美高梅國際酒店集團 (MGM) 2011 Q3 法說會逐字稿

Good morning and welcome to the MGM Resorts International third quarter of 2011 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 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 your conference.

Thank you Linda.

Good morning and welcome to the MGM Resorts third-quarter conference 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.

We furnished this morning our press release on Form 8-K with the SEC as well.

Before turning it over to Jim, I'd like to read our Safe Harbor statement.

On this call, we will make forward-looking statements under the Safe Harbor provisions of the federal Securities law, although results might differ materially from those projected in the forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in these forward-looking statements is contained in today's press release and in our periodic filings with the SEC, including our most recent Form 10-K and subsequent Form 10-Q filings.

During the call, we will also discuss non-GAAP financial measures in talking about the Company's performance.

You can find a reconciliation of these measures to GAAP financial measures in our press release, which is available on our website.

Finally, please note that this presentation is being recorded.

With that, I'd like to turn it over to Jim.

Thank you Dan.

Good morning everyone.

As I think you can see from our results, we had a very strong quarter in terms of our Las Vegas and domestic operations.

Of course MGM Macau had a wonderful quarter as well.

We continue to see consistency in this recovery.

You can see that in the improving city-wide trends when you look at Las Vegas, but also, importantly for us, our operating results.

The third quarter here represents the third consecutive year-over-year quarter of increased revenue, EBITDA, and cash flow margin growth for our wholly-owned properties here.

In the third quarter, domestic operating resorts here had revenue increases of 3%, and our adjusted EBITDA was up 10% in the third quarter.

The 13% RevPAR increase beat our guidance of 10% growth.

That was driven by improvements in both rate and occupancy during the quarter.

The convention mix came in as we expected.

The outperformance was mainly as a result of better than expected demand in our FIT and Leisure segments, which both lead to higher achieved rates.

Resort operations at CityCenter continue to improve with a 26% increase year-over-year adjusted EBITDA.

Bobby will get into that in a while.

MGM Macau had adjusted cash flow of $150 million.

That's up about 80% year-over-year.

Grant Bowie will talk to that in a little while.

Looking at the current trends, they remain very positive.

Bookings and current asking rates are up.

In fact, the convention business is particularly strong.

September was one of our highest convention booking production months ever.

I think that emphasizes the fact that our group business for 2012 and beyond remains quite robust.

Punctuating this operating growth and our confidence in future gains, I have some good news to report that October was the best profit month we've had all year here in Las Vegas.

By the way, October was also a record month for us in Macau, a tremendous result that Grant will be proud to describe.

I'd like to also get into some of our initiatives here leading to this growth in our confidence for future gains.

We mentioned Cotai before.

We're now at a point where we believe we're ready to share with you a few details.

We've been working with Grant and his team, Pansy and our operating and development teams on this resort.

We've developed a design for the property that we're all very proud of.

The resort and casino will have about 1600 rooms and suites, as well as a gaming area that would accommodate up to 500 tables and 2500 slot machines.

Our designs call for food and beverage outlets that offer a range of cuisine not currently available in Macau.

We've been working with a variety of people on that regard.

The retail and entertainment attractions will utilize advanced technology that does not exist in Macau today, which we believe will bring a new level of excitement to the market.

As you know, we don't have a specific date for when we expect to receive the Cotai land-grant issuance, but we are hopeful we'll receive that soon.

In the meantime, we've been working very hard, productively, on the internal development track.

The permitting dialog with the agencies has been quite constructive.

We also have been focusing on the expansion of MGM Macau itself.

Grant can outline some of the expansion efforts underway which are leading to those higher results and certainly a contributing factor to the record October we just produced.

That Company is of course extraordinarily financially strong, increasingly profitable, and the visibility for future growth in our minds has continued to improve.

Back here at home, as you know, the U.S.

Congress is considering proposals that could lead to the legalization and regulation of online poker.

We support this effort, as it clearly would safeguard consumers.

In preparation for this potential legislation, we announced an agreement earlier this week with be Bwin.Party and with Boyd Gaming to jointly offer online poker in the United States.

We feel that the technology has matured to a point where Internet poker can be appropriately regulated.

The agreement will bring both companies' strong brands to the online poker platform that we believe is safe, secure and fair.

This business is going to be about scale and the global brand names, and we believe that this partnership gives us the best opportunity to fully capitalize on this potential market.

Also, as it relates to growing our brand, we announced recently a strategic relationship with Creative Casinos.

Assuming certain conditions are satisfied, MGM will invest $30 million in exchange for a long-term management contract in a minority equity interest.

This deal provides us with a great exposure to Southwest Louisiana and the Texas markets, including the important Houston area.

The deal is consistent with our strategy to develop our brand name in the US, and I think it will allow us to further expand our regional database of M Life customers.

