美高梅國際酒店集團 (MGM) 2013 Q3 法說會逐字稿

Good morning and welcome to the MGM Resorts International third-quarter 2013 earnings conference call.

Joining the call from the Company today are Jim Murren, Chairman and Chief Executive Officer; Dan D'Arrigo, Executive Vice President, Chief Financial Officer and Treasurer; and Grant Bowie, Chief Executive Officer of MGM China Holdings Limited.

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.

Thank you, Jennifer, and good morning everyone and thanks for joining.

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

This morning we furnished our press release on Form 8-K to the SEC as well and can be found on their website.

Before turning it over to Jim, on this call we'll make some forward-looking statements under the Safe Harbor Provisions of the Federal Securities Laws.

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.

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 call is being recorded.

And with that I'll turn it over to Mr. Jim Murren.

Thank you, Dan, and good morning everyone.

Also here we have Phil Hornbuckle, our President, and Corey Sanders the COO, in case Dan and I get the tough questions.

Bobby Baldwin is on the road.

He's out in Asia roping in some customers, so everyone wish him luck.

We reported what we believe to be a very strong third-quarter.

Our EBITDA was up 24% led by MGM China.

And that cash flow was up 25%.

Our wholly-owned strip properties were up 12% year-over-year on budget and improved operations at CityCenter we're happy to say.

We're showing consistency in our wholly-owned operations, as this was the fourth consecutive quarter of year-over-year strip growth for us.

And also margin improvement.

As many of you know we have been targeting investing in our resorts here in Las Vegas and I'm happy to say we're seeing good returns on those investments.

The MGM Grand and Bellagio room remodels, for example, were completed last year and clearly they've been successful in driving profitability at those properties.

In the third quarter, Mandalay Bay benefited from recent capital there, and significantly improved its nightclub, restaurant, and entertainment offerings and Mandalay's EBITDA grew 20% in the quarter, thanks in part to those initiatives.

And as part of that, our focus now shifts to projects underway at New York, New York, and Monte Carlo.

For those of you who've been out here lately, you'll see quite a bit of construction around those two resorts.

All of that effort will be open in the spring of next year.

And those properties will benefit from what we believe to be literally a transformation of their strip fronts, making it very easily accessible, adding casual bars, restaurants and retail.

And that's important to us as we develop West between those two properties in a parklike environment with more retail leading up to a beautiful new arena that we're building with AEG.

M life continues to mature as a program.

In fact, the new mlife.com website which was only recently launched, it was launched in February, is now the highest room revenue producing website within our business.

This has allowed our customers to see our total breadth of offerings, rather than logging on to one website or another and that has led to good cross marketing for all of our properties.

MyVEGAS, our social game on Facebook, will go mobile next week with its own app.

This is becoming an extremely interesting customer acquisition tool for us and we think it is going to further increase, enhance our M life database.

Grant will touch on this more in a moment.

But MGM Cotai Construction is progressing really well.

We are on pace to complete our piling and site work by the end of this year.

And at that point we're going to move on to the basement and tower construction.

And we've added another person to our design team, a leading international designer, Jacques Garcia.

He is responsible for designing our Mansion product.

He's done some of the most beautiful hotels in the world and he's a good addition to the team at MGM Cotai.

And in Maryland, just last week, a bunch of us were there giving our public presentations and we unveiled what we think is really a beautiful design for National Harbor.

And we believe it is reflective of not only the history of Maryland, but the fine monuments in the area.

It is a $925 million effort.

Luxurious, extraordinarily well-designed.

Providing quite a few amenities that do not exist in Maryland or in the region.

And certainly would be the finest resort in the state of Maryland, if we are lucky enough to be selected.

That final decision, we're one of three there, will be decided according to the state by the end of this year.

And in Massachusetts our RFP response is well underway.

We've been working hard in the city of Springfield and with the state.

We expect to submit everything required of us by the end of this year.

And according to the state, a final decision is expected to be made in April of '14.

It was a busy and I'm pleased to say very productive quarter for us at MGM Resorts.

Our margins are improving.

We kept a good eye on our costs.

The property investments are yielding good returns on investment.

We're planting seeds to grow this Company further as we have consistently and determinedly reduced our leverage, improved our balance sheet, and we're happy with our progress thus far.

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

Thanks, Jim.

During the third quarter we were able to grow our revenue by 9% which was led by a 22% increase at MGM China and 6% growth on the Las Vegas Strip.

The leverage in our operating model allowed us to grow our EBITDA and expand our margin.

Margins on our wholly-owned domestic resorts increased by 75 basis points year-over-year, led by an approximate 130 basis point improvement at our wholly-owned strip properties.

