toward reservation shopping.

Certainly, in Michigan, it's been the most topical point of view there, in terms of plopping down casinos in land that were never part of a reservation.

So we fight those efforts.

And I think that that's -- we've been successful to this point in time.

Illinois has, as you are aware, has had a very turbulent time in terms of its casino expansion.

It's on again and off again.

We're pretty pleased with how we're doing in Elgin and you probably have as good of information as anybody.

But we can't speak to whether or not there will be expansion that -- it looked favorable and then it fell apart.

But I think we'll be dealing with that in that market as well as Michigan for a long time.

Alright.

And how about the Harmon issue with Perini, and what's going on with that whole issue about the payments?

Well, currently, we're under estate by the State Supreme Court, so there is no legal activity going on.

There's obviously a lot of research and a lot of work being done behind the scenes.

But we're waiting final determination on a writ that we have before the State Supreme Court currently.

Alright.

And then the last question -- Mandarin Oriental has not been really making a lot of money.

Any chance you guys consider a change in management or what -- how that relationship goes forward?

No, we're not contemplating a change in management.

And they did make money for the first time in January.

So we're hoping that's -- that's one month in a row.

(laughter)

Okay, and your last question comes from the line of Chris Woronka with Deutsche Bank.

Wanted to ask a longer-term question, if I could.

Do you still view those mid-tier properties as kind of core?

Because we think about the recovery building out, it seems like there -- are either a little bit more of a drag than anything else and you're, I think, probably showing some good progress on the upper tier.

So just curious as to your updated thoughts on those properties longer-term.

Maybe I'll start with that, Dan, and then -- Dan, you have a follow-up on the Macau, though.

Do you want to give that?

Yes.

Maybe we could just address -- I think it was David's question earlier.

In terms of revenues and margins in Macau for the quarter, David, you're looking at roughly about $580 million approximately net revenues in the fourth quarter, with about a 24%, 25% margin.

And for the year, about $1.6 billion of net revenues, with about a 22%, 23% overall margin for the year in Macau.

Great.

Now I'll tackle the other question.

I think that it's clear to us, given the strength of the regional markets that we own and operate in Detroit and in Mississippi, that there's great potential to improve cross-marketing between those properties and our Las Vegas properties.

They're very well-managed.

They're dominant in their markets.

They're market leaders in both cases.

And we believe there's a lot of opportunity to benefit our core properties here in Las Vegas.

We've, only, as I've said, rolled out M life -- it's been a matter of months.

And we're starting to see an impact there on those properties, and we believe we'll see that here as well.

One very admirable trait of the Caesar's organization is that they are in so many different markets and they have a great ability, better than we do, ability to cross-market amongst regional markets in Las Vegas.

We admire that aspect of that Company and we think that that is an admirable goal for us.

So, if anything, what I would expect on a longer-term basis for you to see is for this Company to have a broader reach in the regional markets.

Now that doesn't mean that we will be acquiring or building properties -- I don't think that's going to be the case.

But what it does mean is that, we are very active right now in negotiating a variety of marketing agreements with regional gaming, regional entertainment, regional hospitality enterprises, to increase the national reach of our properties and our database.

We, as you know, now have over 60 million names in the database, but we don't have an opportunity to touch most of our customers near where they live.

So, I would say that it would be highly unlikely that we would divest those properties.

And in fact, we view them as foundations to grow further from a national perspective.

And I would expect that this year, we'll be able to announce a handful, if not more, of marketing relationships that will increase the cross-marketing, the cross-branding of our wholly-owned properties with other enterprises.

And I think that will help dramatically the core properties here in Las Vegas, where that is very appealing to them, in terms of creating the customer value proposition that they're looking for, but also our luxury properties as well.

So if that's an answer to your question.

I think this Company is -- we're playing more offense now than we were able to play in 2008 and '09, and even early part of last year.

The balance sheet is in tremendous shape.

Dan and the team have done a wonderful job of providing that pathway for us.

CityCenter is -- increasingly become more profitable.

Bobby and Bill and the whole team there have done a great job of expanding its footprint.

People are acknowledging the fact that ARIA is one of the luxury properties of the world and the campus is very successful, and the traffic there has improved.

Cosmopolitan being opened is a clear benefit to us.

It was a question whether that would help or hurt.

And we can clearly say it has helped -- from the walk-in traffic perspective; from the aesthetic; and it seems to be a very fine property and we wish them all the best.

And I think as we grow this Company, we'll be growing it in revenue ways that will not be as capital-intensive as the historical pattern in the gaming industry.

I think we'll be able to recover a lot of the margin that we had lost during the Great Recession, and improve the balance sheet through those increased cash flows.

And with that, I think we should say -- we're past our time.

As always, we'll all be available for questions if you have them.

We appreciate you spending the time with us this morning, and look forward to seeing you and talking to you again.

Thank you, Concheta.

This concludes today's conference.

You may now disconnect.