Regional representation we believe strongly will drive casino traffic to Las Vegas, where we own dominant brands here, and thus lead to higher resort cash flows.

In fact, while we are on M Life, I'm proud to say it continues to gain traction as the new loyalty program.

In the third quarter alone, the total number of active customers in the database -- that means those who have spent money at our resorts within the last 18 months -- increased 12% year-over-year.

In addition, we've seen significant tier advancement, meaning that our customers are playing at increased levels to reach higher tiers within the program.

In the third quarter, we saw notable growth in our highest tiers, specifically a 13% increase in our active platinum players and a 7% increase in our active NOIR players.

NOIR is our highest tier.

We believe that we're seeing early results of M Life in our regional and strip slot revenues and we've begun the launch of our non-gaming components of M Life in our regional properties.

That will expand to the Strip in the coming months and we're particularly excited about that endeavor.

We think this is really a tremendous opportunity for growth in our Casino revenue and profits and growth in our relationship with our customers as to increasing our market share here.

In MGM Hospitality, under [Gomala Zs], we now have a total of 17 projects in various stages.

We're very excited that our first flag under Hospitality will be MGM Sanya on Hainan Island.

This is a large luxury resort and it's an hour flight from Hong Kong and Macau.

It opens up in a couple of months.

In addition, we just recently announced an agreement to build a Bellagio and an MGM Grand and an MGM Skywalk in Mumbai, India.

So our fundamentals of our business are solid.

Rising revenue is leading to higher profits.

Core consumer and business demand is expanding and is broad-based.

For those reasons, we're quite optimistic for the prospects of our company in the current quarter as well as the coming years.

With that, I'd like to turn it over to Dan for more specifics.

Thanks Jim.

First, I'd like to highlight some results from our resorts in the quarter.

During the third quarter, MGM fully-owned domestic resorts held near the low end of our normal range, which negatively impacted our cash flows by about $16 million, while at Aria they held above their normal range, which benefited our share of cash flows there by about $5 million.

So net-net, our consolidated adjusted property EBITDA would've been roughly $11 million or $455 million had we held at the midpoint in the quarter.

Our adjusted property EBITDA margins at our wholly-owned domestic properties were up year-over-year by about 140 basis points.

We continue to remain focused on managing our expenses while maximizing our revenues, allowing us to achieve over 60% flow-through in the quarter when you're looking at our wholly-owned domestic resorts.

Our table game volume, excluding baccarat, on the Strip was up slightly, about 1% or 2% in the quarter, and slot revenues at our wholly-owned Las Vegas properties were up about 6%.

These trends are important drivers of our business, as you can see in our core property cash flows, which grew in the quarter by some 28% in Quarter 3.

I think that's the third consecutive quarter for our core properties of 20%-plus increase in cash flow on a year-over-year basis, pretty impressive and pretty broad-based when you look at that consumer recovery that's underway.

Our regional resorts continue to do well.

There is continued strength in the combined EBITDA of those three properties up 13% to $79 million, the highest level we are purported since Q4 '07, led by Tunica and Beau Rivage, which had strong quarters.

When you look at the general consumer trends across our business, our food and beverage retail and entertainment revenues for our wholly-owned domestic properties were up low to mid single digits.

Our net RevPAR, excluding our casino and hotel revenues, grew a little over 3% in the quarter, so strong consumer spending across all segments of our business.

As you saw by the release and as Jim mentioned, our retail room rates, our FIT and Leisure segments, which are most indicative of consumer spend, experienced the greatest year-over-year percentage increases amongst all of our rooms segments, up double digits in each of those categories.

Switching gears and moving over to Macau, our VIP volumes grew to $23.1 billion in the quarter, up over 80%.

Our main floor table drop was $558 million and our slot handle was $867 million in the quarter.

We continue to make operational improvements and believe we still have additional room for further growth, both in terms of the utilization of our table games and more importantly some of the work that Grant and his team have been undertaking over the past several months, which include the recent opening of our Platinum Gaming Lounge, a high[end main table floor offering that opened up in stages in both August and September here in the quarter.

Work continues on our new in-house VIP gaming area scheduled to be completed in late November and open in early December.

So we've had a little bit of disruption as we gave up our real estate, as you recall, to our VIP in-house gaming space earlier in the year to one of our junket room operators.

So that comes online in December, and we look forward to that.

At the end of the third quarter, MGM China had approximate an cash balance of $494 million, an outstanding debt balance of $551 million, and an adjusted leverage ratio of less than 1 times based on trailing 12-month results.

Looking at our CapEx in the quarter, we spent approximately $78 million in CapEx, excluding $14 million of expenditures at MGM China, bringing our year-to-date total for our wholly-owned properties to approximately $162 million.

We expect to spend approximately $275 million in capital in this year, which includes completion of the room remodel activity at Bellagio and the start of the room remodel program at MGM Grand here in October.

