Optimism at MGM; SLS: The Unhappy Blob

MGM Resorts International sent CFO Dan D’Arrigo to meet with J.P. Morgan analysts, who found MGM execs in an upbeat mood. “We’d characterize the tone of the meetings as positive and investor interest as high,” wrote analyst Joseph Greff. That’s partly because MGM’s bread and butter, convention-goers, have been coming to Vegas in force and October is on course to set a record for group bookings on the Las Vegas Strip. As for other strategic positioning, management is still working its way through the pros and cons of converting to a REIT. As for ongoing asset sales, Crystals (above) is still the property being most aggressively shopped, although the $1 billion price tag may explain why MGM hasn’t found a buyer yet.

MGM taketh away, planning to eradicate any remaining 3:2 blackjack from its Strip casinos, as well as trying to “capture” more resort fees. Thanks, guys. Greff projected that the company’s forthcoming Macao casino would make a “reasonable” contribution to the bottom line. Interestingly, there doesn’t seem to have been any talk of Atlanta, nor of reducing the company’s substantial debt overhang.

* We’re still four months away from the first anniversary of Golden Nugget Lake Charles but, even without its contribution, Louisiana casino revenues were up 6% last month. Throw in the Nugget and you have 17% growth. Lake Charles is now the unquestioned casino capital of the Pelican State, its $84 million in aggregate revenue leaving New Orleans and Shreveport/Bossier City in the dust.

Business at Pinnacle Entertainment‘s L’Auberge du Lac was down 10%, although it continues to healthily outgross the Nugget, $31 million to $23 million. Up 8%, L’Auberge Baton Rouge continues to dominate that market, where its rivals can’t generate any traction. Pinnacle’s Boomtown Bossier was flat but Boomtown New Orleans saw revenues shoot up 15%. Despite anecdotal claims of business lost due to the new smoking ban, Harrah’s New Orleans was up an impressive 26%, while Horseshoe Bossier City led that market both in revenue and percentage increase (+21%), distantly rivaled only by Eldorado Resorts‘ eponymous casino (+8.5%) and Margaritaville (+13%). The only Caesars property to suffer was Harrah’s Louisana Downs, 17% off the pace.

Boyd Gaming had a fairly good month, although Delta Downs was flat and Sam’s Town Shreveport was down 5%. Riverboats Treasure Chest and Amelia Belle were up 11% and 8%, respectively, and Evangeline Downs rose 5%. The only operator to lose ground in the New Orleans market was Churchill Downs, off 2% at Fair Grounds racino. Monetarily, Pinnacle raked in the most chips in Louisiana but Caesars Entertainment had by far the greatest percentage improvement.

* Did you know that the one-eyed statue in front of SLS Las Vegas, nominally an abstract representation of Sam Nazarian, has been dubbed “The Happy Blob” by tourists? That wasn’t in SLS’ latest SEC filings, which used every excuse except “the dog ate my homework” to explain runaway losses at the casino (“factors beyond our control” and “regulation and licensing” among others). While a vow was made to stick with SLS for the “long haul,” there is no escaping the fact that Stockbridge Capital Partners is having to pour tens of millions of dollars into the property just so it can make payroll. That can hardly be a sustainable business model, not to mention that it’s helped run the project cost up well beyond the half-billion-dollar mark. (Local newspapers keep reprinting the official, $415 million budget figure but I had it directly from Rob Oseland that the actual construction costs came up just short of $500 million.)

However, Stockbridge’s philosophy embraces high-risk investments, so don’t give them your money if you have an expectation of getting it back. “We continue to invest in marketing and advertising to increase awareness of the SLS brand and attract new customers,” rationalizes Stockbridge, although aside from a coupon book, I have yet to see one ad or promotion for the property. Stockbridge boss Terry Fancher has clearly gotten himself in over his head and the $540 million question is whether Chapter 11 or outright closure is the preferable option.