MGM Resorts International (MGM) Q3 2013 Earnings Report, Transcript and Summary

Daniel J. D'Arrigo - Chief Financial Officer, Executive Vice President and Treasurer James Joseph Murren - Chairman and Chief Executive Officer Grant R. Bowie - President William Joseph Hornbuckle - President and Chief Marketing Officer Sarah Rogers Corey I. Sanders - Chief Operating Officer John M. McManus - Executive Vice President, General Counsel and Secretary

Felicia R. Hendrix - Barclays Capital, Research Division Joseph Greff - JP Morgan Chase & Co, Research Division Harry C. Curtis - Nomura Securities Co. Ltd., Research Division Shaun C. Kelley - BofA Merrill Lynch, Research Division Joel H. Simkins - Crédit Suisse AG, Research Division Grant Govertsen - Union Gaming Research, LLC Carlo Santarelli - Deutsche Bank AG, Research Division Robin M. Farley - UBS Investment Bank, Research Division Thomas Allen - Morgan Stanley, Research Division Steven E. Kent - Goldman Sachs Group Inc., Research Division David Bain - Sterne Agee & Leach Inc., Research Division Praveen K. Choudhary - Morgan Stanley, Research Division

Good morning, and welcome to the MGM Resorts International Third Quarter 2013 Earnings Conference Call. Joining the call from the company today are Jim Murren, Chairman and Chief Financial Officer; Dan D'Arrigo, Executive Vice President, Chief Financial Officer and Treasurer; and Grant Bowie, Chief Executive Officer of MGM China Holdings, Limited. [Operator Instructions] Now I would like to turn the call over to Mr. Dan D'Arrigo.

Well, thank you, Jennifer, and good morning, everyone, and thanks for joining. This call is being broadcast live on the Internet at www.mgmresorts.com, and a replay of the complete call will be made available on the company's website. This morning, we furnished our press release on Form 8-K to the SEC as well and can be found on their website. Before turning it over to Jim, on this call, we'll make some forward-looking statements under the Safe Harbor provisions of the federal securities laws. Actual results might differ materially from those projected in the forward-looking statement. Additional information concerning factors that could cause actual results to materially differ from those in these forward-looking statements is contained in today's press release and in our periodic filings with the SEC, including our most recent Form 10-K. During the call, we will also discuss non-GAAP financial measures in talking about the company's performance. You can find the reconciliation of these measures to GAAP financial measures in our press release, which is available on our website. Finally, please note that this call is being recorded. And with that, I'll turn it over to Mr. Jim Murren.

Well, thank you, Dan, and good morning, everyone. Also here, we have Bill Hornbuckle, our President; and Corey Sanders, the COO, in case Dan and I will get the tough questions, so Dan -- Bobby Baldwin's on the road. He's out in Asia. We're opening some customers, so everyone wish him luck. We reported what we believe to be a very strong third quarter. Our EBITDA was up 24%, led by MGM China, and that cash flow was up 25%. Our wholly-owned Strip properties were up 12% year-over-year on budget and improved operations at CityCenter, we're happy to say. We're showing consistency in our wholly-owned operations, as this was the fourth consecutive quarter of year-over-year Strip growth for us and also margin improvement. As many of you know, we've been targeting investing in our resorts here in Las Vegas, and I'm happy to say, we're seeing good returns on those investments. The MGM Grand and Bellagio room remodels, for example, were completed last year, and clearly, they've been successful in driving profitability at those properties. In the third quarter, Mandalay Bay benefited from recent capital there and significantly improved its nightclub, restaurant and entertainment offerings. And Mandalay's EBITDA grew 20% in the quarter, thanks in part to those initiatives. And as part of that, our focus now shifts to projects underway at New York, New York and Monte Carlo. For those of you who've been out here lately you'll see quite a bit of construction around those 2 resorts. All of that effort will be opened in the spring of next year. And those properties will benefit from what we believe to be literally a transformation of their Strip fronts, making it very easily accessible, adding casual bars, restaurants and retail. And that's important to us, as we develop West between those 2 properties in a parklike environment with more retail, leading up to a beautiful new arena that we're building with AEG. M life continues to mature as a program. In fact, the new mlife.com website, which was only recently launched, it was launched in February, is now the highest room-revenue-producing website within our business. This has allowed our customers to see our total breadth of offerings, rather than logging onto one website or another. And that has led to good cross marketing for all of our properties. MyVEGAS, our social game on Facebook, will go mobile next week with its own app. This is becoming an extremely interesting customer acquisition tool for us, and we think it's going to further increase, enhance our M life database. Grant will touch on this more in a moment, but MGM Cotai construction is progressing really well. We're on pace to complete our piling and site work by the end of this year, and at that point, we're going to move on to the basement and tower construction. And we've added another person to our design team, a leading international designer, Jacques Garcia. He is responsible for designing our Mansion product. He's done some of the most beautiful hotels in the world, and he's a good addition to the team at MGM Cotai. And in Maryland, just last week, a bunch of us were there giving our public presentations, and we unveiled what we think is really a beautiful design for National Harbor. And we believe it's reflective of not only the history of Maryland, but the fine monuments in the area. It is a $925 million effort, luxurious, extraordinarily well designed, providing quite a few amenities that do not exist in Maryland or in the region, and certainly would be the finest resort in the state of Maryland, if we are lucky enough to be selected. That final decision, we're 1 of 3 there, will be decided according to the state by the end of this year. And in Massachusetts, our RFP response is well underway. We've been working hard in the city of Springfield and with the State. We expect to submit everything required of us by the end of this year. And according to the state, a final decision is expected to be made in April of '14. It was a busy, and I'm pleased to say, very productive quarter for us at MGM Resorts. Our margins are improving, we've kept a good eye on our costs, the property investments are yielding good returns on investment, we're planting seeds to grow this company further as we have consistently and determinately reduced our leverage, improved our balance sheet, and we're happy with our progress thus far. And with that, I'll turn it over to Dan.