In Las Vegas, our luxury properties continue to lead the way with 18% EBITDA growth in the quarter, driven by both casino and hotel segments of the business.

On the casino side, we continue to see strong activity from a high-end international customers as our marketing team remains focused on driving that business to our strip resorts.

Our efforts are evident as baccarat volumes grew over 20% in the quarter, driving a 16% increase in table games revenue at our wholly-owned Las Vegas resorts.

On the hotel side, our luxury resorts benefited from increased occupied rooms at Bellagio and MGM Grand and are experiencing better pricing due to increased convention room nights.

Our third-quarter strip RevPAR increased 3% year-over-year consistent with our guidance driven by a combination of both occupancy and rate increases.

We expect our fourth-quarter room revenue to be up slightly year-over-year on relatively flat RevPAR with accelerating trends in the first quarter.

In fact, looking into next year, our first-quarter convention trends are looking exceptionally strong.

We're approaching peak convention mix in the first quarter with an expected 21% convention room mix, and beyond the first quarter we expect an increase in convention room mix for all quarters throughout the year.

Shifting over to CityCenter, Aria's EBITDA was $49 million for the quarter, an increase of 3% year-over-year.

EBITDA was negatively impacted by approximately $17 million related to a lower hold percentage when compared to the prior year's quarter.

Aria's table game drop increased by 12% year-over-year.

On the noncasino revenue side at Aria, that increased 9%.

During the third quarter hotel occupancy increased 100 basis points to 89%, ADR increased 3% to $197 and RevPAR increased 4% to $177.

Food and beverage revenues increased as a result of the new Shawn McClain restaurant Five50 which opened in July as well as the continued increase in volume at our newly remodeled buffet.

Entertainment revenues increased driven by a full quarter of Zarkana this year versus a partial quarter of the prior Elvis show in the year before.

Crystals continues to outperform, up 26% compared to the prior year.

We opened three new tenants in the third quarter and more recently we opened another tenant here in October, so we've added four new tenants to the lineup at Crystals here recently.

We continue to see some solid sales in the remaining residential inventory.

During the third quarter, we sold 28 units at Mandarin Oriental and two units at Veer for roughly $27 million in revenue on the condo front.

Earlier this month we successfully refinanced CityCenter's previously outstanding debt with a new $1.78 billion(sic-see press release "$1.775 billion") credit facility.

This transaction significantly reduces our cash interest expense by roughly $80 million and increases CityCenter's financial flexibility and extends their maturity profile.

Looking at the balance sheet to help you with some of your modeling in the fourth quarter, we currently have approximately $1.1 billion in available liquidity under our corporate revolver while MGM China has approximately $1.45 billion in availability at the end of the quarter under their revolver.

Our cash balance at the end of the quarter was approximately $1.4 billion, of which roughly $925 million was at MGM China.

During the third quarter we spent approximately $78 million in CapEx at our wholly-owned domestic resorts.

Our wholly-owned full-year CapEx looks like it's going to come in closer to $300 million to $325 million this year versus our previous guidance of $350 million due to timing of certain projects.

During the third quarter, MGM China spent approximately $27 million at MGM Macau and about $31 million on our MGM Cotai development.

For the year we now expect to spend approximately $52 million on MGM Macau and about $260 million on MGM Cotai for all of 2013.

We expect corporate expense for the fourth quarter to be roughly consistent with the third quarter of around $50 million.

Stock compensation expense is estimated to be about $7 million to $8 million in the quarter and depreciation expense is estimated to be consistent with the third quarter.

We estimate that our gross interest for the fourth quarter will be approximately $210 million, which includes about $5 million from MGM China and about $9 million in non-cash amortization.

With that, I'll turn it over to Grant Bowie to talk about MGM China.

Thanks, Dan, and good morning, good evening, to everybody.

For the third quarter, MGM China net revenue increased 22% to $808 million and generated EBITDA of $191 million.

That's up 25% year on year.

This number includes the branding fee of $8 million, but it also includes in this result negative impacts of approximately $12 million due to lower hold in our in-house VIP segment.

And it also includes a $7.5 million impact from an accrual related to a one-off additional tourism tax assessment that we received.

VIP turnover increased by 28% year over year and we continue to see success from the addition of our second floor gaming rooms and the introduction of a new operator in mid April.

We still see opportunity for continued improvement in yield on the VIP tables to maximize our profitability from this segment.

Overall VIP win for the quarter was approximately 2.8% and that compares to the prior year of 3%.

