美高梅國際酒店集團 (MGM) 2011 Q4 法說會逐字稿

Good morning, and welcome to the MGM Resorts International fourth-quarter and full-year 2011 earnings 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; Grant Bowie, Chief Executive Officer and Executive Director of MGM China Holdings Limited.

Participants are in a listen-only mode.

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

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

Dan D'Arrigo.

You may begin your conference.

Thank you, Rashia, and good morning and welcome to MGM Resorts International fourth-quarter and full-year earnings call.

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

This morning, we furnished our press release on Form 8-K to the SEC, and before we get started I'd like to read our quick Safe Harbor disclosures.

On this call, we will make forward-looking statements under the Safe Harbor provisions of the federal securities law.

Actual 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 filing.

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

You can find the 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, and with that I'd like to turn the call over to Jim.

Thank you, Dan, and good morning, everyone.

2011 was a rewarding year for MGM.

Our net revenues and EBITDA were both up double digits and our margins were up over 100 basis points.

MGM China and CityCenter had breakout years.

Both had significant growth in EBITDA year over year.

And we ended the year on a high note with fourth-quarter RevPAR up 13% year over year.

As a matter of fact, we beat our RevPAR guidance every quarter last year, and that was driven by better-than-expected FIT and leisure bookings.

EBITDA for the wholly-owned MGM China and CityCenter enterprises were all up double digits in the fourth quarter.

Looking back on the year, I'd like to take a moment to highlight a few of the major accomplishments before we move forward.

Over at CityCenter, we refinanced $2 billion of debt and we've already been in the market again this year, partially refinancing yet again at better rates.

Of course, at MGM China, we listed on the Hong Kong Stock exchange, and at the same time MGM Resorts acquired 1% of the stock and consolidated therefore MGM China onto its balance sheet and financial statements.

That, of course, significantly improves our financial standing.

At the same time, we sold $300 million of a convertible note to our partner, Pansy Ho.

Over on the online side, we partnered with bwin.party in what we believe to be a very important strategic franchise, and this will jointly offer online poker in the U.S.

if it's legalized.

And at M life, we've launched the addition of all of our non-gaming capabilities, both starting last year and with great progress here in 2012.

And speaking of 2012, we're off to a very, very solid start.

I'm happy to say that we're executing on many of the goals that we've set out to accomplish.

We've been very busy even in the beginning of this year in improving our balance sheet, and I know Dan is going to go into further detail on some of those steps in a moment.

We have made that a priority.

I've mentioned this before.

But it's my belief that as we improve the balance sheet of this Company, and it's a promise I made to the Board, we will be accruing great value to the owners of the Company, the shareholders, and that has been our goal and we've made much progress there.

Just last week, we officially launched M life's non-gaming program.

We're excited about this, given the nature of our resorts, because this will allow all the customers to be rewarded for everything that they do with us, every dollar virtually they spend in our resorts, hotel, restaurants, entertainment, attractions, spas, you name it.

And in conjunction with that, we launched our new website, Mlife.com, which is working out extraordinarily well, and makes the booking experience for our resorts not only more fun but certainly more productive for us as people can literally craft their own vacations, bundling all their opportunities into one trip.

It's a big step in driving casino play and casino mix into particularly our Las Vegas properties.

We know how valuable this can be to cash flows and to flowthrough and we think we'll be able to report on a quarterly basis great strides in that area.

On the operations side, we announced only a week or two ago a strategic relationship with Ameristar.

We're excited about this.

I know they are as well because it will not only create an opportunity to extend our reach into the regional markets, but will significantly expand, we believe, the benefits of the assets we have here in Las Vegas, increasing again casino mix which we both believe will lead to greater profitability.

We have a variety of these type of relationships underway, probably more to report in the coming quarters, and we believe that that is a great way to leverage our assets, improve our cash flows in a very capital-light fashion.

We're making a name for ourselves in Massachusetts.

We think that's a great potential market for us.

We certainly are trying to stake our position there, and we're looking at a variety of other regional markets where we can invest small sums or partner with others to, again, increase the network that MGM Resorts can accomplish in a cross-marketing basis to Las Vegas.

Part of that goal is on our hospitality division run by Gamal Aziz.

That's a big part of how we believe we can leverage our brands around the world.

Just yesterday, we made an announcement that MGM Hospitality, with our partner Diaoyutai, will develop and manage a hotel right on the Bund in Shanghai.

It's a tremendous location.

It will be called the Bellagio, and imagine having a Bellagio on the Bund in Shanghai.

That will join the MGM Grand that just opened in Hainen Island in the town of Sanya in China.

And those two properties will be joined by two others that opened just this year.

We have one opening in Beijing and another in the large city of Chengdu, and these are but four of about a dozen or so projects we have underway in China.

This online poker initiative is important.

Bwin.party is expert in this space.