Thanks, Jim. During the third quarter, we were able to grow our revenues by 9%, which is led by a 22% increase in MGM China and 6% growth on the Las Vegas Strip. The leverage in our operating model allowed us to grow our EBITDA and expand our margins. Margins at our wholly-owned domestic resorts increased by 75 basis points year-over-year, led by an approximate 130 basis point improvement at our wholly-owned Strip properties. In Las Vegas, our luxury properties continue to lead the way, with 18% EBITDA growth in the quarter, driven by both casino and hotel segments of the business. On the casino side, we continue to see strong activity from our high end international customers, as our marketing team remains focused on driving that business to our Strip resorts. Our efforts are evident as Baccarat volumes grew over 20% in the quarter, driving a 16% increase in table games revenue at our wholly-owned Las Vegas resorts. On the hotel side, our luxury resorts benefited from increased occupied rooms at Bellagio and MGM Grand and are experiencing better pricing due to increased convention room nights. Our third quarter Strip REVPAR increased 3% year-over-year, consistent with our guidance, driven by a combination of both occupancy and rate increases. We expect our fourth quarter room revenue to be up slightly year-over-year on relatively flat REVPAR, with accelerating trends in the first quarter. In fact, looking into next year, our first quarter convention trends are looking exceptionally strong. We're approaching peak convention mix in the first quarter, with an expected 21% convention room mix. And beyond the first quarter, we expect an increasing convention room mix for all quarters throughout the year. Shifting over to CityCenter. ARIA's EBITDA was $49 million for the quarter, an increase of 3% year-over-year. EBITDA was negatively impacted by approximately $17 million related to a lower hold percentage when compared to the prior year's quarter. ARIA's table game drop increased by 12% year-over-year. On the non-casino revenue side at ARIA, that increased 9%. During the third quarter, hotel occupancy increased 100 basis points to 89%, ADR increased 3% to $197, and REVPAR increased 4% to $177. Food and beverage revenues increased as a result of the new Shawn McClain restaurant, Five50, which opened in July, as well as the continued increase in volume at our newly remodeled buffet. Entertainment revenues increased driven by a full quarter of Zarkana this year versus a partial quarter of the prior Elvis show in the year before. Crystals continues to outperform, up 26% compared to the prior year. We opened 3 new tenants in the third quarter, and more recently, we opened another tenant here in October. So we've added 4 new tenants to the lineup at Crystals here recently. We're continuing to see some solid sales on the remaining residential inventory. During the third quarter, we sold 28 units at Mandarin Oriental and 2 units at Veer, for roughly $27 million in revenue on the condo front. Earlier this month, we successfully refinanced CityCenter's previously outstanding debt, with a new $1.78 billion credit facility. This transaction significantly reduces our cash interest expense by roughly $80 million and increases CityCenter's financial flexibility and extends their maturity profile. Looking at the balance sheet to help you with some of your modeling in the fourth quarter. We currently have approximately $1.1 billion in available liquidity under our corporate revolver, while MGM China has approximately $1.45 billion in availability at the end of the quarter under their revolver. Our cash balance at the end of the quarter was approximately $1.4 billion, of which roughly $925 million was at MGM China. During the third quarter, we spent approximately $78 million in CapEx at our wholly-owned domestic resorts. Our wholly-owned full year CapEx looks like it's going to come in closer to $300 million to $325 million this year versus our previous guidance of $350 million due to timing of certain projects. During the third quarter, MGM China spent approximately $27 million at MGM Macau and about $31 million on our MGM Cotai development. For the year, we now expect to spend approximately $52 million on MGM Macau and about $260 million on MGM Cotai for all of 2013. We expect corporate expense for the fourth quarter to be roughly consistent with the third quarter of around $50 million. Stock compensation expense is estimated to be about $78 million in the quarter. And depreciation expense is estimated to be consistent with the third quarter. We estimate that our gross interest for the fourth quarter will be approximately $210 million, which includes about $5 million from MGM China and about $9 million in noncash amortization. With that, I'll turn it over to Grant Bowie to talk about MGM China.