But this $275 million does not include the capital being expended by MGM China.

In addition, we have many exciting capital projects underway at several of our wholly-owned resorts.

As an example, Luxor and Excalibur are in the process of opening eight new food and beverage outlets predominately with outside operators.

Switching over to the balance sheet real quickly, our net debt balance, excluding operating cash in MGM China at the end of the third quarter, was approximately $12.1 billion.

As part of our strategy to continue to extend maturities and lower our cost of capital, we drew down approximately $879 million on our revolver in September and immediately repaid it after quarter end.

The result of which increased our ability to issue additional secured indebtedness to a total of approximately $300 million.

With that, I turn it over to Bobby Baldwin to discuss CityCenter.

Thank you Dan.

Good morning everyone.

CityCenter's operating entities continued with another successful quarter, reporting adjusted property EBITDA from Resorts operations in $50 million, 26% increase over the third quarter of 2010.

Aria's EBITDA of $40 million was driven by strong volumes throughout the resort.

Revenues in the Hotel division increased 20% while Food and Beverage revenues increased 11% compared to last year.

Table games volumes, excluding baccarat, were up 6% and slot volumes were the highest since the opening of the resort, up 24% from the prior-year quarter.

The growth of the Hotel division was driven by increased occupancy and a 15% increase in ADR to $200, resulting in a 22% increase in RevPAR to $173.

Aria continues to emerge as a premier destination for convention business groups.

For 2012 and beyond, our convention booking pace continues to strengthen.

At Vdara, Vdara continues to solidify its position in the market as its reported adjusted EBITDA was $5 million for the quarter.

Vdara has experienced a rapid rise in popularity, as evidenced by occupancy increasing by 14 points year-over-year to 84%.

Even as our available room inventory increased to its full 1435 room complement during the quarter, versus 924 rooms that were available in the prior-year period.

ADR also increased 11% to $157, while RevPAR increased 32% to $131.

Crystals third-quarter EBITDA was $6 million versus $2.4 million in the same quarter last year.

Same-store sales were up 27% year-over-year, maintaining Crystals' position as the second-highest sales per square foot in the marketplace.

86% of Crystals is currently under lease.

Dolce and Gabbana's men's and women's stores, two separate stores, are scheduled to open early next year.

Our residential strategy of leasing unsold units continued to be successful.

To date, we've leased 374 units, allowing us to offset carrying costs of our residential inventory and energize of course the residential component of CityCenter.

As a litigation update, the Nevada State Supreme Court has listed this day that we've been under for some time and we are proceeding with the case, or the multiple cases, primarily with [Pre Billing Company].

The new trial date is scheduled for February 4, 2013.

As it relates to CityCenter's balance sheet, our significantly improve financial position and performance has allowed the joint venture to make $100 million in prepayments to the credit facility in September and October.

That concludes my report.

I'll turn it back to you, Mr.

Murren.

Thank you Bobby.

Just a couple of brief final comments and we'll open it right up to your questions.

I know there's been a lot of discussion, it was throughout the third quarter in the summer of the economic uncertainty, sovereign debt, debt ceiling crisis, paralysis in Washington, I can't remember them all.

We had quite a few issues globally to deal with.

Questions we all got throughout the third quarter is how will that affect your business?

Are you seeing any affect to your business?

I think we can answer, as we did all quarter, absolutely not.

We beat the Street in the third quarter in Las Vegas.

We beat our own expectation in terms of cash flows, even with the hold that Dan talked about and in terms of our RevPAR guidance.

We're off to a very good start here in the fourth quarter.

We had said earlier this year that, as we get into the fall, we felt increasingly comfortable about our business because of the event calendar, because of the convention business, and because of what we saw in our forward bookings.

As I said, we just had a wonderful October to start the quarter.

Quite a few things are going on in this fourth quarter which we think will benefit us, a number of events.

I think we've got an Eagles concert this weekend, another one coming up.

We have the Pacquiao fight in a week.

We have a number of special events and some exciting activities going on for the balance of the quarter, particularly leading up to New Year's Eve when two new big nightclubs open up for us, Hyde lounge here at Bellagio and One Oak over at the Mirage.

We think, in the fourth quarter and based on what we see on the books and how we did in October, we feel comfortable giving a forecast of a RevPAR increase of 10% here in the fourth quarter with the best gains actually coming in the highly important FIT market.

We're also doing quite well in leisure as well.

I think we've positioned ourselves to fully take advantage of the Las Vegas recovery that is clearly underway.

The operating leverage of this business is such that, if we continue on this path, we would likely see an acceleration of the growth of our cash flows into 2012 because we're seeing strong growth in RevPAR, growth in customer spend, and in our volumes.