We were able to drive main floor table volumes up again by 10% and revenues up 31% year-over-year, outperforming the potentialar growth that, thanks to our continued focus on the table yield management and strategically targeting the premium segment.

Our slot handle also increased by 10% during the third quarter.

Looking forward, we're in the process of upgrading the main floor and enhancing our product offerings to drive future growth.

Now our remodeling includes renovation and expansion of the Supreme Lounge which has been very successful for us and we expect this to be completed in 2014.

The Supreme Lounge, as many as you know, is an exclusive area dedicated to our high-margin premium market customers.

Reinvention and improvement in product and service quality has been the catalyst to maintain the attractiveness in this very competitive market.

And we expect this approach to continue into the future.

MGM Cotai is well underway, as Jim mentioned, and we remain on track for an early 2016 opening and our budget is still standing at $2.6 billion.

And with that I would like to turn back to Jim for his closing remarks.

Well, thank you, Grant.

And as Dan mentioned, the first quarter of next year is approaching all-time highs for us in terms of convention business and the year looks like it is shaking out well and is outpacing this year.

The increase in our convention room nights is important to us because it will replace lower rate leisure bookings which historically has helped us push rates in general in all of our segments.

That is why we are optimistic for 2014.

And by the way, typically by the end of the year, we have booked about 80% of our planned convention room nights for the following year.

Here on Halloween we've already booked 88% of our targeted room nights for 2014.

So we're nicely ahead of where we typically are.

We're pleased with this progress.

We know that we have a lot of work to do.

We're enjoying doing it.

We remain focused on executing on the strategies we've laid out to you, both in terms of our operational strategies to drive margins and our capital strategies to improve our properties, increase our market share, and doing so with the lens of always looking towards improving our balance sheet, continuing to get stronger financially.

We're quite excited at what technology is bringing to this company, both in terms of M life on the revenue side, and in terms of operating our business more efficiently and more pleasantly for our employees.

For example, a new HR transformation software called Workday which is being rolled out as we speak.

And we're excited about talking to you about the future and we wanted to give you plenty of time.

So with that I'll turn it over to the operator and we can move right into the Q&A.

(Operator instructions)

Felicia Hendrix, Barclays.

Dan, can you just talk for a minute more about your Outlook for flat RevPAR growth Outlook in the fourth quarter?

I was a bit surprised by that, given that the comps really aren't that tough.

You know, I know the focus is on '14 and the growth that you can see there, but it would be helpful to better understand what you are expecting for the fourth quarter.

The fourth quarter this year, Felicia, is consistent with our expectation all year long.

I think, overall, as we guided our mix for the year, we were looking at 14.5% to 15%.

And it looks like we're going to come in for the year right in that range, so it's consistent with last year's mix, maybe up a touch over last year.

In the fourth quarter, we had some decent activity last year in a slow period from, call it Thanksgiving to Christmas with a couple of decent shows that we had over at Mandalay.

And those shows just kind of rotated out, as they typically do, from just a seasonality perspective.

So as a Company, we've got a tough comp down at Mandalay just because of a couple of decent size shows.

And that's kind of holding the RevPAR back.

And of course in this time period our core properties just don't have the pricing power that the luxury properties do overall when you get into that November December time period.

Okay, that's helpful.

And then just a follow-up.

I believe you said that baccarat in the quarter was up 16% year over year.

Can you help us think about what the mass table percentage was then?

Because I think the overall was 10%?

The baccarat volumes in the quarter, I think were up 20%.

I think the revenue side was up 16% on table games.

Non-bacc table games in the quarter was relatively flat on a volume perspective.

Joseph Greff, JPMorgan.

Good morning, everybody.

Jim, I was hoping that you could share with us any updated thoughts on the Massachusetts opportunity.

Obviously a lot of news there recently.

Sure.

First, as it relates to Massachusetts, and it pains me to say this, but congratulations to the Red Sox, Bill.

(laughter) And I think the least we could do here at Bellagio's is to invite the entire team here to Bellagio to spend a couple of days and meet Johnny the Barber and get rid of the horrendous beards.

Whatever works, baby.

Troy looked like an evil elf.

(laughter)

But we've worked hard there.

We believe that we have a great plan for Springfield.

We have obviously been chosen by the city of Springfield to deliver on this vision.

We've had an extraordinarily -- very close relationship with this process really from the beginning.

John McManus, who looks a bit tired, he's our General Counsel, he's also in the room, has been to Mass.

many a time, including about two weeks ago, at a hearing.

We feel like we have delivered on everything that we need to deliver on.

And that we see no reason whatsoever that we would not be found suitable there.

And I can't speak for the other operators.

