A Vegas Double on CityCenter

Back before the recession, when all was sevens and 21s for Vegas, reading the analyses of Wall Street smarties was a snooze. They all optimistically agreed about how well everything was going and predicted, largely, that it would always be thus.

Now that things have gotten so much more precarious and complicated, though, the reading has gotten much more interesting.

I’ve been watching two gaming industry analysts in particular because they seem to routinely come up with dramatically different conclusions. Their headlines from Jan. 11, for instance, put their diverent views in high relief:

Bill Lerner of the Union Gaming Group: "2010 Off To Good Start in Vegas, MGM Most Leveraged to Recovery."

Robert LaFleur of Susquehanna International Group: "Is MGM Having Trouble Filling Rooms at CityCenter?"

Two rather different sides of that story, huh?

Lerner, a former leading Deutsche Bank gaming-stock analyst for more than a decade, has been a persistent cheerleader for MGM Mirage and CityCenter, the $8.5 billion megaproject that opened in December. His e-blast fit that trend, suggesting New Year's "may have been the strongest in MGM Mirage history" and that "CityCenter and Bellagio foot traffic have been quite strong based on our observations (across a significant number of days and day-parts)." He also wrote that MGM Mirage's 95 percent occupancy in its third quarter of 2009 after laying off 12 percent of its staff suggests they're doing more with less. That would be good for the balance sheets, assuming those guests are enjoying the diminished service enough to return.

LaFleur, meanwhile, has spoken quite negatively about what CityCenter and its main hotel Aria, contradicting much of MGM Mirage CEO Jim Murren's loftiest rhetoric. As far back as September, LaFleur was baffled by those analysts – Lerner among them -- who thought MGM was worth more than $12 a share and last month he told the L.A. Weekly of CityCenter, “There’s nothing unique in the product offering.” (MGM stock closed Wednesday at $11.76, up 27 percent so far this year.)

Since Aria’s opening, LaFleur’s firm has noticed "a notable reduction in asking rates at the Aria, the main hotel at CityCenter."

The grid shows Aria’s room rates keep dropping and are, at some points in February, as much as 41 percent lower than that of neighboring Bellagio, also owned by MGM Mirage. Wrote LaFleur: “It has been a little over a month since Aria opened, and it appears Bellagio still has the upper hand in premium pricing in the MGM portfolio. … This may not be good for CityCenter.”

Whom to believe? Well, at the moment the edge must go to LaFleur because he has actual data that he adds to weekly and Lerner says their analysis is based on, essentially, eyeballing the scene. So MGM Mirage has come out of the best weekend in their HISTORY, per Lerner, only to cut room rates two weeks in a row? Lerner also hasn’t returned to a discussion of how CityCenter has been doing since then except to acknowledge the harsh real estate condo market it faces.

Meanwhile, LaFleur showed numbers that are damning. Aria dropped its rates twice – by a total of $100 -- for the pivotal Feb. 13-14 weekend, which should be a bonanza for Vegas with its confluence of Valentine’s Day weekend, Chinese New Year and the President’s Day holiday. The place has only been open a month; surely if there's as much excitement about it as Lerner believes, Aria would be able to stay at least even with her own older sister?

MGM Mirage brass, clearly, like Lerner’s take that CityCenter is an out-of-the-box homer. Corporate spokesman Alan Feldman dismissed LaFleur’s room rate tracker by noting Susquehanna is only checking on rates available via the Internet and leaves out convention and group sales as well as rooms sold wholesale. And, anyway, Aria, he said, is in the process of finding its level. “We have no history out there,” Feldman said. “It’s not unusual in the history of Las Vegas– it was the case for Bellagio, too – that there are price adjustments in the first quarter.”

That said, of course, earnings will tell the tale sooner or later. But MGM doesn’t report its first quarter earnings until June, so that leaves lots of time for the speculation and spin over CityCenter that may these days be one of the best shows in town.

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Steve Friess is a freelance writer based in Las Vegas. He writes the blog www.VegasHappensHere.com.