Dan and Corey and the operating teams are keeping our costs in line, which is why this higher revenue growth is being driven to the bottom line, leading to expanded margins.

We think there's more opportunity there in 2012.

So with that, I think we would like to turn it over to the operator and get right to your questions.

(Operator Instructions).

Felicia Hendrix.

Jim and Bobby, you both had mentioned the group booking pace for 2012.

You said it was robust for just the Company in general and then at Aria.

I was wondering if you could quantify that further.

Yes, we'll get the numbers for you here.

Do you have them in front of you Dan or --?

We're pacing in line.

The first quarter has a tough comp with CON Expo year-over-year, so that's a difficult when you look at the city-wides at $140,000, but overall we are projecting our convention room mix in 2012 based on our pace to be at or slightly higher where we're forecasting 2011 to be.

So we're making good headway.

The pace is continuing to pick, up as Jim mentioned.

September was strong and we think, from a mix, overall mix standpoint, we'll be at or better than -- slightly better than where we finish up 2011.

When you say mix, does that include pricing, or are you just talking about your customer mix and bookings?

Well, the pricing is higher.

We're right on track on the pricing.

We're up significantly in pricing in 2012.

So the mix is at or above what it is this year, is what we're saying for 2012, because actually, even though that city-wide is not obviously here next year, we've been able to refill that space with higher-priced conferences, which obviously is higher-margin to us.

So, we think this is an opportunity for higher profits on the convention side.

Overall pricing is going to be up again.

As we said earlier, we're on track for the previous guidance in terms of convention pricing.

The story, in our minds at least, is the fact that the convention business, which was strong all year, was what we were hoping for, but we didn't know how FIT and Leisure was going to do.

Right now, FIT in particular, which is just so important our profits, is leading our RevPAR growth and in fact is doing far better than that overall average of RevPAR that I just gave you.

Some of our best, most important properties are leading the way.

Bellagio for example is having a tremendous quarter in terms of RevPAR.

Bobby, on Aria, do you have that?

Yes.

Aria continues -- the convention business continues to be very strong there.

For 2012, as an example, we have 183,000 room nights on the books versus 133,000 last year.

So we're up almost 40% in terms of our bookings for 2012.

The same is true with 2013 and in both cases the rates are higher.

Great, thanks.

Then is Grant on the line?

He is.

In any event, a few questions for you.

I was wondering if you could give us color in terms of what the VIP role looks like and the quarter and what the mass drop looked like in the quarter.

If you don't want to give the exact numbers, perhaps what the year-over-year growth was for both of those metrics.

I think we had given you the number earlier.

We gave those numbers as part of the prepared remarks.

Never mind.

I missed that.

So let's move on to my next part.

Sorry for that.

The other part of my question just was if you could talk a little bit about the construction disruption which you mentioned, perhaps maybe quantify the impact you had in the quarter.

Then as that's rolling off how are you positioned as you move on to newly constructed various areas that are newly improved?

I think, in particular, and (inaudible) with the opening -- the Platinum Lounge, as it's located in the middle of the property, did have some impacts in the main floor, particularly for some of the higher, more premium play.

That flows down in September, as we said.

Since that time, we have seen significant double-digit growth in category and in yield on a per squared foot basis.

We are saying in excess of 12% to 13% per squared foot increases in yield.

That was really a key issue that we saw in the third quarter.

Great.

So as we think about margin improvement going forward, can you help us quantify that?

It's a little bit difficult to do that because, as we all know, the margin is dependent also on the relationship between the main floor revenues and the VIP revenues.

We're still considering to see really strong growth in VIP revenues.

We're anticipating that to even get additional improvement as we bring on the in-house, additional in-house capacity.

So the key for us at the moment is focusing on getting the absolute yield in terms of EBITDA yield and recognizing that there is going to be some variation.

We likewise -- what we have seen now coming through and with the record on October, we saw that across all the revenue streams.

That did deliver really solid yield performance and EBITDA performance in that mid 20s% range.

Great.

That's perfect.

Thank you so much.

Bill Lerner.

A couple of questions, actually all related to Las Vegas and the Bellagio and MGM Grand room renos.

I guess the first is what was that EBITDA impact do you think for rooms out of service during the quarter at the Bellagio?

I think you probably do something like $20,000 per room per quarter, just if I'm -- maybe in the ballpark there, but I wonder what the impact was.

But I think, more importantly, what's been the ADR lift relative to the older rooms following the renovations?

Then as I think about what you're doing at the MGM Grand, you're talking about 25% of your rooms in this market where you have the most operating leverage are being addressed and presumably will have a lift in rate.

That is starting to take effect, and I guess we're seeing that.

So I guess what's your sense in both places of the impact of the CapEx or the return on the CapEx?

I think it's pretty important.

Maybe I'll give a couple of that, and anyone can jump in.