Thanks, Dan, and good morning, good evening to everybody. For the third quarter, MGM China net revenue increased 22% to $808 million and generated EBITDA of $191 million. That's up 25% year-on-year. This number includes the branding fee of $8 million, but it also includes in this result negative impacts of approximately $12 million due to lower hold in our in-house VIP segment. And it also includes a $7.5 million impact from an accrual related to a one-off additional tourism tax assessment that we received. VIP turnover increased by 28% year-over-year, and we continue to see success from the addition of our second floor gaming rooms and the introduction of a new operator in mid-April. We still see the opportunities for continued improvement in yield on the VIP tables to maximize our profitability from this segment. Overall, VIP wins for the quarter was approximately 2.8%, and that compares to the prior year of 3%. We were able to drive main floor type of volumes up again by 10%, and revenues up 31% year-over-year, outperforming the potential growth, thanks to our continued focus on the table yield management and strategically targeting the premium segment. Now slot handle [ph] also increased by 10% during the third quarter. Looking forward, we're in the process of upgrading main floor, and enhancing our product offerings to drive future growth. Our remodeling includes renovation and expansion of the Supreme Lounge, which has been very successful for us, and we expect this to be completed in 2014. The Supreme Lounge, as many of you know, is an exclusive area dedicated to our high-margin, premium market customers. Reinvention and improvement in product and service quality have been the catalyst to maintain the attractiveness in this very competitive market. And we expect this approach to continue into the future. MGM Cotai is well underway, as Jim mentioned, and we remain on track for an early 2016 opening. And our budget is still standing at $2.6 billion. And with that, I'd like to turn back to Jim for his closing remarks.

Well, thank you, Grant. And as Dan mentioned, the first quarter of next year is approaching all-time highs for us in terms of convention business. And the year, it looks like, it's shaking out well and is outpacing this year. The increase in our convention room nights is important to us, because it will replace lower rate leisure bookings, which historically has helped us push rates in general in all of our segments. That is why we are optimistic for 2014. And by the way, typically, by the end of the year, we have booked about 80% of our planned convention room nights for the following year. Here on Halloween, we've already booked 88% of our targeted room nights for 2014, so we're nicely ahead of where we typically are. We're pleased with this progress. We know that we have a lot of work to do. We're enjoying doing it. We remain focused on executing on the strategies we've laid out to you, both in terms of our operational strategy to drive margins and our capital strategy to improve our properties, increase our market share, in doing so with the lens of always looking toward improving our balance sheet, continue to get stronger financially. We're quite excited what technology is bringing to this company, both in terms of M life on the revenue side and in terms of operating our business more efficiently and more pleasantly for our employees, for example, a new HR transformation software, called Workday, which is being rolled out as we speak. And we're excited about talking to you about the future, and we wanted to give you plenty of time. So with that, I'll turn it over to the operator, and we can move right into the Q&A.

[Operator Instructions] And our first question comes from the line of Felicia Hendrix with Barclays.

Dan, can you just talk for a minute more about your outlook for flat REVPAR growth in the fourth quarter? I was a bit surprised at that, given that the comps aren't really that tough. I know the focus is on '14, and the growth you can see there, but it would be helpful to better understand what you're expecting for the fourth quarter.

Yes. The fourth quarter of this year, Felicia, is consistent with our expectation all year long. I think, overall, as we guided our mix for the year, we're looking at kind of 14.5% to 15%. And it looks like we're going to come in for the year right in that range, so it's consistent with last year's mix, maybe up a touch over last year. In the fourth quarter, we had some decent activity last year in a slow period from call it, Thanksgiving to Christmas, with a couple of decent shows that we had over at Mandalay and those shows that kind of rotated out as they typically do from just a seasonality perspective. So we've got -- as a company, we've got a tough comp down at Mandalay, just because of a couple of decent size shows. And that's kind of opened REVPAR back. And, of course, in this time period, our core properties just don't have the pricing power that the luxury properties do overall when you get into that November, December time period.

Okay, that's helpful. And then just a follow-up. You -- I believe, you said that Baccarat in the quarter was up 16% year-over-year. Can you help us think about what the math table percentage was then, because I think the overall was 10%?

The Baccarat volumes in the quarter, I think, were up 20%. I think the revenue side was up 16% on table games. And non-Bac table games in the quarter was relatively flat on a volume perspective.

And our next question comes from the line of Joseph Greff with JPMorgan. Joseph Greff - JP Morgan Chase & Co, Research Division: Jim, I was hoping maybe you can share with us any updated thoughts on the Massachusetts opportunity. Obviously, a lot of news there recently.