The relationship we formed means that MGM will own 25% of this joint venture that will hold rights, exclusive rights, to bwin.party's existing brands for online wagering here in the United States.

In addition and at the same time, we entered into an agreement with bwin.party to use their software and technical expertise to deliver any of our brands, the MGM brands, to the public under which we would pay them a fee.

We therefore believe we are as well positioned as any should the U.S.

market come online on the legalized fashion for poker, which we expect it will, we will be out of the gate as soon as anybody.

And so with that, I'll turn it over to Dan to get into our operating results.

Thank you, Jim.

First, I'd like to give a few highlights from the quarter, help you with some guidance on some items for your models, and then provide you an update on our balance sheet.

As far as the quarter, on the EBITDA margin side we've increased our wholly-owned domestic property EBITDA margins every quarter this year.

And in fact, in the fourth quarter that represented the largest year-over-year improvement in the year of some 200 basis points.

We continue to remain focused on managing our expenses while managing maximizing revenue, allowing us to achieve approximately 48% flowthrough to the EBITDA and profitability line in the quarter.

Our convention trends remained strong during the fourth quarter.

In fact, Mandalay Bay increased its EBITDA by 40% year over year, due primarily to better convention mix in the quarter.

We finished 2011 with our wholly-owned strip convention mix at about 14.7%, which was higher than our expectations coming into the year, driven by a significant amount of in the year/for the year bookings.

On the room trend side, the operating teams continue to do a tremendous job here.

Our leisure and FIT rates have been the biggest driver of the upside to our RevPAR gains in the year.

These segments, in terms of our overall retail segments here, are up 9% in the fourth quarter.

Our casino trends continue to improve.

Our international volumes continue to be strong.

Over the last couple of quarters, we've seen a pickup in our domestic play.

Fourth-quarter domestic rate at table games play increased again year over year, and during the fourth quarter our wholly-owned properties experienced increases in both volume and win in both table games and slots, something we haven't seen since the fourth quarter of 2007.

Our regional resorts continue to do well.

Our regional property showed continued strength with combined EBITDA up 12% year over year.

And we're proud to report that MGM Detroit had its best fourth quarter ever, and in fact that put an exclamation point on its best year ever in 2011, and a great job by George Corchis and Steve Zanella in that marketplace.

Our CapEx in the fourth quarter was $113 million, excluding $12 million at MGM China, and our full year of 2011 was approximately $274 million, excluding about $27 million at MGM China since we began consolidating them.

In 2012, we expect to spend approximately $350 million in capital, excluding MGM China, and Grant will touch on his expectations there for 2012.

And included in those capital plans for this year is the continuation of the room remodel project at MGM Grand, the room remodel at the Spa Tower later on this year here at Bellagio, the conversion and investment in the Michael Jackson show with Cirque du Soleil at Mandalay coming online in late 2012/early 2013, and the Blue Man Group show at Monte Carlo coming on this year.

In Q4, you'll have noticed that our corporate expense was higher than usual in the quarter.

We had some one-time items in the fourth quarter of 2011 related to some transition costs and outsourcing some of our IT functions, some marketing and development expenses, and we had some credits in the prior-year 2010 quarter related to property taxes, so it made for an unfavorable comparison.

Going forward, though, we expect our corporate expense to moderate and be in the mid-$30 million-ish area in the first quarter before stock compensation expense.

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

Our depreciation expense in the quarter we estimate to be approximately $235 million to $240 million.

And our interest expense in the fourth quarter was $274 million, including approximately $6 million from MGM China and about $24 million in amortization expense.

We estimate that our interest expense in the first quarter will be approximately $285 million, including roughly about the same amount -- $6 million for MGM China and about the same amount of $24 million in amortization expense.

As Jim mentioned earlier, we've had a busy start to the year and have already achieved some major accomplishments in improving our balance sheet.

I will start first over at CityCenter where we added onto our first-lien notes by some $240 million a few weeks back.

This lowered our interest rate and extended our maturities by a year at CityCenter.

There remains about $75 million outstanding under the current first-lien term loan, and we've received commitment to replace that term loan with a revolver for the same amount, and we expect that to be finalized in the upcoming weeks.

On the MGM Resorts side, we completed a successful and very well subscribed bond offering, which was upsized from $500 million to $850 million.

That was some three times oversubscribed, and we achieved a rate of 8 5/8, which is the lowest unsecured rate we have achieved since before the economic downturn.

And as we pointed out in the release, we've received preliminary approval from roughly 62% of the lenders at our amend-and-extend transaction of our credit facility.

We expect the closing of that to be later this week or early next, and we expect to initially achieve roughly about 150 basis points in rate improvement on the extending portion of that facility.

As a reminder, our average borrowing cost is -- on our outstanding debt is approximately 8%, so for every 1% improvement in rate that we can achieve, that is an incremental $125 million in interest rate and incremental free cash flow to our Company.

