The project is under construction at a time when the recession has dried up consumers' appetite for leisure activities.
Dubai World and MGM mirage take on Las Vegas project
Dubai World and MGM Mirage have agreed to provide US$1.6 billion (Dh5.8bn) to finish building a huge new leisure complex on the Las Vegas strip in case outside financing cannot be secured. The project, which is expected to open late next year, is currently under construction at a time when the recession has dried up American consumers' appetite for leisure activities. MGM and its joint venture partner Dubai World have each agreed to make additional equity contributions of up to $959 million, the company said in a statement of acquisition on the US Securities and Exchange Commission website last week.
The CityCenter project is a mixed-use development, built on 30 hectares along the Las Vegas Strip between the Bellagio and Monte Carlo resorts. It will include a 61-storey, a 4,000-room hotel tower and 500,000 square feet of retail, dining and entertainment space. In addition MGM said it had agreed to partially guarantee the completion of CityCenter through a commitment to contribute up to another $600m to the joint venture.
The partners said last month they had finalised $1.8bn in debt and received another $500m in commitments towards the $3bn in financing needed to complete the $9.1bn development. Last month, MGM's third-quarter profit tumbled 67 per cent as gamblers stayed away from Las Vegas. Other casinos around the country also saw profits slump. On Friday, Trump Entertainment Resorts and Harrah's Entertainment both said they fell into the red during the third quarter. Trump reported a net loss of $139.1m in the third quarter, compared with a profit of $6.6m last year. Harrah's swung to a net loss of $129.7m, from last year's profit of $244.4m, on falling sales.
"This year the results for casinos and generally anyone who works in the gaming industry have been bad, given the fact that Americans now spend 106 per cent of their income and can't afford to gamble after the credit crunch," said Rohit Talwar, the chief executive of Fast Future, a UK-based hospitality consultancy. However, from a long-term perspective, investing in the gaming sector might lead to more profitable outcomes, analysts predicted.
"As with all economic sectors, tourism and gambling have trackable life cycles, only gaming is more linear and sustained. On a global perspective, people will continue to visit places like Las Vegas, and they will continue to gamble there," said Andreas Braeuer, a senior consultant from PKF, Dubai-based business advisers to the hospitality sector. "Thus from a long-term investment perspective, investment in that sector is a viable undertaking."
Mr Talwar agreed. "I think in three years time the gaming industry will be back on its feet again, and this is a good opportunity for Gulf countries to invest in the sector when prices are low." firstname.lastname@example.org