But we've worked hard there. We believe that we have a great plan for Springfield. We have, obviously, been chosen by the city of Springfield to deliver on this vision. We've had an extraordinarily very close relationship with this process, really, from the beginning. John McManus, who looks a bit tired, he's our General Counsel. He's also in the room. He's been to Mass many a time, including about 2 weeks ago at a hearing. And we feel like we have delivered on everything that we need to deliver on, and that we've seen no reason whatsoever that we would not be found suitable there. And I can't speak for the other operators. Obviously, there's been an awful lot of activity and drama there. But we like the process, it's been very transparent to us, and we believe there's no reason why we will not be found suitable. And as I said earlier, the state has indicated that it would like to make a determination by April, I think, Bill, right, of next year.

Licensing before the end of [ph] November.

And licensing before November of next year.

Of this year.

Of this year. I'm sorry, licensing, November this year and April for the final. Joseph Greff - JP Morgan Chase & Co, Research Division: Great. And then I have a follow-up for Dan. Dan, I was maybe hoping you can give us a little but more detail or clarification on your prepared remarks about seeing accelerated trends in 1Q. Are you talking about REVPAR growth? Are you talking about room revenues? Or are you talking about revenues overall or margin improvement? I'll leave it very broad and open ended, just to get some clarification in terms of how you guys are thinking 1Q '14 is shaping up based on what you know now.

Well, what we can see, Joe, is very strong hotel part of our business, obviously, led by the convention business, which is exceptionally strong in the first quarter. And I would say then strong year-over-year for each quarter thereafter based on the forward trends we're seeing right now. So the convention side is going to lead the charge as it relates to room rate growth and REVPAR growth next year. And we think we'll get into more color on that in our next call, but we think that's going to be up nicely in the first quarter. And hopefully, that'll set the trend for the rest of the year.

Just to add, Dan, that everything that we had hoped the first quarter to shape up to be, we feel more confident than ever that it will exactly be that. And I would just go as far as to say yes to all your questions, Joe, in terms of not only revenues but margins because of the substantial amount of growth that we see on the books and the event calendar for 2014.

Your next question comes from the line of Harry Curtis with Nomura Securities.

I have a quick question for Grant. Recently, there's been some focus in Mainland China on anticorruption policies. And do you have any sense overall -- or is there any chatter about how much business that might be, either government-related, actually, flows through Macau. I know it's difficult to answer, but more importantly, what are the safeguards that you have in place to prevent it at MGM?

There's, obviously -- has been a lot of talk. And as you well know, as a company, we're particularly focused on all of the practices that we need to do, not just for Macau, but also for our global structure, particularly, in the areas of AML and KYC, et cetera. So I think that within our company, there's certainly been an ongoing and continuous commitment to ensuring we meet those obligations. I think in Macau as a whole, I think that the systems are continuing to be enhanced as a destination. We, obviously, become more sophisticated in managing those practices. So Macau government is very focused on ensuring that it meets its obligations, and we work closely together with them to continue to enhance those practices over time.

Okay. And then returning to the U.S. Dan, if you could give us a sense of how much lower rated business is in Vegas next year that could be displaced or burned off? And then what the -- what's the typical difference in total spend, that's both in room and out-of-the-room spend between those 2 customer groups?

Well, I think, Harry, one of the big pieces that we're still burning off, particularly, on the convention side are some of the contracts that we had entered into in 2009, 2010, that were multi-year contracts that are still burning off last year, this year and next. And I think last year's number, we were still roughly about 50%, 60% of our convention room nights were booked in those more difficult times than some of the mirror contracts that we are entering into now, obviously, at much different rates than we were getting back in '09 and '10. So there's still a fair amount of convention business that's burning off in that particular segment, and that's going to continue to be a benefit as we move forward in the forward booking, on the convention side.

Can you put some numbers around just the differential in the replacement and the upgrade?

Well, I think, just -- I think, purely from a room-rate standpoint, you're looking at upwards around $50 to $60 in displacing that lower-end leisure rates into a convention room rate. So it's pretty significant just on the room rate piece, not to mention the ancillary benefits of the restaurants, the entertainment venues by having that better priced customer in town. And the impact of the tide rising for some of our core properties as we're able to kind of use those, particularly, at the likes of Luxor and Excalibur, as we're able to use those in terms of overflow during peak period to help them drive rate midweek. So that's important component for our business.

And Harry, what I would add is, because of the increased convention base, not just for us but in the city, it will also bring in that lower end leisure rate up also. You'll get a double hit there also.

Your next question comes from the line of Lewis Chinchilla [ph] with Amber Research [ph]. Your next question comes from the line of Shaun Kelley with Bank of America.

