Struggling with an economy that has gouged gambling profits and cut casino companies’ ability to borrow, MGM Mirage hopes to keep expanding its international hotel and casino empire and fattening its profit — but have other companies foot the bill.
Under 10 new deals, the largest owner and operator on the Las Vegas Strip will manage hotels abroad without spending on land or development, part of its overall effort to cut costs and risk. Several of the hotels will carry the names of the company’s famous Bellagio and MGM Grand casinos in Las Vegas.
Most hoteliers use franchising and management contracts to generate revenue at lower risk and cost. But MGM Mirage’s deals to brand and manage hotels built by others are a notable first for the casino operator partly controlled by billionaire investor Kirk Kerkorian. They may be the company’s only option for expansion as it continues to struggle with massive debt, which it reported at $12.36 billion as of June 30.
Major casino companies have typically grown by buying or building properties they also operate, like the $8.5 billion CityCenter project MGM Mirage is building in Las Vegas, which it plans to manage. The 67-acre-project, co-owned by Dubai World, starts opening in December.
“You are not going to see anytime soon these big, massive investments in brick-and-mortars in our industry, at least in the gaming industry,” Gamal Aziz, who leads MGM Mirage Hospitality, the subsidiary in charge of the 10 contracts, told The Associated Press. “So how do you execute on your growth strategy?” More.