Obviously there's been an awful lot of activity and drama there.

But we like the process.

It's been very transparent to us.

And we believe there's no reason why we will not be found suitable.

And as I said earlier, the state has indicated that it would like to make a determination by April, I think, Bill, right, of next year.

And the licensing before.

And licensing before November of next year.

Of this year, I'm sorry.

Licensing of November this year and April for the final.

Great.

And then I have a follow-up for Dan.

Dan, I was maybe hoping you could give us a little bit more detail or clarification on your prepared remarks about seeing accelerated trends in 1Q.

Or are you talking about RevPAR growth?

Are you talking about room revenues?

Or are you talking about revenues overall or margin improvement?

I'll leave it very broad and open-ended just to get some clarification in terms of how you guys are thinking 1Q of 2014 is shaping up based on what you know now.

Well, what we can see, Joe, is very strong hotel part of our business.

Obviously led by the convention business which is exceptionally strong in the first quarter.

And I would say, then strong year-over-year for each quarter thereafter based on the forward trends we're seeing right now.

So, the convention side is going to lead the charge as it relates to room rate growth and RevPAR growth next year.

And we think we'll get into more color on that in our next call.

But we think that's going to be up nicely in the first quarter.

And hopefully that will set the trend for the rest of the year.

And I would just add, Dan, and that everything we had hoped the first quarter to shape up to be, we feel more confident than ever that it will exactly be that.

And I would just go as far as say yes to all of your questions, Joe, in terms of not only revenues, but margins because of the substantial amount of growth that we see on the books and the event calendar for 2014.

Good enough.

Thanks, guys.

Harry Curtis, Nomura Securities.

I have a quick question for Grant.

Recently there's been some focus in mainland China on anticorruption policies.

And do you have any sense overall or is there any chatter about how much business that might be, either government related, actually flows through Macau.

I know it's difficult to answer.

But more importantly, what are the safeguards that you have in place to prevent it at MGM

There obviously has been a lot of talk and, as you well know, as a company, we are particularly focused on all of the practices that we need to do, not just for Macau but also for global structure, particularly in the areas of AML and KYC etc.

So I think that within our company, there's certainly been an ongoing and continuous commitment to ensuring we meet those obligations.

I think in Macau as a whole, I think that the systems are continuing to be enhanced as a destination we obviously become more sophisticated in managing those practices.

So Macau government is very focused on ensuring that it meets its obligations and that we work closely together with them to continue to enhance those practices over time.

Okay.

And then returning to the US, Dan, if you could give us a sense of how much lower rated business is in Vegas next year that could be displaced or burned off?

And then, what's the typical difference in total spend?

That's both in room out of the room spend between those two customer groups?

Well, I think, Harry, one of the big pieces that we're still burning off, particularly on the convention side are some of the contracts that we had entered into in 2009 and 2010 that were multi-year contracts that are still burning off last year, this year, and next.

And I think last year's number we were still roughly about 50%, 60% of our convention room nights were booked in those more difficult times than some of the newer contracts that we are entering into now, obviously, at much different rates than we were getting back in '09 and '10.

So there's still a fair amount of convention business that's burning off in that particular segment.

And that's going to continue to be of benefit as we move forward in the forward booking on the convention side.

Can you put some numbers around just the differential in the replacement and the upgrade?

I think purely from a room-rate standpoint, you're looking at upwards around $50 to $60 in displacing that lower end leisure rate into a convention room rate.

So it's pretty significant just on the room-rate piece.

Not to mention the ancillary benefits of the restaurants, the entertainment venues, by having that better priced customer in town and then the impact of the tide rising for some of our core properties as we are able to kind of use those, particularly at the likes of Luxor and Excalibur, as we're able to use those in terms of overflow during peak periods to help them drive rate midweek.

So that's an important component for our business.

And, Harry, what I would add is because of the increased convention base, not just for us but in the city, it will also bring that lower end leisure rate up also.

You'll get a double hit there also.

Okay, thanks very much.

Shaun Kelley, Bank of America.

Good morning, guys.

Just wanted to ask a little bit about operating leverage for next year.

Jim, I think you talked a little bit about margin growth.

This quarter we did see, I guess, flow-through was a little bit lower than the really great numbers you guys drove in 1Q and 2Q.

So whether it's Corey or Jim, could you guys talk a little bit about expected flow-through for next year in terms of what the model is set up to do right now?

I'm speaking specifically as it relates to the Vegas properties.

Maybe I'll start and then turn it over to either Dan or Corey.

The goal that we set for ourselves a couple years ago was to drive 50%, 60% of flow-through.