I just wanted to ask a little bit about operating leverage for next year. Jim, I think you talked a little about margin growth. This quarter, we did see the -- I guess, flow through was a little bit lower than the really great numbers you guys drove in 1Q and 2Q. Whether it's Corey or Jim, could you guys talk a little bit about expected flow through for next year in terms of kind of what the model is set up to do right now? And I'm speaking specifically as it relates to the Vegas properties.

Sure. Maybe I'll start, and then I'll turn it over to either Dan or Corey. The goal that we set for ourselves a couple of years ago was to drive 50%, 60% flow through. And, obviously, we've done a bit better than that. Some quarters, there's been as much as 100%. And we can't do that every single quarter, we just can't do it. But we would expect significant flow through in '14 and '15. I think year-to-date, we're up about 90-something percent, Sarah?

94%

94% year-to-date on flow through, and so that's a pretty good number. We're shooting to continue to drive our flow through up as much as possible. And nice to be getting 100% all the time, but our goal has been in the 60% range on a long-term basis, and I think that's extremely achievable.

Yes. Any ADR increase, obviously, will always go to the bottom line. And then, in general, as the convention mix improves and the catering improves, that's a higher-margin business than our normal food and beverage business. Hopefully, with the increased visitation, it will increase the occupancy in our shows, which also goes all to the bottom line, because those are just empty seats, if they're not being filled right now. So I think the flow through next year should be as strong, if not stronger, than what we've seen this year.

That's really helpful. And then, I guess, just as a follow-up, Corey, you just mentioned a little bit about some of the shows. But I guess, just generically, it looks to us, at least like some of the non-gaming and non-hotel revenue was up nicely in the quarter. Can you just talk a little bit about -- do you see enough kind of things going on, whether it's nightclubs or conventions to continue to drive that -- I guess, that category higher than average? I know you're seeing good -- kind of good consumer spending trends. Or is that a little bit better than, at least, core gaming right now?

They're improving slightly. I think a lot of our capital investments have paid off between the show at Mandalay Bay, some of the new restaurants, the nightclubs, we're seeing that additional spend. And people coming here for reasons other than gaming. So I think it's slowly coming back, especially at the core properties, the luxury properties, they're seeing a little bit better spend.

Yes. And I would add, Corey, when you have higher convention business, you get -- typically get a lot of buyouts of venues that would otherwise be closed. You could have night clubs that are bought out during the day. You can have parties out at a pool or at the beach at Mandalay. You'll have tremendous amount of incremental found revenue for us when convention business is robust. And it, certainly, will be in the first quarter, that's going to have a significant impact in our non-gaming revenue in the first quarter. And those are very profitable revenues for us.

Your next question comes from the line of Joel Simkins with Crédit Suisse. Joel H. Simkins - Crédit Suisse AG, Research Division: Obviously, we continue to hear a lot of discussions around Japan. Can you just give us an update hereon in terms of thinking with regard to legislation, and how you guys think you're positioned for that opportunity longer term?

You want to do that one, Bill?

Yes. Real quick, obviously, we know that Diao [ph] in session right now, they're dealing with a complicated tax issue. But there's belief that time will allocate and allot for them to be able to take on the question. We're hoping and believe that by spring, something will come forward. From that process, it's still complicated. I mean, at the end of, when it's all said and done, you're probably looking at actual license and selections into '18, '19 -- sometime in that timeframe. We're positioned, we've been on the ground, we continue to be on the ground better part of the year, 1.5 years now, and we're excited. I mean, at the end of the day, it will be probably be the second largest marketplace in the world, and so we're very focused on it from that perspective. Joel H. Simkins - Crédit Suisse AG, Research Division: And one quick follow-up, if I may. Obviously, the CityCenter capital structure continues to get a lot better, the properties trending in the right direction, with that said, how do you think about sort of the opportunity to buy out your partner at some point? And then on top of that, again, how are you thinking about monetizing the Crystals longer-term?

You want to take that one, Dan? Did you want to do that? We have great relationships with our partners. They have not asked us to buy them out. I think they're pretty happy with the fact that the asset is increasing in value. I'm sure that we would like to own 100% of it someday, but I don't think that day is today, because they're happy with their position. So I'd have to leave that one for some time in maybe, in the future. In the meantime, we did look at selling Crystals earlier this year. Cap rates had fallen to sub-5%. It was an extraordinary time for retail, particularly luxury retail. And we did quite a bit of work on this. And we concluded at the time, we just weren't prepared to sell Crystals. We just didn't have enough of the diligence done to do it, and the market moved away from us a little bit. So it's something that partners are willing to pursue at the right valuation. We think that time is on our side from a standpoint of the fact that the NOI at Crystals continues to grow. We think it's going to have a tremendously strong year in 2014. And the more track record we develop at Crystals, the better cap rate we're going to get and the more robust bidding will likely to have in the future. So that's not a long-term asset, most likely, if we get the right valuation, but it's not something that we're going to sell this year.