So as we go forward, we believe there will be (multiple speakers) opportunities to further reduce these borrowing costs and improve our overall free cash flow.

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

Thank you, Dan, and good morning, everyone.

We had a great year at CityCenter with EBITDA from operations up to $236 million and we ended the year on a strong note with EBITDA in the fourth quarter up 62%.

ARIA's 2011 EBITDA improvement is attributable to significant growth in volume and revenue across all key operating divisions.

Casino revenues increased 27% year over year and hotel revenues increased 24%.

ARIA ended the year strong with fourth-quarter EBITDA up $47 million.

Our slot revenue for the quarter was the highest since opening that property, a 21% increase from last year, and we continue to be one of the market leaders in table games as well.

ARIA benefited by approximately $6 million due to slightly higher table games hold percentage in the fourth quarter compared to the previous year.

ARIA's fourth-quarter hotel room revenue improvements were driven by a 10% growth in RevPAR.

It is significant to note that this growth was achieved by improving our convention segment with a 20% growth in occupied convention room nights and a 9% higher ADR versus last year.

ARIA continues to develop as one of the top convention destinations in the country.

For 2012, we have over 100% of our planned convention room nights already booked.

ARIA's leisure segment business is also improving.

Our production numbers in domestic leisure are on par with Bellagio's as awareness in the United States continues to build.

We are making progress on the international leisure market as well and see an opportunity for further improvements in that market.

We are currently in negotiations with Cirque du Soleil to have the Elvis show replaced at the end of this year.

We are very excited about offering a new show to our guests, and I expect the unveiling to be a significant boost to business volumes throughout the entire resort.

We are in the process of updating some of our dining options.

The restaurant Union has been closed and will be replaced with a high-energy, fun, casual Mexican restaurant, Javier's, which is extremely popular in the Southern California market.

We are also evaluating our other dining options for opportunities to introduce additional recognizable brands to ARIA.

We look forward to hosting the annual Michael Jordan Celebrity Golf Invitational again this year at ARIA and Shadow Creek, and it is in the last weekend of March.

Vdara was able to grow both rate and occupancy in 2011 while also adding an additional 131,000 available room nights to its inventory.

But Vdara had its best quarter yet in the fourth quarter and continues to gain momentum as the best non-gaming, non-smoking resort in Las Vegas.

Crystals same-store sales were up 24% year over year during the fourth quarter, and we now are approximately 86% leased.

Both Dolce & Gabbana's women's and men's stores have opened this year, and these are our two flagship locations for Dolce & Gabbana.

Eres, a store featuring Chanel's swimwear and lingerie, is scheduled to open during the second quarter of this year.

Finally, our residential strategy of leasing unsold units continues to be successful.

To date, we've leased 405 units at CityCenter with total monthly lease revenues of $751,000.

That concludes my report, and I'll turn it over to Grant Bowie.

Grant?

Thank you, Bobby, and good morning, and for those of us in Asia, a very early morning.

We are very happy here at MGM China to be with you today and we're very pleased also with the progress we're making in developing our business.

For the fourth quarter, net revenues for MGM China were $719 million.

That's up 26% year on year.

EBITDA reached a new record of $174 million, an increase of 23% year on year.

During the fourth quarter, we were able to drive significant growth from each of our revenue segments.

In our VIP business, rolling chip volume grew by 29%.

This growth came from increased volumes from our existing operators, as well as being able to add two additional and new operators.

We also benefited from VIP hold at 3.2% during the quarter.

On the main floor, table drop was up 13% and slot handle up 35%.

The success on the main floor was the result of the launch of our Supreme Lounge in late December 2010 and the subsequent opening of our new Platinum Lounge at the end of the third quarter of 2011, both of which are catering to our premium main floor customers.

The environment and enhanced services have been well received by the customers and had the effect of increasing both win per unit and overall player traffic.

Continued development of our targeted customer communications and entertainment also resulted in a record daily visitor count in December and allowed us to set a new record for our slot revenue in December.

Our focus on our customer relationship building across all segments continues to improve revenues and is a core strategy to drive our future revenue growth.

We also continued to make operational improvements and are confident that we are still able to drive additional earnings growth from our business.

We opened our new MGM VIP in-house area in mid-December, and while it is still very early, we have seen initially strong increases in volume.

We continued to reinvest in Macau, and at MGM Macau CapEx was $45 million in 2011 and will be approximately $80 million in 2012.

Of this, $45 million is allocated to build out the undeveloped space on our second floor, with the balance being applied to rejuvenating capital works.

In Cotai, we are well positioned and have plans for a truly unique MGM experience.

Our plan is to have approximately 500 tables, 2,500 slots, 1,600 rooms, and at the moment there's budgeted to be approximately $2 billion to $2.5 billion to be spent over a timeframe of approximately 36 months.

At the end of the fourth quarter, MGM China had approximately $720 million in cash, debt of $552 million, and had adjusted leverage ratio of less than one time based on the trailing 12-months EBITDA.