And obviously we've done a bit better than that.

Some quarters it's been as much as 100%.

And we can't do that every single quarter.

We just can't do it.

But we would expect significant flow-through in '14 and '15.

I think year to date we're up about 90 something percent, Sarah?

94% year-to-date on flow-through.

So that's a pretty good number.

We're shooting to continue to drive our flow-through up as much is possible and it would be nice to get 100% all the time but our goal has been in the 60% range on a long-term basis.

And I think that's extremely achievable.

Any ADR increase obviously will always go to the bottom line.

And then in general, as the convention mix improves and the catering improves, that's a higher-margin business than our normal food and beverage business.

Hopefully with the increased visitation it will increase occupancy in our shows, which also goes all to the bottom line because those are just empty seats if they're not being filled right now.

So I think the flow-through next year should be as strong if not stronger than what we've seen this year.

That's really helpful.

And then, I guess, just as the follow-up, Corey, you just mentioned a little bit about some of the shows.

But I guess just generically it looks to us at least like some of the non-gaming and hotel revenue was up nicely in the quarter.

Can you just talk a little bit about, do you see enough things going on whether it's nightclubs or conventions to continue to drive that category higher than the higher than average?

Are you seeing good consumer spending trends?

Or is that a little bit better than at least core gaming right now?

They're improving slightly.

I think a lot of our capital investments have paid off between the show at Mandalay Bay, some of the new restaurants, the nightclubs.

We're seeing that additional spend and people coming here for reasons other than gaming.

So I think it is slowly coming back, especially at the core properties.

The luxury properties we're seeing a little bit better spend.

And I would add, Corey, when you have higher convention business, you typically get a lot of buyouts of venues that would otherwise be closed.

You could have nightclubs that are bought out during the day.

You can have parties out at a pool or at the beach at Mandalay.

You'll have a tremendous amount of incremental found revenue for us when convention business is robust.

And it certainly will be in the first quarter.

That's going to have a significant impact in our non-gaming revenues in the first quarter.

Those are very profitable revenues for us.

Great, thanks a lot.

Joel Simkins, Credit Suisse.

Yes, obviously we continue to hear a lot of discussions around Japan.

Can you just give us an update here in terms of thinking with regard to legislation how you guys think you're positioned for that opportunity longer-term?

Yes.

Real quick, obviously we know the Diet concession right now.

They're dealing with a complicated tax issue.

But there's belief that, time will allocate and allot for them to be able to take on the question.

We're hoping and believe that by spring something will come forward.

From that, the process is still complicated.

At the end of it, when it's all said and done, you're probably looking at actual license and selections into '18 or '19, sometime in that timeframe.

We're positioned.

We've been on the ground.

We continue to be on the ground, better part of the year, year and a half now, and we're excited.

At the end of the day, it will probably be the second largest marketplace in the world.

And so we're very focused on it from that perspective.

And one quick follow-up, if I may.

Obviously, the CityCenter capital structure continues to get a lot better.

The property's trending in the right direction.

With that said, how do you think about sort of the opportunity to but out your partner at some point?

And then on top of that, again, how are you thinking about monetizing the Crystals longer-term?

We have a great relationship with our partners.

They have not asked us to buy them out.

I think they're pretty happy with the fact that the asset is increasing in value.

I'm sure that we would like to own 100% of it someday.

But I don't think that day is today, because they're happy with their position.

So I'd have to leave that one for sometime maybe in the future.

In the meantime, we did look at selling Crystal's earlier this year.

Cap rates had fallen to sub 5%.

It was an extraordinary time for retail, particularly luxury retail.

We did quite a bit of work on this and we concluded at the time we just weren't prepared to sell Crystals.

We just didn't have enough of the diligence done to do it.

And the market moved away from us a little bit.

So it's something that the partners are willing to pursue at the right valuation.

We think that time is on our side from the standpoint of the fact that the NOI at Crystals continues to grow.

We think it's going to have a tremendously strong year in 2014 and the more track record we develop at Crystals, the better cap rate we're going to get and the more robust bidding we will likely have in the future.

So that's not a long-term asset, most likely, if we get the right valuation.

But it's not something that we're going to sell this year.

Thank you.

Grant Govertsen, Union Gaming Macau.

Guys, I have got a question for Grant.

In your prepared remarks you were talking about the Supreme Lounge that will be coming on line next year.

I may have missed it, but could you give us a sense for the scope of it in terms of the number of tables or the incremental number of premium tables that this might be bringing online?

Hi, Grant.

At this stage it's actually primarily focused on premium slots.

And we're working through just some final details in the layout.

Primarily with some additional private rooms.

