PENNIES FROM KEVIN - The World's Biggest Theme Park
MGM Mirage has just made a deal to absorb Mandalay Resort Group. The buyout will not only create the largest gaming company in the world, but could forever change Las Vegas.
By Kevin Baxter
Posted via 22.214.171.124 on June 18, 2004 at 1:42 AM (MST)
Statements below are the work of their authors and not necessarily the opinion of Theme Park Insider.
In case you haven't noticed, we are slowly ramping up coverage on Las Vegas, so don't get all whiny because this is "supposed to be a theme park site!" With rides, attractions and quality shows, Vegas truly is the World's Biggest Theme Park. So if you don't like it, just read something else! Just kidding. Read this! Just don't whine about it!
MGM Mirage has pulled a Comcast, only they did so successfully. And quickly. In about a week, MGM Mirage made an offer for Mandalay Bay Resorts, had that offer rejected, then worked with Mandalay to work out an acceptable offer. So MGM Mirage will soon control 28 different casinos, eleven of which on the Las Vegas Strip: Mandalay Bay, the Luxor, Excalibur, Monte Carlo, Circus Circus and the current MGM Mirage casinos, the MGM Grand, New York New York, Bellagio, the Mirage, Treasure Island and the Boardwalk. (Yeah, the Boardwalk.) Of the 72,000 hotel rooms on the Strip, MGM Mirage would own more than half.
So how will this affect life in Las Vegas? Well, MGM has been on a buying spree for the past few years, having snapped up New York New York, Bellagio, the Mirage, TI (yuck!) and the Golden Nugget (which it later sold), and the end result has basically been higher room rates. Even though the Strip still has several casinos that aren't related to any others, MGM Mirage's growth spurt affected a lot. About two-thirds of the Strip's rooms were controlled by three companies, these two and Caesars Entertainment. So when one raised room rates, the others did also. Which usually got the loners to try increases also. (Just like Disney/Universal/SeaWorld in Orlando, huh?)
But, not all has been bad. A bigger company meant bigger hotels. Bellagio is adding another tower and TI got a more elegant makeover.
And bigger is what the new company will be about. The company is expected to have $750M annually in available cash, meaning plans that have been in the works could become reality much more quickly. The Boardwalk has been supposed to get the demolition treatment for years, and the 55 acres between the Monte Carlo and Bellagio, an area that was maintained by both companies prior to this deal. Mandalay had plans on the books for 22 acres next to Mandalay Bay and 15 acres across from Luxor. Plus, there are already ideas to implode the family-oriented Excalibur and building something nicer on the property. And any one of these properties could turn into the rumored Cirque du Soleil casino!
There had also been rumors of MGM Mirage buying the Tropicana across the street, which one might think is history, but those familiar with the southernmost part of the Strip know the new company would own three casinos on the southwest corner, two on the northwest corner and the sole casino on the northeast corner. The Trop, on the southeast corner, would give the company a southern Strip monopoly. The cash-rich company could connect the Bellagio-Monte Carlo monorail to the Excalibur and possibly across the street to the Trop and over to the MGM Grand, where the non-free monorail currently ends. (All this is fuzzy right now, as there are plans to extend that monorail to the airport, making a Trop stop likely.)
This many hotels in one company would also benefit tourists in another way: entertainment access. Currently, most shows hold out a large chunk of good seats for hotel guests. So if you are staying at Bellagio and wanted to see Mystere over at TI, you would get into that good section as an MGM Mirage guest. Outside of Celine Dion's new show, the new MGM Mirage would have a lock on almost all the popular Vegas shows, including Mamma Mia, O, Zumanity, Danny Gans, Blue Man Group and Rita Rudner. Furthermore, all these shows would be heavily promoted inside more than HALF the rooms on the Strip. And any bumpkin tourist could walk up to their MGM Mirage ticket desk and have dozens of shows to choose from without ever having to set foot on a non-MGM Mirage property. (Sounds kind of like Walt Disney World, don't it?)
Even better, the virtual monopoly on the south end might actually keep the current casinos from adding new towers, which is the current rage. Caesars currently has three major construction projects going on and they are creating havoc mid-Strip. Why would the MGM Grand or NYNY need a new tower when they can build a brand-new hotel in one of three empty lots? And for cash!
The absolute worst thing that might happen is the loner hotels deciding they need to consolidate to keep up. It is already believed that Caesars and Harrah's, now Numbers Two and Three, will start throwing money at other casinos. Harrah's recently bought the famous Binion's Horseshoe, which it will sell as Binion's as it is saving the Horseshoe name for a new megaresort, and has already had talks about obtaining the New Frontier, which is right across from the sure-to-impress Wynn Las Vegas. That is a good walk from the Harrah's on the Strip, but then the Harrah's owned Rio isn't even on the Strip, so Harrah's is used to distance.