Yes, we had quite a few rooms out of service in the third quarter at Bellagio.

The profit impact was at least $1 million of cash flow, obviously a lot more revenue, but the cash flow impact, because we had, what, about 300 rooms out at any given time.

The selling rate for those renovated rooms are consistently $30 higher than the average ADR at Bellagio, so the impact of the rooms that have been coming online have been very profitable, of course the renovations for all of the standard rooms, which is 2568 standard rooms, so you can work on the math in terms of what the future profitability impact could be for Bellagio.

It's certainly happening.

The MGM, we start that -- and that by the way was a $70 million CapEx program, so the ROI on that CapEx of at Bellagio is going to be, we think, very robust.

MGM is a larger rumor model program.

That begins at the end of this year, Corey?

It starts at the end of -- it's starting now.

It's starting literally now.

It's a $160 million remodel program.

It's a much larger room base at 4300 rooms.

At that point, there will be about 700 rooms out of service at any given time.

If early indications are correct, we're going to get probably not a $30 increase, but we'll get a $10, $20 increase in ADR at MGM based on that.

Let me follow up on that real quick because, year-over-year, I think you (technical difficulty) put out any renovation or CapEx at the property that I can recall.

Of note, you picked up like $21 in ADR.

What's gone on -- I don't know to if Scott is on the call or what have you, but what's going over at the MGM?

Is it mix shift?

I know there's obviously rate with the market but it seems to be much in excess of what we've seen year-over-year for the whole corridor.

I'll turn it over to Corey.

Are you talking Bellagio?

No, MGM Grand.

Oh, MGM.

Basically I'm thinking about how you've already gotten pretty significant lift, and now you're -- without the remodel it's pretty interesting to see where that will end up with the benefit.

I'm just wondering what's happened.

Has there been a mix shift that's helped you there or was it underpriced or something else?

MGM has also been one of the benefactors of the demand in Leisure and FIT.

Especially in the summer periods, they have a lot of high demand because of their pool.

I think they had a pretty [deepened] convention mix also.

I need to look at that.

But --

Yes, that's is what's driving a lot of it.

Also, as you know, it's an event driven property, and we spoke on this a couple of calls ago, but the amount of events we're having in the MGM Grand Garden Arena is up significantly year-over-year.

It was in the third quarter.

That drives much higher ADR, and that's happening here.

That's why it sometimes seems trivial to mention that we're having a concert with a big company like this, but that is very significant.

The ADR this weekend at the MGM will be up dramatically versus the same weekend a year ago because of a very popular concert, more so when we have the Pacquiao fight next week.

So the fact that the Grand Garden is fully occupied, it will be very robust in the fourth quarter, as well as leading to higher ADR at MGM, and the convention business has been quite strong as well.

When you get the convention business strong and the FIT strong, you're squeezing out a little bit of the leisure, which is allowing us to drive better rates there also.

So the overall mix of the Grand with over 5000 rooms has been the beneficiary of that kind of demand.

Anything else, Dan, you want add or --?

Yes.

When you look at it, the Grand is getting probably more of a benefit and is one of the highest FIT and Leisure percentage increases within our portfolio in the third quarter.

That's great.

Thanks a lot guys.

Shaun Kelley.

Good morning everyone.

I just wanted to ask a little bit more about the profit flow-through in the quarter and how we can think about that going forward.

I think you mentioned in the prepared remarks it was around 60% in the quarter for the wholly-owned operations.

My question is this.

We've actually seen some of the regional companies do kind of even higher flow-throughs than that, sometimes even approaching 100% because of a promotional allowance, just decreases that they've seen.

So I'm kind of wondering.

Do you think the 60% is -- can you improve on that from here, given how early we are in the cycle, particularly with some of the RevPAR gains that you've seen and what you guys are kind of doing on the expense side to maybe drive that?

Yes, I think, when you look at it, the teams have done an outstanding job in managing the expenses and offsetting any kind of expense increase that we've had with further cost reductions and containments.

Our FIT numbers are slightly lower than they were last year and still significantly lower than the peak.

So I think, as you think about the topline continuing to grow, I think there is room for possible higher flow-throughs.

I just don't want to get ahead of ourselves here.

60% is pretty good, and so that is -- that's our goal is to continue to maximize that opportunity and drive further margin improvement, which we think we can do.

Of course if we held the same year-over-year, the flow-through would've been better.

It's just that you've got to obviously look at the hold being down year-over-year.

If it was flat, the flow-through would've been better of course.

The other point to make is that if we're correct on our strategy with M Life and our strategy in terms of developing regional presence which will feed Las Vegas, you're going to see higher casino revenue.

You're going to see higher win per units on slots and tables, which -- and therefore higher productivity even at the same level of occupancies in the hotels, which would have a profound impact on flow-through.

That's helpful.

