Casino Mergers: Will Bigger Be Better?

The merger of MGM Mirage and Mandalay Resort Group will put one entity in control of nearly 37,000 Las Vegas hotel rooms — more than there are in the entire city of Chicago and twice as many as in Boston.

In addition to the Mandalay Bay Convention Center, the combined company will own and operate 23 hotels, including a dozen of the Strip's most recognizable brands. The merger of Caesars and Harrah's, meanwhile, will create an empire of 54 hotels, including five Las Vegas hotels offering 17,000 rooms.

Michael French, a partner with Pricewaterhouse Coopers' hospitality and gaming advisory group, believes the mergers will help the companies manage inventory and generate higher revenue per room.

"There have been a lot of mergers. Big gaming companies have become more and more dominant. There's going to be more inventory for more types of functions and groups. Therefore, you have the ability to control every market segment," he said.

Because of the convention center, the merger of Mandalay and MGM Mirage is of more interest within the tradeshow industry. "Everybody's very, very excited about the Mandalay-MGM merger, but I'm hearing nothing about Caesars and Harrah's," said Chris Meyer, director of convention center sales for the Las Vegas Convention & Visitors Authority.

Despite MGM Mirage's control over more than one-third of Las Vegas' room inventory, show organizers aren't shaking in their boots. On the contrary, some foresee better treatment, since MGM Mirage was one of the first casinos to recognize the value of meetings and conventions.

Back in 1996, before it acquired the Mirage, MGM launched a $250 million renovation that included a 300,000 square foot convention center. MGM Mirage's five casinos together offer 785,000 sq. ft. of convention and meeting space.

"We're hoping for good changes," said Debbie Brown Des Roches, director of tradeshow and membership services for SnowSports Industries America, whose SnowSports Show has been held at the Mandalay Bay Convention Center since the facility opened in 2004.

Darel Cook, director of expositions and meetings for Promotional Products Assn. Intl., said he's looking forward to new management at Mandalay Bay, where The PPAI Expo is booked through 2007. As part of the merger agreement, the Mandalay management team will depart.

Although Mandalay's sales force possesses the requisite customer-service skills, Cook maintained that the organization's approach to dealing with show management lacks flexibility. "They don't really understand our business," he said.

For example, Cook said his group must re-sign new agreements each year, even though space has been booked years in advance. And two months after this year's show, Cook said he's yet to receive a bill. In addition, room blocks are negotiated for three Mandalay hotels, yet attrition fees are levied if organizers fail to deliver the agreed-upon number of visitors at individual hotels.

"It's been a very frustrating experience dealing with the management at Mandalay," Cook said. "If some of those people from MGM move over, it will be a huge benefit for Mandalay Bay. They understand the business."

Mandalay officials declined comment, referring questions to MGM Mirage.

Alan Feldman, senior vice president of public affairs for MGM Mirage, said personnel changes will be determined "on a property-by-property basis." He added that MGM Mirage has an appreciation for the convention business. "We've been clear that that's one of the drivers for us in doing this acquisition. We see conventions playing a big role," he said.

When MGM Mirage made its $7.9 billion cash takeover offer for Mandalay last June, MGM Mirage Chairman J. Terrence Lanni said the company had no plans to impose massive changes or layoffs.

"You wouldn't want to make a lot of changes in how it's operated, in my opinion," French said.

Meyer said show managers haven't expressed any worry that room rates would rise after the merger. Besides, he said, "Rates are going up everywhere. We went from a heavy buyers' market to a heavy sellers' market."