Earlier today, the MGM China Board approved a special dividend in the amount of approximately $400 million to shareholders on record on March 9.

We are pleased that our improving cash flows has afforded us the ability to return cash to our shareholders.

Our Board will continually review opportunities for the use of cash, and going forward we will manage our growth and expansion prospects with our desire to return cash to our shareholders.

With that, I'd like to turn back to Jim for his closing remarks.

Thank you, Grant.

Thanks for being up so late or early, depending on your perspective.

You know, we feel extraordinarily proud of last year's results, but I guess the real emotion is how optimistic we are about the future, and I think we have some reason to be.

We are off to a very good start here in 2012, both in Las Vegas and in Macau.

The tone of business here this year is quite positive.

Grant's done a tremendous job in Macau in general, and specifically to expand our resort there, the MGM, and we are very excited about Cotai.

We are excited we have a Company that has the ability to generate significant cash there to reinvest into Macau, and at the same time return a great value to the shareholders.

Both markets are growing.

Certainly Macau is, but now so is Las Vegas, and I'm pleased to say that MGM's building its market share in those markets.

Grant mentioned what we're doing in Macau, and here in Las Vegas, in addition to what we did last year, we will keep this momentum going.

Just over the New Year's Eve weekend, we opened up two major nightclubs, 1OAK over at Mirage and Hyde here at Bellagio.

And they're doing tremendously well from the P&L perspective in adding a lot of energy, driving a lot of revenue to the properties.

And earlier this month, we opened up Lily, another lounge here at Bellagio, and we have plans to open a Hakkasan.

Hakkasan is going to spend a tremendous amount of money at the MGM to replace Studio 54 that has been there for over 10 years.

These major upgrades to the physical facilities have been matched by major upgrades to our rooms.

Certainly the room remodel program here has added tremendously to the ADR of Bellagio, and we're seeing great early returns on much higher ADR at MGM as we renovate those rooms as well.

And we're driving people here to Las Vegas by being very strategic and aggressive on our event calendar.

We mentioned last year how strong the event calendar looked for both the MGM Grand Garden Arena and the Mandalay Event Center, and I'm happy to say it's even better this year.

Just to mention a few coming up, we have Floyd Mayweather fighting in May at the MGM, and then Manny Pacquiao the next month, in June.

Madonna is coming back.

She's going to be here in October, and we have several of these type of events throughout the year, which we know has a material impact on ADR and casino revenue.

On the ADR side, we mentioned this a few times last year, we said the first quarter would be the toughest comp because there was a big, big convention here last year and we have to overcome that.

But even still, because of recent bookings, we believe our RevPAR will be up in the first quarter, up a couple percent, 2%, 3%, but growing.

In fact, the second quarter looks particularly strong, and we think our RevPAR is going to grow nicely throughout the year even on top of the good growth that we had in 2011.

This is based on the booking trends that we see.

We're seeing very strong pace throughout the year, and our convention base is extremely solid.

And when you combine that to the growing FIT and leisure bookings, we're seeing a broad-based retail improvement in rooms revenue.

Las Vegas has clearly regained its position as the place to be, and looking at this year just alone, to give a sense of it we had records or near records in almost every event that we've had already this year.

The Super Bowl was tremendously effective for the town and for us, I think we were half the town in terms of revenue in the Super Bowl.

Chinese New Year was outstanding.

We just finished up Presidents weekend.

It was up nicely versus last year, and of course we have March Madness coming in next month.

So, the combination of an improving market here in Las Vegas and certainly in Macau, strategic investments into our properties to make our properties ever more exciting, the addition of Mlife which is driving casino play and overall spend to our properties, and a very robust event calendar bodes very, very well for Las Vegas and, more particularly, MGM.

It bodes well for Macau and particularly MGM China.

And with that, I think I'll turn it over to the operator and we can get to your questions.

(Operator Instructions).

Felicia Hendrix, Barclays Capital.

Hi, good morning.

Jim, just to tack on to your final commentary on RevPAR, thank you for some of the quarterly color.

Just wondering, when you think about it, for the -- RevPAR for the full year of 2012, do you think that you can achieve mid- to high single-digit growth there?

I think that's very reasonable.

Okay, thanks.

And then, just a little bit of housekeeping on rev.

Can you just give us what the change in cash ADR was in the quarter?

And then, also, your RevPAR increased.

It's still kind of like the last quarter, it's comping against -- not apples to apples with the Resorts fee.

Do you know what your REVPAR increase would've been if you adjusted for the Resort fee?

We will look at the cash number in a second.

You know, the Resort fee helped us in the fourth quarter by a couple of percent.

But we have largely anniversaried all of that.

So, RevPAR guidance going forward will not have any or very little impact on Resort fee.

(Multiple speakers)

Felicia, it still would have been up a little over 10%, excluding Resort fee.