I guess the second thing I had was just, Jim, you mentioned the event calendar and how much that could just specific weekends.

I think, as we look across Las Vegas for this year, it's actually been a huge year, two big fights and a lot of big concerts and events that have been very successful.

Do we have to worry at all about kind of lapping that in 2012?

To what extent can we look out at the event calendar for next year and think that some of this can continue because Vegas is just a venue that these types of events want to be at?

I would be very confident in saying that 2012 will be even better based on what we have on the books already in both MGM and Mandalay, not only the number of events but the quality of the concerts.

Of course, if Manny Pacquiao wins, which we all expect he will, the fight of the century would be Pacquiao-Mayweather.

We're certainly going to be shooting for that if that happens next year.

But just what we know right now, I think you should be comfortable with the fact that both arenas will be very, very active.

I think it will drive, particularly drive business at the MGM and at Mandalay in terms of rooms.

That's helpful.

Thanks guys.

Steven Kent.

Could you just talk a little bit maybe, Dan, about your expectations to maybe lower some of your financing costs or extend out the credit?

I know you discussed that a little bit in your press release as the motivation for shifting some of the cash around.

But I was wondering in the financial position paragraph, I was just wondering if you could give us an update on that.

Then separately, just on the low hold percentage, if you could give us a sense as to what is causing that, whether there is -- the customers are moving around more frequently, whether they're going to other casinos, if there is something there.

Then finally on low hold, Aria seems to bouncing all over the place.

Is that just because there's not enough play coming through there on hold?

I'll tackle the first and I think we'll tagteam you on the second part of the question.

But as it relates to our financing strategy, clearly that's my highest priority is to continue to move down this cost of capital, which will ultimately improve our free cash flow.

What we did at the end of the quarter was provide us with even greater flexibility to do that.

It's something we had done once before in late '09 in preparing ourselves for 2010, but this is a much different environment.

So I wanted to make sure we had maximum flexibility.

I think you should expect that we're going to be taking a look at things like our credit facility, continuing to look at accessing the markets opportunistically.

The good news is we don't have to do any of that here in the near term.

We have plenty of liquidity to get us through most of 2013 today.

And so right now, it's all about being opportunistic and bringing down this cost of capital.

You should see us doing that both here in the US with our US credit facility and financing activities as well as Macau.

Macau is an opportunity there.

I think, throughout the course of this year and into early next year, our highest priorities in this category are those two credit facilities, the domestic one and the Macau facility.

All things being equal, could you give us a sense today of what kind of range of savings you think you could see next year or the year after?

I think just looking at it at a at high level, when you kind of just look in rough numbers, it's hard to give you a number because obviously the debt markets move around and are pretty volatile right now and in the last couple of months.

But just to put things in perspective, we're just inside of about $1 billion of interest costs.

As we could improve every point of interest savings, that equates to roughly about $100 million of incremental free cash flow to the Company.

So it's pretty impactful when you think about it in those terms.

Maybe another way of looking at it, Steve, is Dan is going to redo the credit facility.

We're going to save quite a bit in interest there.

He's probably going to do that in the next quarter or so.

So the credit facility is going to come down in terms of interest rates.

We have those lovely New York New York bonds that come due, 13% notes in 2013.

Clearly, as we refinance in the secured market and in the unsecured market, we're going to lower our overall cost of debt.

That's where we are today.

We've now reached a point where we were hoping for back a couple of years ago.

A couple of years ago, it was about extending maturities, increasing liquidity and runway.

We used to talk about runway all the time.

Now it's about refinancing it at progressively lower rates.

We're at the threshold of being able to do that right now.

We're going to start doing it immediately with the credit facility and with secured debt and with overall cost of capital coming down.

So it's 2012, '13, '14 we believe will be a story of dramatic reduction in our overall interest because the debt is coming down and the cost of capital is coming down as well.

On your hold issue, I don't know what to say about that.

You've been in the business a long time.

Our hold goes up and down.

Our volumes are up.

We're getting the play.

These are customers that are coming back to Las Vegas and playing at the best properties in town.

We own a number of those.

As it relates to Aria, I'll turn it over to Bobby to Aria, but we're actually really excited about the play at Aria.

It's been one of the top properties in town.

Of course, there's going to be more volatility when you're reporting a single property versus a consolidated company.

So Aria is always going to have a little more volatility than the MGM Group in total.

Last year, the hold percentage at Aria was right about 23%, which is just right about on our expectation for the year for 2010.

This year, we're a little high, about 27% year-to-date.

Most of that relates to baccarat play.

Again, as a single property, you would expect a little more volatility.

At least the ball is bouncing in the right direction.

Okay, thank you.

Joseph Greff.

Hello everyone.

I'm not sure if you addressed this at all, but can you talk about the potential for a dividend out of MGM China?

