Inside Asian Gaming

GAMING | March 2008 42 Briefs Harrah’s Entertainment, which was recently taken private, said it swung to a fourth-quarter loss, hurt by charges from accounting reviews. Las Vegas-based Harrah’s, the world’s largest gambling company by revenue, posted a loss of US$47.8 million in the fourth quarter of 2007, compared with a profit of $47.6 million in the same quarter a year earlier. Adjustednetincometotalled $80.1million,comparedwith $84.9 million in the fourth quarter of 2006. Quarterly revenue climbed 8% year- on-year to $2.63 billion. Harrah’s said resultswere hurt by a $169.6 million pre- tax write-off of impairment charges resulting from required accounting reviews at its Caesars Indiana property and London Clubs International PLC. London Clubs operates seven casinos in the UK, two in Egypt, one in South Africa and is a consultant for a casino in Lebanon. The company was acquired by Harrah’s in 2006. Affiliates of private equity firms Apollo Global Management LLC and TPG Capital LP completed their $17.3 billion acquisition of Harrah’s in January. The company operates 50 casinos worldwide, including Caesars Palace, Flamingo and Bally’s in Las Vegas. Harrah’s earned $619.4 million for full-year 2007, compared with $535.8 million in 2006. Revenue rose to $10.82 billion from $9.67 billion in 2006. Harrah’s CEO Gary Loveman said results were “mixed” across its properties in different parts of the US. While he noted strong early numbers in 2008 at the Harrah’s property in New Orleans, results were “more modest” in other areas. “In Las Vegas, the gaming business has held up well, but room rates are off a little bit,” said Mr Loveman. The Vegas convention market had also started to soften as corporations reacted to the economic downturn by scaling back expenses, with cancellations and lower attendance at large trade shows. In line with the overall weakness of the Atlantic City casino market, the Harrah’s casinos in AC saw income drop to $61.1 million in the fourth quarter of 2007, from $64.3 million in the same quarter a year earlier. Mr Loveman attributed the drop to new smoking restrictions, increased promotional spending and competition from new slot halls in Pennsylvania. A US$1 billion cash infusion from its joint venture partner gave MGM MIRAGE’s earnings a boost in the fourth quarter of 2007, according to a Las Vegas GamingWire report. MGM MIRAGE completed the sale of half of its massive under- construction CityCenter development to Dubai World during the quarter,contributing to a rise in net income to US$872.2 million,from $201.6 million in the same quarter of 2006. MGM MIRAGE said it also benefited from a strong quarter at the gambling tables. Overall gaming revenues increased 2%, helped by a 17% increase in baccarat volume and a 3% increase in slot machine revenues. The company reported a 5.6% increase in overall quarterly revenue to $1.9 billion, from $1.8 billion in the year-ago quarter. Revenues for all of 2007 were almost $7.7 billion, compared with $7.2 billion in 2006. Dubai World owns almost 20 million shares of MGM MIRAGE, which equates to 6.7% of the company. Dubai World will own 9.4% of the gaming company when it completes a pending stock purchase. Tracinda Corp., the investment arm of billionaire Kirk Kerkorian, remains the company’s major stockholder with roughly 54% of MGM MIRAGE. Following a conference call with analysts and investors, MGM MIRAGE CFO Dan D’Arrigo said the nation’s current economic slowdown and other factors could slow revenue growth at the company for at least the first half of 2008. Nevertheless, Mr D’Arrigo said the company is proceeding with development plans for a $4 billion to $5 billion resort project on the northern end of the Strip, a joint venture between MGM MIRAGE, Kerzner Holdings International and Dubai World. Development plans are under way on the $5 billion MGM Grand Atlantic City. “We still have 160 acres of developable land in Las Vegas, so we have plenty of opportunity to expand,”D’Arrigo said. CityCenter, the nation’s largest privately funded development project ever, will cost between $8.1 billion and $8.4 billion, according to MGM MIRAGE estimates. “I don’t think CityCenter is any different than any large development around the world,” D’Arrigo said. “There is incredible competition with China and the Middle East for building materials. We’re also factoring in the labor costs going forward.” CityCenter has 5,600 construction workers and is expected to have 7,000 construction employees by summer. The project is expected to open in 2009 and includes a 4,000-room hotel-casino, residential offerings, boutique hotels and a retail, dining and entertainment complex. Through the fourth quarter,CityCenter had sold 1,336 units of the 2,647 available residences, totaling more than $1.67 billion in sales.