Our next question comes from the line of Grant Govertsen with Union Gaming Macau.

Got a question for Grant. In your prepared remarks, you were talking about the Supreme Lounge that will be coming online next year. And I may have missed it, but could you give us a sense for the scope of it, in terms of the number of tables or the incremental number of premium tables that this might be bringing online?

Actually, at this stage, it's, actually, primarily focused on premium slots, and we're working through just some final details in the layout, primarily, with some additional private rooms. But it's about providing additional capacity, because that's where it seems to be growing at the moment. At the moment, it's not for tables. Once we do put that additional slot area in there that a couple of the private rooms which are currently running as machines will be available to add table games back into -- so go back to the original rather than swing around [ph]. So that's basic [indiscernible]. We're looking on the order of 60 to 70 more units.

Understood. And, actually, that leads to my follow-up. And it sounds nitpicky in the face of terrific results, but your slots are, it looks like it's gone down sequentially for couple of quarters, and perhaps the supreme lounge is a part of that solution, but any color you could provide on that would be appreciated.

Yes. I think one of the challenges is that a lot of our business is really at the high premium. And we had a very, very strong first half, and we had some really good performance and customers. And that tends to set up a bit of a cycle. And as a result of that, there's -- there has been a longer period between visits coming into this fourth quarter, we've actually seen -- particularly, with the holidays we just got through, we're seeing some performance improvement in that. Slot business, I think, overall, has seen some flattening in the market. Even though there's good growth across the market, the growth rates have slowed a little bit. So we need to get back and look at product mixes and everything like that. Compounded with that a little bit is I think you're aware, that the government has been implementing a number of responsible gambling initiatives over the last 8 or 9 months. And we're just working through all of those, which we just have to accommodate. So it's a combination of a number of events, but we're comfortable that we need to put out when we put all those pieces back together and get all the bits working together again, that it will come back and will continue to grow.

And our next question comes from the line of Carlo Santarelli with Deutsche Bank.

I actually had a few questions. Dan, I wanted to revert back to the comments that you made earlier on the convention mix. You did say first quarter convention room nights, 21% of total?

Correct.

And I would assume, if the rest of the year is up, across the board year-over-year, that you're looking for a mix record base, because if I recall, that's kind of around 16%, historically?

Yes. We think for the year, Carlos (sic) [Carlo], based on how we're pacing right now that we're going to start coming and approaching near that level, whether or not we get fully back to that peak which was slightly over 16%. It will depend a little bit on some of the year-on-year bookings, but right now, we're probably projecting this year to finish up like I said earlier 14.5% to 15%. Next year, convention mix, we're probably looking at 15.5% to kind of 16% in that particular room segment for us. So we're getting pretty close, and a couple of things swing our way, we could very well be back at peak level very easily next year.

Great. And then I think you also mentioned 80% or 88%, I wasn't sure which it was, but percentage of -- percent of those room nights were already on the book. Would you guys be able to give us some color around the rate cadence of that business on the books as of today?

It was 88%. Those are actual hard contracted room nights for next year and we're up kind of mid-single-digits in terms of rate.

Great. And then one last follow-up, if I could, just on the margins. When I look at kind of the mix between hotel revenue and other, I think that, that basically, accounts for some of the sequential stuff. But if you look back historically at revenue levels similar to where you are today or were in this quarter on the Strip, and you look at kind of the mix of hotel, which is actually skewed higher as a percentage of your total revenue, you've actually done more in aggregate EBITDA in prior years prior to the cost cut. So I'm wondering if there's something else that's kind of changed in the margin structure. And fully acknowledging, obviously, you guys are doing a nice job growing EBITDA with mid-single digit revenue growth, but if there's something else that has changed since kind of years past, where the margin growth is going to be a little bit harder to come by as we go forward.

Well, I think what you're seeing now, Carlos (sic) [Carlo], and Corey will straighten me out where I go astray. But I think, really, what you're seeing is part of the disparity and what the city-wide do within the portfolio of properties. And so that midweek business leisure-wide versus the city-wide convention room nights is really driving more, I would say, seasonality in the business quarter-to-quarter today than it did say, a few years past or during the peak time period where we were able to kind of price rooms, not just because of convention, but we had stronger leisure business, when we moved into say, the seasonally slower summer months in June, July and August. So you just don't have that depth of leisure business. And that there's some disparity there some seasonally. For us, we also have kind of things that happen, I mean, Bellagio had a pretty low hold percentage last year, as they did a touch better this year, but it's not a Bellagio like hold percentage. So that too affects when you're looking at quarter-to-quarter kind of flow through and leverage in the system. We're not using that as an excuse, because our overall hold percentage was fine. But, obviously, there's a lot of -- lot more volume here at Bellagio than some of our other buildings from the high-end perspective.