Then a second question going back to the Las Vegas Strip and asking or talking about the topic of operating leverage differently, if we're looking out to next year with the Group pricing ramping and overall volumes continuing to improve, do you anticipate any major changes in your operating infrastructure?

In other words, if net revenues are, say, going up a mid single-digit range and we assume table hold is normal, how much of an operating expense increase would you expect?

Then my third question for you guys is you mentioned that table game volumes in the third quarter, ex-baccarat, were up 1% to 2% year-over-year.

I'm presuming baccarat volumes were down year-over-year.

Could you just explain why that was?

Thanks so much.

Sure.

We're trying to take notes here on your questions.

Jump in if we missed any one.

First, on MGM China, clearly we're very proud of the financial performance of MGM China and the record month it just had in October.

We'll be debt free in that operation this quarter, but we have set a precedent already of dividending out excess cash to shareholders when appropriate.

So without giving you specifics in terms of timing or quantum, it's clearly an objective of the Board of MGM China to balance growth and return to shareholders.

We've done it before.

We did it significantly this year and we've never been stronger than we are now going into next year.

In the beyond, we're going to have, in our minds, numerous opportunities to dividend money back to shareholders as well as fund any growth that we have at MGM Macau, the existing property, and in Cotai.

Dan, do you want to hit the flow-through?

Is that the second one?

Yes.

I'm sorry.

I missed that question.

I had the first and the third and that was (multiple speakers)

My question was if we look at next year, 2012, on the Las Vegas Strip and we assume net revenues grow at a mid single-digit range and we assume that the table hold is normal, in that kind of scenario, how would you expect operating expenses to grow?

I think my objective is to try to keep them as neutral as possible.

Obviously, we've got some inherent increases in some of our labor contracts in some of those pieces going forward.

But our objective is, any kind of those creep so to speak is to try and neutralize it with other plans and other savings.

That's the goal and what we're working with each of the property CFOs to continue to find new ways to neutralize any kind of costs creep as much as possible.

It's to be maybe 1% or 2% at most in terms of expenses, so for that reason the Dan mentioned.

So we should get, if we get the revenue growth that we expect, we should have significant flow-through and margin improvement.

Then the baccarat volume question?

We've looked at the up, down and left to right all year long and always do.

Really, the baccarat numbers really are just purely a lot of times based on time of travel and dates of trips.

The players -- we're seeing the players; we're getting the players.

Some show up in August; some show up in October.

It's just a matter of their schedules and how they come in.

But the overall tone of that business continues to be strong, particularly on the international side.

It just moves around based on timing of events and their trips.

Yes, in fact, Bill Hornbuckle might be on the call.

It's late where he is too because he's in Asia.

We're on our marketing trick right now.

We've had hundreds of people, I think over 500 people, in Jakarta party alone coming to our event.

So the events that we have to prepare ourselves for Western and the Chinese New Years are occurring literally as we speak, great attendance at these events, which bodes well for baccarat play in the fourth quarter and the first quarter.

Great.

Thank you guys.

Carlo Santarelli.

Thank you.

Jim, you mentioned earlier about the strength in Las Vegas in October.

Was that more on the gaming side, room side, or could you maybe quantify which properties saw a little bit excess?

Without getting specific property by property, I could say a few comments about October.

It was extraordinarily broadly based.

We had really a wonderful month in terms of room revenue and profits.

We had strong casino play.

The core properties, which we mentioned before were the ones that have been increasing year-over-year at the most, continue to do extremely well.

October I think in the City was a good month, and that of course benefits the midmarket properties particularly.

Bellagio is really on fire in terms of its revenue growth.

It's the leader here, best property, and it's setting a tone for the luxury properties that we have, MGM and Mirage and Aria as well.

So I'm happy to say that it is extremely broad-based both in the Casino side and on the Hotel side.

We had a few good events, both convention and arena events in October.

That helps.

We're going to have here more here in November in terms of events at the arenas, so we're off to a very good start.

If I could ask a follow-up as it relates to Macau, I know it's early and there are still some obstacles to clear, but have you guys discussed or could you share with us some ideas around cost of that Cotai project?

I don't think we've talked about that yet.

We have a pretty good idea, Grant and the team and our team do, but I think you'll get that probably on our next quarter call.

we'll be prepared to mention that.

I think that we'll be over there next week, more fine-tuning that cost of that project.

But it's pretty clear what a property this size would cost.

There are a lot of comparables, Galaxy when it opened, others that have already talked about costs.

Given the size of the property, rooms and casino, food and beverage offerings, you probably could get it pretty close within $0.5 billion I'm sure.

We'll have more on that in about a month or two.

Great, thank you.

Robin Farley.

Great, thanks.

A couple of questions.

First on Cotai, in terms of the development process, roughly when would you be shovel ready?