But it's about providing additional capacity, because that's where it seems to be growing at the moment.

At the moment, it's not the tables.

Once we do put that additional slot area in there, that a couple of the private rooms, which are currently running as machines will be available to add table games back into.

So go back to their original role as a swing room.

So that's basically that.

We're looking in the order of 60 to 70 more units.

Understood.

And so then that leads to my follow-up.

It sounds nitpicky, in the face of terrific results.

But your slots lower -- looks like it's gone down sequentially for a couple of quarters and perhaps the Supreme Lounge is a part of that solution.

But any color you could provide on that would be appreciated.

Yes, I think one of the challenges is that a lot of our business is really at the high premium.

And we had a very, very strong first half.

Had some really good performance and customers.

And that tends to set up a bit of a cycle.

As a result of that, there has been a longer period between visits.

Coming into this fourth quarter, we've actually seen, particularly with the holidays, we just got through seeing some performance improvements in that.

The slot business, I think overall, has seen some flattening in the market.

Even though there's good growth across the market.

The growth rates have slowed a little bit.

So we need to get back and look at product mixes and everything like that.

Compounded with that a little bit, I think you're aware that the government has been implementing a number of responsible gambling initiatives over the last eight or nine months.

And we're just working through all of those which we just have to accommodate.

So it's a combination of a number of events.

But we're comfortable that we to put out -- when we put all those pieces back together and get all the bits working together again, that it will come back and will continue to grow.

Great, thank you very much.

Carlo Santarelli, Deutsche Bank.

Good morning.

Actually had a few questions.

Dan, I wanted to revert back to the comments that you made earlier on the convention mix.

You did say first-quarter convention room nights 21% of total?

Correct

And I would assume, if the rest of the year is up across the board year-over-year, that you're looking for a mix record basically.

If I recall, that is kind of around 16 historically?

Yes, we think for the year, Carlos, that based on how we're pacing right now, that we are going to start coming and approaching near that level.

Whether or not we get fully back to that peak which was slightly over 16% will depend a little bit on some of the year-on-year bookings.

But, right now, we are probably projecting this year to finish up, like I said earlier, 14.5% to 15%.

Next year, convention mix we're probably looking at 15.5% to kind of 16% in that particular room segment for us.

So we're getting pretty close.

And a couple of things a swing our way, we could very well be back at peak level very easily next year.

Great.

And then I think you also mentioned 80 or 88, I wasn't sure which it was, but percent of those room nights were already on the books.

Would you guys be able to give us some color around the rate cadence of that business on the books as of today?

It was 88%.

Those are actual hard contracted room nights for next year.

And we're up kind of mid-single digits in terms of rate.

Great.

And then one last follow-up if I could.

Just on the margins.

When I look at kind of the mix between hotel revenue and other, I think that basically accounts for some of the sequential stuff.

But, if you look back historically at revenue levels similar to where you are today or were in this quarter on the Strip, and you look at kind of the mix of hotel which was actually skewed higher as a percentage of your actual revenue, you've actually done more in aggregate EBITDA in prior years prior to the cost cuts.

So I'm wondering if there's something else that's kind of changed in the margin structure?

And fully acknowledging, obviously, you guys are a nice job growing EBITDA with mid single-digit revenue growth.

But if there's something else that has changed since kind of years past where the margin growth is going to be a little bit harder to come by as we go forward?

Well, I think what you're seeing now, Carlos, and Corey will straighten me out where I go astray, but I think really what you're seeing is part of the disparity and what the city-wides do within the portfolio of properties.

And so, that midweek business, leisurewide, versus the citywide convention room nights, is really driving more, I would say, seasonality in the business quarter to quarter today than it did, say, a few years past or during the peak time period where we were able to kind of price rooms not just because of convention, but we had stronger leisure business when we moved into, say, the seasonally slower summer months in June, July and August.

So you just don't have that depth of leisure business and that there's some disparity there seasonally.

For us, we also have things that happen.

Bellagio had a pretty low hold percentage last year.

They did a touch better this year, but it's not a Bellagio like hold percentage.

So that, too, affects when you're looking at quarter to quarter kind of flow-through and leverage in the system.

We're not using that as an excuse, because our overall hold percentage was fine.

But obviously there's a lot more volume here at Bellagio than some of our other buildings from the high-end perspective.

Great, and lastly, and I'll listen.

Just anything in the fourth quarter from a hold perspective at any of the properties in Vegas that stands out that we should be mindful of?

I think Bellagio actually did better in their fourth quarter hold percentage which helped last year even itself out for the full year.

Bellagio and MGM.