Thanks.

In the fourth quarter, right?

Fourth quarter.

And the cash ADR?

Do you know, Corey?

Yes, it's 8.6% in the fourth quarter, 11% for the year.

What was that?

Go ahead, Corey.

8.6% for the fourth quarter, 11% for the year.

Great, thank you.

And then, just -- so on the -- you guys certainly had good results.

There's just a few properties I was wondering if I could get some clarification on.

You know, MGM Grand margins were flat year over year.

Wondering if that had to do with some construction disruption, yet the hotel statistics were a lot stronger so I am assuming that that is just because you had rooms out of service.

Mirage was lower year over year also.

Anything specific going on in there?

And then, Bellagio.

Did you guys just have a great quarter at Bellagio or was there some hold there?

The Mirage hold was down year over year.

We did have disruption at the MGM.

Bellagio was up in terms of its hold percentage, but really Bellagio across all its (inaudible) -- room, food and beverage, entertainment segments, it's really been improving all year long, but their hold was up year over year as well.

Their hold was up, but their non-gaming revenues and profit were up significantly.

Thank you.

And then, just moving to Grant.

Obviously, you've continued to improve the property.

It certainly shows in your numbers.

Just wondering if you could walk us through what your expectations for the property are when Sands Cotai Central opens.

And then, also, what you expect to happen to the promotional environment in Macau when Sands Cotai opens?

Thanks.

So Grant, we will turn that one over to you.

Thanks, Jim.

Hi, Felicia.

I think the opening of Sands Cotai Central is predictable.

And I think that as we have seen before, we will be able to sustain and maintain our position, and as we've continued to do, because we just keep on executing on our strategies.

I think the interesting observation is going to be is how the other Cotai properties handle that expansion.

So I think for us on the peninsula, we're now used to Cotai properties opening.

I think we all know what we have to do, and I just reiterate the point that we've always stayed close to our customers.

We want to build a strong relationship, and that tends to allow us to hold.

Clearly, we would expect that they will go and try the new place, but as we've seen with COD, Galaxy, they've come back to us, and that's always what we want to focus on.

Thank you (multiple speakers).

No, that was -- it was -- you answered both parts.

Thanks.

Harry Curtis, Nomura Securities.

Hey, good afternoon.

Quick question on your flowthrough, so it was a little bit softer in the fourth quarter than it had been in the second and third quarter.

If you could explain what segments really held it back, were there any one-time items that could explain that?

And as the year goes on, do you expect the flowthrough to improve?

Go ahead, Grant.

Harry, as it relates to the flowthrough, I think if you look at the seasonality in the business, the fourth-quarter flowthrough is never and never has been as great as, say, the third quarter when you're looking at the sequential improvement, from that standpoint.

48% flowthrough in the quarter is one of the highest levels in any of our fourth quarters, and even, in fact, higher than 2006 levels.

So when you look at the factors that go into that, one of the big key factors is our occupied room nights, which are always lower in the fourth quarter than, say, the third quarter.

And as you know, that is a big driver of some of the incidental other revenues, food, beverage, entertainment, some of the high profit margin areas as well.

So I think the fourth quarter is -- was a great flowthrough in terms of comparisons.

I think the sequential piece is a little bit of an apple to an orange comparison, but the overall fourth quarter was pretty strong in terms of flowthrough when you look at the seasonality aspect.

So you'd expect it to be higher for the year?

For the year, yes.

I think for the year we have been higher.

We're up over 50% for the overall year in 2011, and I think that's a good way to kind of model the incremental flowthrough going forward.

That's great, and then, Jim, quick question on Internet poker.

Nothing was attached to the tax bill.

Can you give us your sense of where it goes at the federal level from here?

Sure, I think that there are several options in front of Congress in terms of getting Internet poker passed at the federal level this year.

Several pieces of legislation need to be passed, and it could be associated with any one of those.

It's hard to say exactly when or if.

I do believe it will be passed at the federal level and I do believe it will be passed this year, but that's my opinion and one that is shared by a lot of people that are close to this.

On a parallel level, though, as you know, states are fervently working on their own legislation and can do so and will do so if the federal government does not act.

States can compact with one another, forming an intrastate network of Internet poker, and we would certainly be involved in that.

We're prepared -- in fact, our arrangement with bwin.party is designed to capitalize on Internet poker legalized in the U.S.

in either fashion, either statewide or federally.

We vastly prefer the federal option for any number of reasons -- uniformity of regulations, taxation, strengthening of [decline] prevention, but we can't speak for the federal government.

It seems sometimes they can't speak for themselves.

So I think that it will happen at the federal level.

It's not easy because -- not because Internet poker is becoming a complicated issue.

It's becoming a more clear issue today.

It's because Washington has become more complicated.

If it doesn't happen at the federal level, it will happen at the state level, and either way, I think, it happens this year in 2012, and I would have to say that we will be literally one of the first horses out of the gate when it is approved.