Great. And lastly, and I'll listen. Just anything in the fourth quarter from a hold perspective at any of the properties in Vegas that stands out that we should be mindful of?

I think Bellagio actually did better in their fourth quarter hold percentage which helped last year even itself out for the full year. But I can't...

MGM may have -- I don't want to...

Yes, Bellagio and MGM. We'll have to go back and look, Carlos (sic) [Carlo]. But probably, if there were any, it would've been at Bellagio and MGM, that may have held a little bit better last year.

And our next question is from the line of Robin Farley with UBS.

One for Grant. First, looking at your Cotai property and targeting early 2016, I guess, it seems like, in recent years, the Macau government has kind of staggered a little bit some of the property openings using labor quotas and things. And there are a couple of properties that are kind of targeting a similar timeframe to open. Do you have any sense from the government, whether they are more comfortable with multiple properties opening within the same sort of 6 months period? Or any thoughts on that?

I don't think there's -- the government has that particular view. And I don't think they've actually staggered them. I think what's happened is the realities of individual timelines have actually determined their opening dates. But I'd -- clearly, we all know in this marketplace that there is a lot of product coming on stream. And I think everybody is working diligently as we are to make sure that we're in a position to be able to get the people, get the opportunities and get the product and get open on time. So I think there's a lot of work to go. But I think it'll work itself through as programs normally do. But what we're doing is building a whole series of different scenarios that we can work with and around.

Okay, great. And then just a follow-up question for Vegas and the convention business, which I know has been talked about a lot. But you made a comment that you're booked ahead in terms of the number of room nights you may approach peak mix. And you mentioned that the rates for convention business would be up mid-single-digits, and that helps you to -- that you're essentially also replacing leisure travel when you increase the mix of convention business. And so does that sort of suggest that your REVPAR expectation overall for Vegas next year is in that mid-single digit range?

Well, we try to give quarter -- Robin, it's Jim. We try to give quarter-to-quarter guidance. We certainly will do better than that in the first quarter, but beyond that, we just feel better about just giving you the quarter-to-quarter guidance. Clearly, the metrics are setting up favorably for us for the whole year, given the fact that our -- will do. We'll have stronger convention business that generates higher rates. The convention business next year will be at a higher rate than this year. The mix will be higher than this year, it will replace lower-rated business such as leisure. As Corey said, there'll be more conventions in town next year, which could drive the core properties for us and help leisure rates, and, in fact, help retail rates in general, FIT rates as well. So we're setting ourselves up as a valley here in Las Vegas to have strong REVPAR growth in 2014. But I think we're going to stick to the quarter-to-quarter guidance for now.

And our next question comes from the line of Thomas Allen with Morgan Stanley.

You talked about how some of the lower end Strip properties are going to benefit from overflow from the more high-end ones in 2014. Given the lower-end properties are coming off of a lower base, could you see higher revenue and EBITDA growth at those properties?

I think that's completely conceivable. The deltas on some of those properties could be higher, because of the lower base and because of what we're doing to those properties, not just New York, New York and Monte Carlo as we mentioned. But really there's a upgrade program underway at all of our properties, to one degree or another. So I don't think it's unreasonable to think that. What do you think, Corey?

Yes, I think the last, what I would recall substantial increase in convention attendance city-wide was 2011. And if you look at the results of our core properties from 2011, that showed signs of not only revenue growth but EBITDA growth. So I would suspect we should be able to see some of that in 2014.

Great. And can you just give us an update on your plans for the Borgata and your share there?

As you know we're working with the state on licensing, and we hope to be relicensed in that state. John, when -- by the -- what would you guess?

We don't -- we're in the process. I think a reasonable estimate would probably be first quarter.

Yes, so the idea is -- that's our first goal -- is to be relicensed in the state. We expect -- that we have no reason to expect we won't be relicensed there. Up until that point, we can't have any view on Borgata. In fact, I saw Keith Smith this week, and I can't even talk to him about Borgata according to the settlement agreement. So once we are relicensed, which we expect that we will be, we look forward to sitting down with Boyd and helping map the strategy of Borgata's future.

Tom, just a quick follow-up. We still have about $110 million, 1-1-0 million sitting in our New Jersey trust account that comes to us as well once this process is over.

And related to the online gaming opportunity, do you receive -- are you part of the JV when it launches? Or do you have to wait until you're licensed in that state again?

Well, our trust is still the economic beneficiary. But as far as actually having a seat at the table, we have to wait for the license, but we're still the economic beneficiary.

And our next question comes from the line of Steven Kent with Goldman Sachs.

I've got no questions, a lot have been asked and answered.

And our next question comes from the line of David Bain with Sterne Agee. David Bain - Sterne Agee & Leach Inc., Research Division: Guys, can we get any current thoughts on the culinary union discussions. On your website, you thought maybe a settlement could happen this month. And any foreseen changes there? Obviously, those are factored into your flow-through thoughts for next year, correct?