We'll have to go back and look, Carlos.

But probably if there were any would have been at Bellagio and MGM that may have held a little bit better last year.

Thanks, Dan.

You just set a record for Carloses on the call.

That was three of them.

(laughter)

Robin Farley, UBS.

One for Grant first.

Looking at your Cotai property and targeting early 2016, guess it seems like in recent years the Macau government has kind of staggered a little bit some of the property openings using labor quotas and things.

And there are a couple of properties that are kind of targeting a similar time frame to open.

Do you have any sense from the government whether they're more comfortable with multiple properties opening within the same sort of six-month period or any thoughts on that?

I don't think the government has a particular view.

And I don't think they've actually started them.

I think what's happened is that the realities of individual timelines have actually determined their opening dates.

But clearly we all know in this marketplace, that there is a lot of product coming onstream.

And I think everybody is working diligently, as we are, to make sure that we're in a position to be able to get the people, get the opportunities, get the product and get open on time.

So I think is a lot of work to go.

But I think it will work itself through as programs normally do.

So what we're doing is building a whole series of different scenarios that we can work with and around.

Okay, great, thanks.

And then, just a follow-up question for Vegas and the convention business, which I know has been talked about a lot.

But you made a comment that you're booked ahead in terms of the number of room nights, you may approach peak mix.

And you mentioned that the rates for convention business would be up mid-single digits and that that helps you to -- that you're essentially also replacing leisure travel when you increase the mix of convention business.

And so, does that sort of suggest that your RevPAR expectation overall for Vegas next year is in that mid-single-digit range?

Well, we try to give -- hi, Robin, it's Jim.

We try to give quarter to quarter guidance.

We certainly will do better than that in the first quarter.

But beyond that, we just feel better about just giving you the quarter to quarter guidance.

Clearly the metrics are setting up favorably for us for the whole year, given the fact that we'll have stronger convention business that generates higher rates.

The convention business next year will be at a higher rate than this year.

The mix will be higher than this year.

It will replace lower-rated business such as leisure.

As Corey said, there will be more conventions in town next year which should drive the core properties for us and help leisure rates and, in fact, help retail rates in general, FIT rates as well.

So we're setting ourselves up as a valley here in Las Vegas to have strong RevPAR growth in 2014.

But, I think we're going to stick to the quarter to quarter guidance for now.

Okay, great.

Thank you very much.

Thomas Allen, Morgan Stanley.

Good morning.

You talked about how some of the low-end strip properties are going to benefit from overflow from the more high-end ones in 2014.

Given the low-end properties are coming from a lower base, could you see higher revenue and EBITDA growth at those properties?

Thanks.

I think that's completely conceivable.

The Deltas on some of those properties could be higher because of the lower base.

And because of what we're doing to those properties.

Not just New York, New York, and Monte Carlo as we mentioned.

But really, there's an upgrade program underway at all of our properties to one degree or another.

So I don't think it's unreasonable to think that.

What do you think, Corey?

Yes, I think the last what I would call substantial increase in convention attendance citywide was 2011.

And if you look at the results of our core properties from 2011, that showed signs of not only revenue growth but EBITDA growth.

So I would suspect we should be able to see some of that in 2014.

Great, thanks.

And then can you just give us an update on your plans for the Borgata and your show there?

Thanks.

As you know, we're working with the state on licensing.

And we hope to be relicensed in that state, John, when?

By the -- what would you guess?

We're in the process, I think, reasonable estimate would probably be first quarter.

Yes, so the idea is that's our first goal is to be relicensed in the state.

We expect -- we have no reason to expect we won't be relicensed there.

Up until that point, we can't have any view on Borgata.

In fact, I saw Keith Smith this week and I can't even talk to him about Borgata, according to the settlement agreement.

So once we are relicensed, which we expect that we will be, we look forward to sitting down with Boyd and helping map the strategy of Borgata's future.

Great, thank you.

And just a quick follow-up, we still have about $110 million -- one, one, zero million -- sitting in our New Jersey trust account that comes to us, as well, once this process is over.

And related to the online gaming opportunity, do you receive -- are you part of the JV when it launches or do you have to wait until you are licensed in that state again?

Well, our trust is still the economic beneficiary.

But as far as actually having a seat at the table, we have to wait for the license.

But we're still the economic beneficiary.

Thank you.

Steven Kent, Goldman Sachs.

I've got no questions.

A lot have been asked and answered.

Thank you, Stephen.

David Bain, Sterne Agee.

Guys, can we get any current thoughts on the culinary union discussions?

On your website you thought maybe a settlement could happen this month.

Any foreseen changes there?