Just a quick follow-up.

Does Senator Kyl's influence, in your view, extend into the House?

Or maybe a different question, do you have any champions for federal approval in the House?

This CEO doesn't opine on politics like others.

So, I feel like I'm going to stick to the gaming industry that I'm involved in.

But I do believe there is broad-based support in the Republican and Democratic side in now both the Senate and in the House.

I think that the House, from what I've been led to believe, really views this as a very critical law enforcement issue, very critical.

They recognize that the DOJ's interpretation of the Wire Act leaves open the opportunity for state-by-state gaming where they will not have an influence on the regulatory compliance.

And that deeply concerns many people in the House, and I think that is the big change between 2012 and 2011 and I think that is the change that gets it over the finish line.

Steven Kent, Goldman Sachs.

Just a couple questions.

First, Dan, could you just talk about, broadly, ways or additional levers you have to reduce leverage in 2012 and into 2013?

I realize that you guys have done an incredible job over the past couple of years.

But are there significant opportunities over the next two years that we should be looking for that might just actually get that leverage down completely?

Or more substantially?

And then, separately, just on the leisure consumer.

Can you just tell us a sense of what you're seeing from them?

It sounds like your convention business is very good.

On the non-convention nights, especially mid-week, are you able to fill the rooms?

It looks like that from a RevPAR perspective, but are you able to get them to spend money?

Are they spending more money in restaurants, in the casino?

Just some color on that would be helpful.

Sure, Steve, this is Dan.

I'll tackle the first, and then I'm sure Jim and Corey would jump in on the second.

As far as the additional levers, obviously as our properties continue to improve and recover, this becomes more and more a free cash flow story as we go forward and improve from an operations standpoint.

We still have roughly about $180 million sitting in a trust account in New Jersey, and are continuing to work through that process and are working on the sale of our interest in Borgata as well, on top of that $180 million.

So that's clearly another lever that will go to reduce debt and provide that additional lever.

When we look out to the future, and I can't speak for our joint venture board, particularly MGM China, but clearly the announcement today by the China Board is a productive one from a shareholder in an MGM Resorts standpoint, and I think that is something that that Board will look at from time to time and explore returning capital to shareholders, in addition to the growth initiatives that they have in Macau and perhaps Taiwan in the future.

So I think when you look at the levers, we're going to continue to obviously be opportunistic in the markets as well.

I think no one is as equipped.

We've got some of the best accounting and finance and legal teams internally here to access the markets quickly and opportunistically, and I think that gives us a lot of levers to push and pull on over the upcoming quarters.

Let me just add to that, Dan, if I could.

I focus on the cash flow because we know what our CapEx plans will be over the next several years, and we believe that these capital expenditures will yield good ROIs.

These are projects that are enhancing already existing buildings.

There's no new build in here.

There's not a lot of greenfield construction.

This is generating very healthy returns right away.

Bellagio's room remodel would be an easy example of that.

So limited and known fixed CapEx with high returns driving revenues in a variety of ways.

The big driver of debt reduction will be on the cash flow side, and that is going to be growing, in our opinion, yearly.

Dan mentioned Borgata, that's certainly true not only the money we have trapped there, but our 50% interest, and of course Macau, which Dan mentioned.

I'd also throw CityCenter into that dialogue.

CityCenter is a deleveraging enterprise, and its goal is to return value to its shareholders, Infinity World, and MGM Resorts, and through the residential inventory that we own and through the rise in cash flows, we think that CityCenter will be deleveraging and be a source of cash to the partners.

So, a variety of levers that we have.

What's not on the list is our asset sales.

That is opportunistic and happens occasionally.

We have done it before, but it's unlikely that we would sell any of our operating assets.

We feel like they can generate a lot of money for us as the markets improve, and that is certainly already starting to improve.

So that was on the table a few years ago; it's not now.

On the second part of your question, I think it was on the leisure side, was it not, Corey?

You know, we've -- that's a particularly bright story for us.

I'm looking at something that happened last week.

It's the most retail bookings that we booked just last week, for example, in the last five years, and the week before that, as I look at it, was the third-highest that we've had in the last five years.

So, and in fact if you look at all the bookings this year, if this schedule is -- yes, it is correct, which is good (multiple speakers).

We're having near records or top 20 booking weeks in every single week.

So this momentum, why we are so confident that 2012 is improving, is the leisure bookings that are occurring right now for this year are near records and certainly kinds of numbers we haven't seen in half a decade.

And then, of course, on the international side, which is particular important to us, I think for Las Vegas, it's about 18% of visitation.

Is that right?

Sure.

So it's higher for us, given the nature of our resorts, and that traffic is improving.

And of course, McCarron Airport is expanding, international carriers are adding flights to Las Vegas, and that really plays right to our strength.