Caesars, on the other hand, has its casinos all in a tightly knit bunch. You don't have to go outside to get from Paris Las Vegas to Bally's, and the Flamingo is right across the street, which is right across the street from Caesars Palace. The company recently sold the off-Strip Las Vegas Hilton, which was kinda weird since it is now on the city's monorail line. Would they want a single casino far from their other selections? Do they have a choice? Possibly, as the Barbary Coast and Imperial Palace are both sad places that border Caesars properties.
Still, with the south Strip monopolized by one company, and nowhere to go mid-Strip, the future clearly lies between Wynn Las Vegas and the Stratosphere, the nothernmost casino on the Strip. The first company brave enough to build one or two properties on this end might end up a big winner down the road, so to speak. Unlike the nearby Circus Circus (which MGM Mirage will certainly either implode or at least remodel), The Stratosphere and Sahara are worthwhile properties. Vegas thrives on the motto "Build it and they will come!" Well, except for the Aladdin.
Just look at what has happened to the south end. The MGM Grand and Excalibur added interest to the Tropicana's boring end. Luxor and New York New York made people want to stay at that end. Mandalay Bay has been nothing but icing on the cake. And Monte Carlo... well, you can get to the Bellagio from there.
Now if MGM Mirage does end up owning everything on the south end, wouldn't it be nice if they would cover the walkways outside? And maybe air-condition them! Hell, I'd never leave their casinos!
My two pennies... Gimme yours!
From Robert Niles
I like having lots of competitors in a market. The more options consumers have, the more likely that one of them comes close to matching any given consumer's preferences. So that's why I initially oppose most mergers. I just don't like seeing the number of competitors reduced.
Posted via 126.96.36.199 on June 19, 2004 at 4:14 PM (MST)
That said, I'm gonna bring up a touchy subject here and question just how many *real* independent competitors we have in Las Vegas. I know we've got a number of different corporate names in play on the Strip. But who's controlling those companies and their Vegas operations behind the scenes? And how much latitude do individual casinos and casino groups have in what is supposedly a regulated environment?
I don't know. But those are questions I'd want answered before I offer an opinion on the MGM-Mandalay merger.
From Derek Potter
I agree that competition is a good thing. MGM owning half the strip is not necessarily a good thing. As with any business, competition keeps business creative, fresh, and at a good value.
Posted via 188.8.131.52 on June 19, 2004 at 6:58 PM (MST)
I'm glad that Vegas has become more of a family destination, and I appreciate the giant themed resorts such as MGM, Caesars, and Paris, but I also like the smaller joints. Places like the Tropicana, Golden Nugget and the Palms take you back to the days before the big corporations came in. Call me a gangster, but I still like old school Vegas too...especially when a ride on the brutal Manhattan Express costs that much to ride.
From Robert Niles
Personally, I loved my last stay in Vegas, at the Hard Rock. And I'm planning on staying at the Palms next time I visit, probably in a few weeks. So I am also drifting away from the big Strip resorts. (Though I do come back to them every trip for the entertainment.)
Posted via 184.108.40.206 on June 19, 2004 at 10:08 PM (MST)
Contrary to what some libertarians would have you believe, smart anti-trust enforcement can help business by keeping them from conglomorating into bloated messes that can't compete with more nimble businesses.
Granted, Mandalay got better when it switched its name from Circus Circus and opened its new flagship resort. But Mirage (the group, not just the hotel) certainly lost a bit of its specialness when Steve Wynn sold it to MGM. I guess I love staying at properties that reflect an owner's personal vision, rather than one created by a corporate committee. Wynn, the Mortons and the Maloofs deliver that experience in Vegas. MGMMirageMandalayetc. doesn't. And getting even bigger certainly won't help.
From Kevin Baxter
I am curious to see what MGM Mirage would build next, since the only thing they can claim is the somewhat uninspired MGM Grand.
Posted via 220.127.116.11 on June 20, 2004 at 11:41 PM (MST)
One thing I can say about a few companies owning everything - and you may have hinted at this, Robert - is that the bigger they are, the less likely they are to be mob-oriented. Also, bigger companies are more likely to build new resorts, which is usually good, Monte Carlo's boringness ignored.
And Derek, the whole family thing is past tense. One of the main reasons they are probably contemplating imploding Excalibur is because it just looks too family-friendly. MGM Mirage would probably be delighted if all the kids stayed down the Strip at Circus Circus. With Wet 'n' Wild, the Adventuredome, the Stratosphere's rides and the Sahara's rides, maybe this end should focus on becoming Family Central. Leave the rest of the Strip to us adults.
From Derek Potter
sounds like a plan to me Kevin
Posted via 18.104.22.168 on June 21, 2004 at 7:46 AM (MST)
From J. Dana
Actually, I don't think Robert was necessarily saying bigger is better. Kevin said, "the bigger they are, the less likely they are to be mob-oriented. Also, bigger companies are more likely to build new resorts, which is usually good, Monte Carlo's boringness ignored." Although I agree that the bigger companies might have more funds for these projects, the bigger companies also have less personal vision. Wynne made the Mirage beautiful through sheer strength of vision. I hope his new super-luxury resort will do the same. The thing that excites me about his new resort is that it isn't themed...it's just gonna be something new and luxurious (wow, what a concept).
