MGM sees consumer "stressed"

By Deena Beasley

LOS ANGELES (Reuters) - U.S. consumers are stressed, MGM Mirage (MGM.N: Quote, Profile, Research, Stock Buzz) Chief Financial Officer Dan D'Arrigo said on Monday, adding that the casino operator was seeing weakness in low-end "value" properties and the meeting business.

D'Arrigo said that Las Vegas, one of the most popular travel destinations in the United States, was relatively resilient to a weak economy but not immune from recession.

"There is a little bit of softness in some of the value properties" in Las Vegas, he told the Reuters Travel and Leisure Summit in Los Angeles. "The consumer is stressed a little bit."

That is showing up in weaker business at properties like MGM's Circus Circus and Excalibur on the Las Vegas Strip, D'Arrigo said.

MGM, which also operates resorts like the Bellagio and MGM Grand, said last week that its January Las Vegas hotel revenue was down a few percentage points from a year earlier.

D'Arrigo told Reuters that full-year 2008 "revenue per available room" could trend down a bit, given the strong growth that has been posted in recent years, although it is too early to tell for certain.

He also said MGM's high-end business, driven in large part by international gamblers, continues to perform very well, and that is balancing some of the weakness at lower-end properties.

But D'Arrigo also said that the convention and meeting business, which accounts for about 20 percent of the company's Las Vegas hotel business, is slowing.

Meeting lengths are being shortened and companies are sending fewer conventioneers, although gatherings are not being canceled, he added.

D'Arrigo emphasized that the wide breadth of MGM's Las Vegas offerings makes the company less vulnerable to a downturn in any one sector.

He said MGM remains on track to open its multiuse CityCenter project in late 2009. It is one of several high-end projects scheduled for construction on the Strip over the next few years.

The Las Vegas convention bureau has estimated that more than 40,000 hotel rooms, mostly luxury, will be added to the gambling corridor's inventory over the next few years.

But D'Arrigo said he expects only half of that total will actually get built as the disarray in the credit markets delays or even kills some of the planned projects.

Las Vegas will only have to attract an additional 2 percent to 4 percent of visitors each year in order to absorb those rooms, he said.

(For summit blog: summitnotebook.reuters.com/)

(Reporting by Deena Beasley, editing by Gary Hill)