MGM Mirage Is Feeling Lucky

This is a partial transcript from "Your World with Neil Cavuto," February 1, 2005, that was edited for clarity.

NEIL CAVUTO, HOST: Rolling the dice. MGM Mirage, the casino and hotel operator, reported some boffo results, operating profits surging 40 percent in the latest quarter. That easily beat estimates.

Casino revenue climbing 10 percent, hotel revenue up about the same, with a 90 percent occupancy rate.

MGM Mirage owns the upscale Belaggio and recently snapped up Mandalay for nearly $8 billion.

Now if you got into this a year ago — don't you hate when I do this — if you did, though, you'd be up 80 percent. And of course, you all did.

Well, a record 41 million people traveled to Las Vegas last year. Is this a good sign of what's to come? Especially with all those foreigner armed with suddenly stronger currencies.

Let's ask Terry Lanni, the MGM Mirage chairman and CEO, in Las Vegas.

Sir, good to have you.

TERRY LANNI, CEO AND CHAIRMAN, MGM MIRAGE (MGB): Hi, Neil. How are you?

CAVUTO: I'm, fine, sir. So you, too, what's driving all of this?

LANNI: Well, to me it's absolutely amazing. Las Vegas is literally on fire when you look at property values, you look at the interest. Everywhere I go, people want to come to Las Vegas. And it's a significant portion of our revenues, so we're very pleased with that.

CAVUTO: Are you worried, though, it's a little too high, even among developers I talked to who are building in your region. They're worried, you know, you can't keep up these 20, 30, 40 percent year over year increases in real estate values.

LANNI: Well, if you take a look at it, I remember when people were saying if you paid more than a half million dollar an acre, it made no sense on the strip. Acreage now in the strip is going at $15 million to $20 million an acre.

Now how much longer that's going to continue rising, I can't predict that, but I can tell you this. I don't see it going down anytime soon.

CAVUTO: Let me ask you about the role of foreigners armed with suddenly very strong currencies. They can get more for their money when they come here. Who's leading the charge?

LANNI: Well, we're seeing a lot of people from Europe. The euro is as strong as it is, at about $1.32 to the dollar. And the various currencies in the Far East.

It's pretty much the same people who have been visiting Las Vegas for the last 10 to 15 years. And it's obviously a bargain now. You're right, when we're developing condominiums for example, the residences at MGM Grand, and we've seen an increase in the number of foreign purchasers. And I think when you look at the weakened dollar compared to their currency, that's certainly a factor.

CAVUTO: Even the French?

LANNI: We don't spend a lot of time with the French.

CAVUTO: OK. Just curious. You know, it struck me just — I was reading the other day that you hired a former FBI deputy director to oversee security, I guess, at your worldwide operations. Why did you do that?

LANNI: Well, we've been taking a look at and bidding, as you know, in Macau and now in the process of developing, through a partnership there, a hotel-casino which should break down in the second quarter this year and be open by '07.

The fact that the U.K. was spending a lot of its time and energy through with the houses of parliament, to change and make more inviting the laws in that particular jurisdiction. And now more recently, the government of Singapore is considering, and we are bidding for a request for a concept there.

We think with the international involvement, having an individual with Bruce Gephardt's background as the No. 2 person overall in the FBI. Upon his retirement, we engaged him, and it will give us better contacts with the appropriate authorities and regulators in those marketplaces where we expect to do a lot of business in the future.

CAVUTO: Do you or are you signaling that you're worried about security abroad?

LANNI: No. I think that the issue is that you want to be — you know, be concerned about security here in the United States as well as overseas. And having people who have the expertise outside this country, where our people right now don't have that particular expertise in security, because they've been focused more on security here in our properties in this country, we just needed to amplify it by getting people of that particular experience.

But you don't worry about what you can't affect, but you also have a responsibility to give the proper levels of security to our guests and to our employees, and to know the backgrounds of the people we're doing business with overseas.

CAVUTO: You know, we expect tomorrow the Federal Reserve to hike interest rates yet again, Terry, and many expect that we'll keep seeing this every six weeks when these guys gather. Are you worried?

LANNI: No. If you look at the interest rates today, if that goes up another quarter percent, it will be at 2.5 percent. That's nothing. I remember back in President Carter's days with the misery.

CAVUTO: I hear you there, but what if it's five percent by year end, though?

LANNI: We built in increases, not to five percent level. I think it's going to be closer, can't predict it for sure, but I think it would be closer to maybe 4.25, 4.50 percent. We've built that into our models, and we're comfortable with it. We can sustain the growth that we have in spite of those increased interest rates.

CAVUTO: All right. Terry Lanni, thank you very much. Always good having you on.

LANNI: Thank you, Neil.

CAVUTO: Mr. Lanni is the MGM Mirage chairman and CEO in sunny Las Vegas. It's always sunny in Las Vegas.

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