Posted via 22.214.171.124 on June 22, 2004 at 5:23 PM (MST)
I don't like Vegas being owned by just three companies (my pro-capitalistic notions notwithstanding). However, mega corporate ownership is just creeping in everywhere: Broadway, theme parks, bookstores, movie studios, media companies, etc. I'm all for free-market competition, but only if there's still a free market....having only two or three owners kinda doesn't seem that way...my two cents worth.
From Philip Curds
I'm not convinced an enlarged MGM group will be a good thing for the consumer. With over a half of the hotel rooms under the ownership of MGM, the likelihood is higher rack rates for consumers. Although, the business of this merger seems to be favourable, I doubt the wisdom of the merger for the consumer. I like that of fellow Themeparkinsider.com guests suggest that this merger is not good for competition. I ask the monopolies commission to look into price fixing in the Las Vegas strip over the next 6 months. If prices rise over historical averages (including time period changes) it should be recommended that the MGM merger be rejected on the grounds of anti-competive behaviour. This is unlikely if Mr. Bush is to stay in office after the elections, since he seems to be in favour of big business, perhaps because of the funding given to his campaign. By the way, I'm English so I'm not a democrat and neither a strong European, so I'm not just anti-Bush. Although, if I was American I'd have to say, Mr. Bush is far more charismatic than Mr. Kerry. I wonder who will win. Anyway, about Las Vegas, I do think this situation needs to be reviewed over 6 months. Otherwise, MGM will take too much control over the the strip. It'll be just like the mob owning the strip, except replaced by corporate hotel companies.
Posted via 126.96.36.199 on June 22, 2004 at 7:12 PM (MST)
From Kevin Baxter
As I started writing the article, I definitely didn't like the idea of one company owning so much, but after thinking about it, there were many pluses.
Posted via 188.8.131.52 on June 23, 2004 at 4:01 AM (MST)
Steve Wynn is certainly the visionary of Vegas, but he isn't the only one creating great casinos out there. Luxor and Mandalay Bay are defnitely two of the more ingenious hotels on the Strip and their designers would most certainly be considered for future properties. Caesars has been doing good things with Caesars and Paris is one of the class hotels. Harrah's has really yet to prove its ability since both their properties have been built by others, but they have been building all over the US and some of those are nice, though not Vegas nice.
There are other quality hotels - like the Venetian, Wynn Las Vegas (if we go by track record) and the Palms - which are doing well enough (or will) to expand to a second property. These hotels are our only hope of this not turning into a three-company town. Donald Trump has gotten his Nevada gaming license too, and you can't count him out. Yeah, he can't run the ones in Atlantic City for crap, but he'd undoubtedly throw enough money at a Strip one to make it interesting.
As for price-fixing, I didn't think it was much of a worry since it basically is going on already. Everything mid-Strip southward has gotten insane in the past year. Then again, most of these hotels are the same companies. Even so, Excalibur and Circus Circus are still two of the cheapest on the Strip and they are part of the very large Mandalay Bay Resorts. Monte Carlo, Treasure Island, Luxor and Paris are all part of chains too and they haven't gotten as insane as some of them. Vegas knows their biggest market is LA, who head there for weekends. Considering much of the LA market is heading off-Strip to the Hard Rock, the Palms and the Rio, there is a definite ceiling to room prices. The monorail should help matters since now more people can stay down-Strip at cheaper places like the Sahara or the Riviera and get to the excitement very easily. I'm not saying worsening prices can't happen, but I don't see them getting much worse than they already have gotten. While competition will lessen on the Strip, there is still plenty of competition in town.
From Kevin Baxter
Also, things are not totally secure on the deal going through as is. MGM Mirage is already going to have to sell a casino in Detroit due to antitrust laws there, and owning more than half the hotel rooms on the Strip might be another sticking point. They might be forced to sell off a hotel there, and Circus Circus is the obvious choice. Excalibur would be the other, but its location is too important. I would say the sale of CC is more than 50% likely as it isn't exactly the nicest property on the Strip.
Posted via 184.108.40.206 on June 23, 2004 at 5:09 AM (MST)
But then who would they sell it to? Caesars? Harrah's? Caesars has too much on its plate right now, but Harrah's has already said it is interested in anything that might come available on the Strip. Selling to Harrah's could help them with the whole price-fixing thing, and Harrah's would probably offer more for it than anyone else. Still, let's hope MGM Mirage Mandalay etc opts for one of the others I mentioned, just to keep things a little more kosher on the Strip.
Does anyone know who owns the land between the Stratosphere and Circus Circus? I read that the Sahara actually owns it and it has been on sale for years, but no one has bought it. Wouldn't that land and Circus Circus's land be nice for a couple connected casinos or a lavish casino with another golf course on the Strip? CCLV has a lot of acreage, but with only about 35 or so next door, I'm not really sure there's enough for the 140 or so acres a golf course requires. Too bad, since this end of the Strip needs to offer stuff that isn't more south if they want to become the next Tropicana and Las Vegas Blvd.
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