Monday, December 14, 2009

MGM Mirage To Launch Luxury Hotel Brands In India

. Monday, December 14, 2009

By stockOzone team

MGM Mirage, the Las Vegas Strip’s largest casino owner, is entering India with non-gaming luxury hotels as the struggling gaming and hospitality giant turns to emerging markets like India and China to get over the recession blues.

“India is one of the fastest growing regions for both business and leisure travel. In the next few months, we would launch two of our brands - Bellagio and MGM Grand - in the country,” said Rishi Kapoor, vice president (development), India, at MGM Mirage Hospitality, the non-gaming hotel business of the second largest gaming in the world. “We are in advanced stage of talks with developers for the same,” he added.

While Bellagio is positioned as the super luxury brand, MGM Grand is positioned a tad lower. The company will also bring in a third luxury hotel brand, Skylofts. The company is already pursuing development opportunities in select locations across the country, Mr Kapoor said. “We have identified several cities such as Delhi and the National Capital Region, Mumbai, Hyderabad, Bangalore and Chennai and leisure destinations in Kerala, Goa and Rajasthan to establish these brands.” MGM Mirage, however, will keep its investments minimal by going in for the management contract business model to bring in its brands of hotels.

Under management contract, the brand runs a hotel built by the real estate developer for a fee as well as a share of the total revenues earned through the property. This means there’s no major investment for the hotel brand. The gambling can’t afford to take any risk, after the deep recession in America’s gaming capital over the last three years. After two decades as one of the fastest-growing metropolises in the US, Las Vegas has seen unemployment rate jump from 3.8 per cent to 12.3 per cent in just three years, thanks to record foreclosure rates.

Deserted and hit by a steep fall in gambling revenues, casinos had to slash room rates by about 30 per cent and store cheaper wines to woo customers back. Many projects, including MGM Mirage’s ambitious $8.5-billion City Center project complete with 6,000 high-end hotel rooms and 2,400 luxury condos, came to a standstill.

MGM Mirage and its partner Dubai World, which announced late in November that it wanted a six-month delay on payments on $26 billion in debt, finally managed to open the City Center project last week. While MGM Mirage Hospitality is not looking at acquisitions or inorganic growth in India, Mr Kapoor said the company was open to a joint venture.

“Depending on the partner and the opportunity on the table we would be open to a joint venture relationship with a local company,” he said. In the past, several international hotel companies have formed joint ventures as minority shareholders with Indian real estate companies. Listed on the New York Stock Exchange (NYSE), MGM Mirage is a development company with significant holdings in gaming, hospitality and entertainment. It owns and operates 17 properties located in Nevada, Mississippi and Michigan, and has 50 per cent investments in four other properties in Nevada, New Jersey, Illinois and Macau.

Disclosure: Author does not own any of the stocks discussed here.

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