MGM Mirage Considers Dividing Hotels, Casinos into Two Companies
MGM Mirage Chief Executive Officer Terry Lanni responded Tuesday to bad news regarding income by asserting that a move to split the company and its assets into two separate entities may be coming soon. Lanni said business factors may make dividing the hotel and casino divisions into their own companies a wise decision.
Lani noted on a conference call that pure hotel companies have advantages casino operators do not enjoy, and that the difference has been frustrating as MGM seeks to expand its hotel brand around the world.
Lanni's statement came on the heels of an earnings report from the first quarter that showed a decline in income of 30%. The company was able to point to the fire at the Monte Carlo Casino and the resort's subsequent closure for a month as a major factor in the disappointing news. Also relevant were continuing costs of ongoing projects, such as the CityCenter complex being built on the Las Vegas Strip.
Still, revenue was down at existing operations, painting a bleaker picture than Lanni would like his growing hotel empire to carry. Furthermore, MGM's partner, Dubai World, is the financial arm of the Arabic country of Dubai, and would probably prefer its investment be clearly in a hotel rather than casino market, for public relations reasoning if nothing else.
However, when the economic wheel spins again and prosperous times return, MGM may regret hasty moves that separate the ridiculously profitable casino business from a hotel industry in which, unlike casinos, not everyone gets rich.
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