MgmMirage

Like many other brands, MGM Mirage has decided to make money by selling its name. The brand, which has been struggling all year, particularly with the battle to get the huge $8.5 billion Las Vegas CityCenter project completed, is in need of some cash. MGM Mirage has inked 10 franchise deals with hotels carrying the Bellagio and MGM Grand name deals that will let the brand expand in a way that it could not on its own seeing as it is already $12 billion in debt.

The deals are a first for MGM Mirage. Two MGM Grand casino resorts are planned for Ho Tram, Vietnam and Sharm el-Sheikh, Egypt. Other plans include Bellagios in Cairo, Mumbai and four in China. Bellagio, MGM Grand and Skyloft hotels will also be franchised in Dubai. These deals will give MGM Mirage two to three percent of gross sales with an additional 10 precent if a property achieves its profit goals. MGM Mirage is hoping that branded resorts will attract visitors even without gambling which means they will have to position themselves as a distinctive hotel brand that doesn't rely on a casino as a main atraction. What MGM Mirage and Bellagio do have that some other hotels don't is experience at maintaining full service complexes with restaurants, nightclubs, shops and entertainment all designed to make the guest so happy that they never want to step outside.

Back in May we learned that buyers into Las Vegas' CityCenter's Veer and Vdara towers wanted an adjustment on their condo prices because of changes in the real estate market. At the time it looked like MGM Mirage was standing firm on their prices and MGM Mirage spokesman Alan Feldman said the company was going to wait until the end of the year to make any decisions because it was too soon to say how the market could shift. Something must have shifted already because now MGM Mirage has said it will cut the prices of condos. Bloomberg News has a quote from MGM Mirage Chief Executive Officer Jim Murren that states plainly that there is no denying that the real estate market has fallen dramatically since the deals were inked.

MGM is building 2,400 condos at CityCenter and some buyers have had trouble obtaining mortgages for the high-priced condo units especially since real estate values have fallen by over half in the past three years. Without mortgages many deals will be unable to close. Details on the condo price cuts are expected to be announced this fall and should provide some relief for buyers. So far 65 percent of the Veer Towers units are under contract and 45 percent of the Vdara hotel-condo units are under contract.

MGM Mirage has announced a list of retailers that will be joining Crystals, the massive 500,000-square-foot complex in the new CityCenter development. The Crystals facility is set to open on December 3 and will include most of the major luxury brands which already have at least one outlet on the Las Vegas Strip like Prada, Christian Dior, Bulgari, Carolina Herrera, Hermes, Roberto Cavalli, Cartier, Van Cleef & Arpels, Louis Vuitton, Tiffany & Co., Ermengildo Zegna and Versace. The center will also mark the debut of other stores in Las Vegas such as Tom Ford, Assouline, Kiton, Miu Miu, Paul Smith and Porsche Design. Other previously announced retailers are H. Stern, de Grisogono, Marni, Boutique Tourbillon and Mikimoto. Wolfgang Puck and Todd English will also have restaurants at the complex. This line-up puts CityCenter in direct competition with other shopping areas on the Strip including the Wynn and the Forum Shop. As 2009 rumbles on it is hoped that more and more luxury shoppers will return to Las Vegas; the city has experienced a sharp decrease in tourism. Figures released last month show that the rate of decline in tourism has slowed in recent months. The $8.5 billion CityCenter project has faced a variety of troubles during the construction process but when it opens it will be the biggest development Las Vegas has ever seen.

MGM Mirage and New Giza for Real Estate Development have announced plans for the MGM Grand New Giza on the outskirts of Cairo, Egypt. Equity funding for the development will be provided by New Giza for Real Estate Development while MGM Mirage will provide management services and branding. The 550-room MGM Grand will have views of the city of Cairo and the pyramids of Giza and will be connected via electric train to the new Egyptian antiquities museum currently under construction.

The New Giza development is a new master-planned community that is built over 1,500 acres of land and will include homes, hotels, restaurants, malls and a golf course. Around 80 percent of the 2,500 villas and townhomes will enjoy all-around views of Cairo and the Pyramids of Giza. The hotel is currently under design and is expected to open in 2013.

Although Las Vegas condo prices have tumbled, MGM Mirage hasn't gotten the message. The Las Vegas Sun has a piece on the push to sell condos in CityCenter's Veer and Vdara towers. According to their report, buyers of CityCenter condos are looking for discounts but so far MGM Mirage hasn't budged. Some buyers signed purchase contracts more than two years ago when real estate was peaking. Now that the units are headed to completion and escrow buyers don't want pay more than they are worth in the current market.

MGM Mirage spokesman Alan Feldman has said the company is going to wait until the end of the year to make any decisions since it is too soon to say how the market could shift. Buyers have signed purchase contracts for CityCenter condos worth an average of $1 million per unit.

One disgruntled buyer Steve Mack, who bought a $3 million condo at the CityCenter Mandarin Oriental project, is calling for at least a 30 percent price reduction and says many buyers may decide to walk away from the deals, surrendering their deposits, if they are expected to pay full price. Some buyers are also finding that getting a bank loan for a luxurious second home is much more challenging than it would have been before the recession and so they may have no choice in the matter.

Feldman trotted out the party line that CityCenter is a premium project and therefore deserving of prices that are higher than those of other complexes in the area. It's not a bad argument, CityCenter does offer a wide range of amenities and even despite its recent financial woes is likely one of the more secure developments in Las Vegas. But there's a difference between premium and exorbitant and MGM Mirage may have to meet buyers halfway in order to close those deals.

Why does it seem to be that the second that the economy gets even a tinge better prices start shooting up? The Las Vegas Sun delivers the sad news that MGM Mirage is already plotting to raises rates on the company's hotel rooms after seeing more bookings. Admittedly MGM Mirage which has struggled in recent months and does have the huge CityCenter project to pay for, does need the cash. Still, I have to wonder, is it too soon?

Conventions still haven't returned to Las Vegas in droves but the Sun article says that the MGM Mirage hotel occupancy rates, which dipped into the high 70s in January climbed back into the high 90s. Phil Ruffin, who bought Treasure Island from MGM Mirage will also be raising room rates because he's looking to attract the big fish customers rather than focusing on occupancy rate. The lower rates have worked their magic of getting more guests in beds but now the resorts seem to be more confident that the economic momentum is, if not completely charging upward yet, at least not fixed to slide lower.

Should hotels raise rates during the summer time in Las Vegas? The triple-digit heat often makes visits to the city only palatable for those interested in gambling in air-conditioned spaces or lounging in the shade of the pool cabanas. It seems like the fall season might be the time for a modest price increase but for hotels laboring under the strain of reduced rates for months already that may be too long to wait.