Sure. We've been working on this agreement for quite some time. As you know, the culinary agreement is typically 5 years -- 4, 5 years. And we've been adding strong and very productive negotiations with the culinary this year. All of us have been involved in that, Corey, myself, Dan, Bill Hornbuckle. And we feel like we have a good understanding between the leadership of the culinary and ourselves in terms of what the challenges are in the market, economic challenges and a recovering, but not fully recovered market and some of the challenges of operating in the business in 2013, '14, '15, that did not exist a few years ago in terms of how operations are staffed, what's going on in terms of flow through and in terms of volume. And I'd have to say that it's been very productive, wouldn't you say, Corey? And we have no reason to believe that we're not going to be, really, resolved on this quite soon. Our goal is to forge an agreement that we work together with the union, we have a great relationship with them and create a package with them that not only reflects those conditions of the market but the concerns that the members have in terms of health care, in terms of benefits, in terms of job security and in terms of growth. And I also have to say that, that union and others have been very supportive of our efforts not only here in Las Vegas. But when we've gone on the road, whether it be in Massachusetts, in Maryland, we saw a lot of our culinary friends in the audience last week, didn't we, Bill, supporting us at National Harbor, and it was great to see them there and other unions as well. So I'm very confident that we'll be done soon. All of our negotiations are incorporated into our thoughts for our forecast for '14 and are incorporated in what we discussed in terms of margins and flow through. David Bain - Sterne Agee & Leach Inc., Research Division: Great. And just 2 more if I could, quickly. The room remodel at The Hotel, I don't think it was mentioned in the rebranding to Delano. Just -- is that project timeline going to remain, or the capacity needs changing things there for earlier, mid-2014?

Yes. We changed -- we had a couple of room remodel changes when we do our model rooms. And we finally all signed off on it not too long ago. We really liked the product, so did Delano. So when are we going to start that?

We're looking at kind of an April-ish start date to start the project itself and look to complete around September, October, those roughly 1,200 suite.

And as those rooms come back online, we will actually sell them. We won't name it Delano, until we're 75% complete. But the actual delay in the room remodel has actually worked out in our benefit, especially with the strong first quarter convention business.

Yes, that was going to be a concern of ours, that we have a lot of rooms out of service in the first quarter. Now, we won’t, because we're starting in April. David Bain - Sterne Agee & Leach Inc., Research Division: Well, that's awesome. Okay, great. And just lastly, Grant, if I could. Pension [ph], do you have any thoughts there in terms of expansion plans? And what that could look like in terms of capacity, amenities, timing, if anything, for you guys?

I think, I will [indiscernible]. David Bain - Sterne Agee & Leach Inc., Research Division: Or whoever wants to take that question.

Do you want it, or do you want me to take it?

Go ahead, Grant.

Okay. I think pension [ph] for Macau is a fabulous opportunity, and we like it like most are studying it. I think there's still a lot of planning and consideration to be done. Obviously, Jim Long [ph], the major part that's -- on Hanjin [ph] is about ready to open. So that's really going to be a catalyst. But I think, yes, it's certainly part of our overall strategy, but I think we need to do it in an appropriate way. And it needs to, obviously, balance the development of the region. But it's certainly something that's on our radar, and we're looking at very positively.

And our next question comes from the line of Praveen Choudhary with Morgan Stanley.

Very quickly for Grant. When you mentioned about $12 million for the lower hold, as well $7.5 million for the accrual, can you talk about similar number in Q2 of '13 or last year Q3 of '12, if you do have that number?

Actually, I don't have that back into the prior period. I think that for the Q2, it was pretty well even. That really wasn't such a big impact, specifically. But Praveen, let me get back to that, and I'll get you that information to be accurate. I don't want to guess.

That's perfect. And then I can -- if I can add one more question. You have given us the total CapEx of $2.6 billion. But if you have to include capitalized interest and land cost, what would be that number? Because most of the other operators are giving the full CapEx, including those 2 items.

You want me to go, Dan, or do you want to pick it up?

Yes. I mean, obviously, Praveen, the land concession contract is public and out there already. I think we've spent about $60 million, $70 million in total on the deposit, and there's annual payments on a go-forward basis, so that's public information, and you should be able to grab that. As far as capitalized interest, we'll be working through that. We'll be able to give guidance going forward, but we don't think it's going to be that material in the overall schemes, given the free cash flow and the amount of debt that will be at the MGM China level, even at the peak point of construction.

I could tell you that the total [indiscernible] value is $175 million when you go to the public record.

On the [indiscernible] contract.

Yes, okay.

Operator, I think that brings us to the top of the hour. And if there's any more follow-ups or questions, the team will be here all day and happy to take any calls off-line. Thank you, all, for participating this morning, and have a Happy Halloween.

Thank you. This does conclude today's conference call. You may now disconnect.