So I would say on the retail side in general, if you look at our FIT business, our international business, leisure picking up substantially, convention business, we'll have another very good year in 2012.

That all conspires to have a very strong year on the room side.

I would add the international customer stays longer time and they spend money, so although they fall in that leisure bucket, they are very much like an FIT customer.

So we've seen uplift in our slot play, in our fine dining.

Our ADR in that segment is up over 10%, so it's been a great segment for us this year.

That's a good point, Corey.

Mark Strawn, Morgan Stanley.

Hi, good morning.

Can you give us a sense or some color on how you expect your group rates to trend in Las Vegas in 2012 within the context of the (multiple speakers) guidance you gave?

And then, not to get too far ahead of ourselves, but would you expect those rates to step up meaningfully in 2013 as maybe some of the lower-rated group business you booked during the downturn starts to almost completely burn off as we turn the calendar into 2013?

(Multiple speakers) you're talking about convention business, right, not leisure business?

Yes, that's correct.

Okay.

I think, Mark, as Jim pointed out earlier, obviously the first quarter has a tough comp.

We see the second quarter improving, and the back half of the year is also holding up well.

There's still more work to do, obviously, this year.

I think we're projecting for 2012 kind of the same convention room mix as we finished up 2011 with, and I think what it will come down to is the in the year/for the year bookings, which in 2011 were exceptionally strong.

And if we can come anywhere close to that, we think we can drive better rates in 2012 than 2011.

The 2013 and 2014 pace right now looks exceptionally strong, both in terms of rate and room nights booked, and we still have more work to do there as well, but were gratified by what we see this early on, and 2013 and 2014 looks very strong.

And I think the same bodes for ARIA as well.

Their convention bookings, as Bobby mentioned -- our goal coming into any given year is about having 80% of what we want in the convention room nights contracted and on the books, and as Bobby mentioned earlier, for 2012 ARIA is already at 100% of that goal in terms of contracted room nights in 2012, and 2013 is getting even stronger every day.

Okay, great.

Just one quick follow-up.

Is it fair to characterize than in the group business you're booking, say, more than, say, in the last year or so in bookings -- or it's -- would you say it's easier to push rate gains and have stronger contracts in place than maybe a couple years back?

There's no doubt about that, Mark.

Our mix ended up higher in 2011 than we thought, and even still it looks like our mix will be flat to up a little bit, but at higher rates is the important thing, and better still in 2013 because many of these conventions are two- to three-year conventions.

We were booking conventions in 2008-2009 with modest annual escalators.

They're burning off right now, so the conventions that we're booking today and the ones that we booked last year are at much higher rates.

So not only is our mix improving, but the rate that we're getting, ADR rate, we're getting for those conventions is improving.

And the overall spend is going up because the folio spend is higher.

They're doing more -- they're having more fun when they're here.

They're booking out restaurants.

They're booking out the Beach at Mandalay.

They're having more special events, and the delegations have gone up.

Attrition levels have gone down, attendance has gone up.

CES is a good example.

It just happened this year.

All-time record for the town, all-time record for us.

Do you want to add anything to that, Corey?

Or is that --

No, I think the other positive side we're seeing, as Jim said, we are seeing multiple-year bookings and we're actually having to turn away certain bookings because of space limitations, which we haven't seen in a few years.

So, all in all, it's a positive story on the convention side.

And ARIA being the only gold, LEED Gold, conference FIT.

I know Bobby wishes we had a couple hundred thousand square feet more.

I mean, we're already sold out for ARIA, and that creates a lot of rate opportunity.

We've obviously been driving rate at ARIA.

And the 2013 rate is strong and 2014 is even stronger.

Great.

Thank you very much for the color.

Shaun Kelley, Bank of America.

Good morning, everyone.

Most of my questions have been answered, but I did want to follow up on, you know, one.

I think, Jim, you had mentioned a little bit strategically about some of the management fees and some of the hotel deals you're signing.

You know, that line item actually was around breakeven or so this year, at least according to my model.

So I'm kind of wondering, how do you see that ramping as some of these new properties open up and when can you start to get some meaningful earnings contribution from that line?

It is.

We started first in China, Shaun.

We started that company way back in 2007.

It takes a while to do these things.

I know some of our competitors are -- they're dipping their toe in the water right now, but they're years behind us.

And just in that one enterprise alone, we have about in China about 12 different deals under various forms of development.

Some of them take quite a while.

So we're already starting to make money in China now, the joint venture is, because we opened in Sanya.

Over Chinese New Year as an example, that hotel, the MGM Grand, was getting over $1,000 a night in ADR, and that is an hour flight, by the way, to Hong Kong and to Macau.

So the cross-marketing of having an MGM Grand in the Hawaii of China touching our customers is very, very valuable.

So I think that that company is growing and will grow in terms of cash flows, not only in China but around the world.

Remember also that in that line item we have [brand co], which is MGM China's brand co, and that steps up from -- remember, it was only half the year last year.