Kind of regardless of official government approval and all that, just in terms of your own development timeline, when it would be shovel ready?

Then also on Las Vegas, I don't know if I missed it but did you give Q4 RevPAR guidance for Las Vegas?

Also I don't know if you quantified.

You talked about mix in 2012, intending it to be flat with 2011.

I don't know if you put a number on that.

That's it.

Thanks.

I'll hit the first one.

We will be prepared as soon as -- we're ready to do site work right away as soon as we're allowed to.

We're in a position right now to do that.

And so shovel ready is -- we're pretty ready right now.

We could be in the ground early next year, but we could start doing site work immediately upon -- we're at that point where we're ready to go immediately upon the pending approval.

Did anyone get Robin's second question?

Did you give Q4 RevPAR guidance for Las Vegas?

I don't know if you gave it.

Yes, I'm sorry.

We did.

I did.

RevPAR guidance we gave was 10%, which I think was the same guidance we gave in the third quarter, although we came in at 13% in the third quarter.

But we gave RevPAR guidance of 10% in the fourth quarter for Las Vegas.

Did you quantify the convention mix for 2012?

I know you talked about it being relatively flat with 2011 on higher rates, but can you quantify what you're targeting?

Sure.

I think Bobby was saying that RevPAR for Aria itself would be also (inaudible) that guidance

It was 10%.

-- up 10% for Aria as well in the fourth quarter.

We didn't give that, but now we did.

In terms of the mix, convention mix in the third quarter is about 12.5% this year.

It's going to be higher in the fourth quarter, probably around 14%.

That will bring the year-end at about 14.5%, yes, 14.5%, 14.6%.

We'll be higher next year.

We'll be closer to 15% next year.

And Aria will be about 16.5%

I don't know if this is something you can quantify, but just thinking about kind of the underlying same-store -- is there a way to quantify what the cash room revenues at Bellagio, the changing cash flow revenues for the un-renovated rooms, just to get a sense of how those are year-over-year?

They are up as well.

We'll look at that.

I don't know that I have that in front of us, but if you take the apples-to-apples rooms, given the extremely strong RevPAR at Bellagio itself, particularly in October, it's wonderful.

Of course, most of these rooms aren't back yet, but it's up heavy single -- heavy double digits in terms of RevPAR even on the un-renovated rooms.

Great.

Thank you.

Operator, I think we have time for one more question.

Harry Curtis.

Hello.

Just a quick question on the mix of your leisure business this year and what you would expect it to go to next year.

Jim, you mentioned that -- I think you used the expression "beginning to squeeze them out a bit".

What sort of inventory had they been getting as a mix of your business this year, and what might that look like next year?

I'm going to give it to Corey.

he's got the schedule in front of him.

Do you know what our leisure mix was this year?

Yes, it's approximately 40 (technical difficulty) and it will be around there next year also.

We continue to move that around.

But I think what's key also, yes, we want to move it around by shrinking the spread between the FIT and Leisure as we're accomplishing that also.

(multiple speakers)

I'm sorry, have the commissions changed?

Have the commissions changed?

The commissions are still the same.

My second question is renovation plans on some of the tier 2 projects.

You're attacking your biggest cash flow boxes.

What are your thoughts on eventually getting to some of the others?

Could you do that again Harry?

Your renovation plans, you're attacking the big boxes now, your biggest cash flow generators.

Do you have plans to renovate some of the tier 2 properties?

We do.

Do you want to take that, Bobby?

Yes.

As it relates to the mid-tier properties, we've just completed exercise -- the exercise of master planning the casino floors in particular at Luxor and Excalibur and New York, New York.

So we have lots of work going into 2012 and 2013 in the mid-tier properties, much of it in the public areas.

And the rooms -- we go out about 10 years, so we know over the next 10 years what we want to do in terms of rumor models.

I think the one after the Grand, do we have that one?

It will be a combination of a couple of the core properties and maybe even the hotel at some point in time over the next three to four years.

(multiple speakers) [Spa] Tower (inaudible).

[Spa] Tower will be next year.

Yes, so with the Spa Tower here at Bellagio, it's was one that we only built -- when did you finish that, Bobby?

Was it 2000-and -- ?

[September] '04.

We're going to work on that next year.

We have some more work to do at Luxor and Excalibur.

We started those rumor model programs The hotel at Mandalay Bay, but there's a schedule so we can take out capital.

We can pace out minimizing the amount of rooms out of service in any given time, but expect this will be going on on a continual basis.

On the leisure, I just want to clarify it.

The luxury is a lot lower than the core is.

We continue to be able to move that mix around on the luxury where that's our main focus right now and we're seeing that result.

That answers the question.

Thank you.

There are no further questions at this time.

Thank you all for participating.

We're available for follow-up questions after the call.

This concludes today's conference call.

You may now disconnect.