Obviously those are factored into your flow-through thoughts for next year.

Correct?

Sure.

We've been working on this agreement for quite some time.

As you know, the culinary agreement is typically five years, four or five years.

And we have been having strong and very productive negotiations with the culinary this year.

All of us have been involved in that.

Corey, myself, Dan, Bill Hornbuckle.

And we feel like we have a good understanding between the leadership of the culinary and ourselves in terms of what the challenges are in the market, economic challenges in a recovering but not fully recovered market, and some of the challenges of operating in the business in 2013, 2014, 2015, that did not exist a few years ago in terms of how operations are staffed, what's going on in terms of flow-through and in terms of volumes.

And I'd have to say that it's been very productive, wouldn't you say Corey?

And, we have no reason to believe that we're not going to be really resolved on this quite soon.

Our goal is to forge an agreement that we work together with the union and we have a great relationship with them.

And create a package with them that not only reflects those conditions of the market, but the concerns that the members have in terms of healthcare, in terms of benefits, in terms of job security, and in terms of growth.

And I also have to say that that union and others have been very supportive of our efforts, not only here in Las Vegas, but when we've gone on the road, whether it be in Massachusetts, in Maryland, we saw a lot of our culinary friends in the audience last week, didn't we, Bill, supporting us at National Harbor.

And it was great to see them there and other unions as well.

So I'm very confident that we'll be done soon.

All of our negotiations are incorporated into our thoughts for our forecast for '14 and are incorporated in what we discussed in terms of margins and flow-through.

Great, thank you.

And then two more, if I could, quickly.

On the room remodel at the hotel, I don't think it was mentioned in the rebranding to Delano.

Is that project timeline going to remain or the capacity needs, changing things there for earlier mid-2014?

Yes, we had a couple room remodel changes when we do our model rooms and we finally all signed off on it not too long ago.

We really liked the product.

So does Delano.

So when are we going to start that?

We're looking at kind of an April-ish start date to start the project itself and look to complete around September or October those roughly 1,200 suites.

And as those rooms come back online, we will actually sell them.

We won't name it Delano until we're 75% complete.

But the actual delay in the room remodels, that actually worked out in our benefit.

Especially with the strong first-quarter convention business.

That was going to be a concern of ours, that we'd have a lot of rooms out of service in the first quarter.

Now we won't, because we're starting in April.

Okay, great.

And then, just lastly, Grant, if I could, Hengqin.

Do you have any thoughts there in terms of expansion plans and what that could look like in terms of capacity, amenities, timing, if anything for you guys?

Do you want it, or do you want me to take it?

I think Hengqin for Macau is a fabulous opportunity and we, like most, are studying it.

I think there's still a lot of planning and consideration to be done.

Obviously Chimelong, the major part that's on Hengqin is about ready to open, so that's really going to be a catalyst.

And I think, yes, it's certainly part of our overall strategy, but I think we need to do it in an appropriate way and it needs to, obviously, balance the development of the region.

But it is certainly something that's on our radar and we're looking at it very positively.

Okay, great.

Thank you, guys.

Praveen Choudhary, Morgan Stanley.

Thanks, guys.

Thanks for taking my question.

Very quickly for Grant, when you mentioned about $12 million for the lower hold and about $7.5 million for the accrual, can you talk about similar number in Q2 of 2013 or last year Q3 of 2012 if you do have that number?

Actually don't have that for the prior period.

I think that for the Q2 it was pretty well even.

It really wasn't such a big impact, specifically.

But let me get back to that and I can get you that information to be accurate.

I don't want to guess.

That's perfect.

And then if I can add one more question.

You have given us the total CapEx of $2.6 billion, but if you have to include capitalized interest and land cost, what would be that number?

Because most of the other operators are giving the full CapEx including those two items.

Obviously, the land concession contract is public and out there already.

I think we've spent about $60 million, $70 million in total on the deposit and there's annual payments on a go-forward basis.

So that's public information and you should be able to grab that.

As far as capitalized interest, we'll be working through that.

We'll be able to give guidance going forward.

But, we don't think it's going to be that material in the overall schemes, given the free cash flow and the amount of debt that will be at the MGM China level, even at the peak point of construction.

That's very helpful, guys, thank you again.

I can tell you the total max value is $175 million when you go to the public record.

Perfect.

Thanks again, guys.

Operator, I think that brings us to the top of the hour.

And if there's anymore follow-ups or questions, the team will be here all day and happy to take any calls off-line.

Thank you all for participating this morning.

And have a happy Halloween.

Thank you.

That does conclude today's conference call.

You may now disconnect.