It was $15 million.

This year, it will be 12 million -- I'm sorry, a $30 million number here in 2012.

So brand co, which is the company that has, for a fee, lent the names MGM to MGM China, goes in cash flow from $15 million last year to $30 million this year.

That helps an awful lot.

So the combination of these hotel management deals, development fees, brand co has had a big impact on improving the cash flows.

And I think it's going to grow into quite a large company over the next several years.

Dan, did you want to add something to that?

Yes, and I think the other thing to point out is with these brands and these flags, particularly in Asia, we're going to get to know a lot of customers that we don't even know exist, so the cross-marketing opportunities into Las Vegas and Macau we're not going to quantify or even attempt to do that at this stage of the game, but that is an opportunity we think could pay some significant dividends to both Macau and Las Vegas.

That's helpful.

And then, just one more on Las Vegas, to follow up on some of the prior questions.

I was wondering, as you think about the mid single-digit to high single-digit kind of RevPAR expectation for 2012, some other of your competitors have been a little bit more cautious, particularly around maybe the third quarter, and just kind of wondering how you see -- obviously, your portfolio spans a much broader set of customers, but do you see kind of low end outperforming high end, or where are you having the most success in pushing rates and building occupancies at this point in the recovery?

You're right.

We do have a vast portfolio of every price point, but in the core properties they're doing particularly well.

There's no doubt about that.

But I wouldn't ignore the luxury properties.

I'm not sure what the competitors are saying, but we're going to do well, we believe, in RevPAR at the luxury properties.

The room remodel program only finished at the end of last year at Bellagio.

So we get a full-year benefit of that.

That is going to have a material impact on RevPAR at Bellagio.

The MGM Grand remodel program improves that RevPAR throughout the year.

That major remodel is done in September, I think, of this year.

It started last September, and so -- and we're seeing the convention business so, and the events calendar so robust at Mandalay Bay.

You saw Mandalay Bay did well in the fourth quarter.

There's a tremendous amount of opportunity at Mandalay Bay, and Mirage as well.

So I think that you will see -- my guess is that you'll see strong RevPAR throughout the portfolio.

We certainly are able to drive great RevPAR growth at our core properties as the luxury portfolio in general in town, ours and our competitors, improves, and they sell the most.

So, there's an opportunity there.

I think the combination of Mlife, our events, the capital we spent last year and spending this year, and being pretty aggressive in the marketplace.

We've added a lot of people on the convention sales side, the leisure sales side, yielding more effectively.

All will combine to get very good and growing RevPAR this year.

And of course, Jim, there's no added first-class room inventory on the horizon in Las Vegas for quite some time.

Good point, yes.

Great.

Thanks for taking the questions.

Operator, I think we'll take one more question.

Joe Greff, JPMorgan.

Good morning, everybody.

Looking back at last year in Las Vegas, your hotel revenue growth led the enterprise revenue growth.

As you look into 2012 and given your comments about the good things you're doing with Mlife, the event calendar, what's on the books for groups, and the comparisons, do you think the non-room revenue growth exceeds the room revenue growth in 2012?

I think it -- the revenue growth, particularly on the convention side, led this recovery, Joe, and the other aspects of our business are catching up.

And so, I think we're going to have a good year on the convention side, but if the early numbers here in 2012 are any indicator, gaming is coming back in Las Vegas.

Our table play is improving nationally and internationally.

Our slot business has been really very strong, and that bodes well for the nationally-oriented events like March Madness or the concerts, fights that we have.

I think that if you look at our portfolio, you're going to see, even without Mlife adding to the mix but certainly that will be additive, a more broad-based recovery and a more broad-based strength in our business, not just on the room side, but on the non-gaming revenue side and on the gaming side.

And that's the opportunity, which is a good way to end, because why we're so excited here is that we knew and I think we all have collectively agreed that for Las Vegas to come back, the convention business had to lead the way.

That has happened.

We also knew that we needed to restore Las Vegas visitation.

We could hit a record, an all-time record in visitation in Las Vegas, this year.

Then we knew that, well, people have to start spending a little bit more money when they get here, and what I think you've heard from us on the last couple of calls is that RevPOR, the total revenue per occupied room, is starting to go higher, and that's certainly the case here in 2012.

And I think that all points to the fact that Las Vegas will have in general, not just ourselves but the market, will have a much better year in 2012 because the recovery of revenue is more broad-based than it was last year, and everyone, including ourselves, are managing our costs.

And so, the flowthrough we talked about earlier should be felt Strip-wide.

We certainly are going to try to maximize the [tiered] company, and I think it's going to grow throughout the year.

So with that, I think we should -- of course, we are always around.

Please give any of us a call if you have any follow-up questions.

I want to thank you all for joining us on the call and thank you for your support of the Company.

And thank you, Grant, for staying up so late.

And this concludes today's conference call.

You may now disconnect.