2. what if
MGM MIRAGE
Opposite Page
Top Row Bellagio • New York-New York • Mandalay Bay
Middle Row Monte Carlo • MGM Grand • Excalibur
Bottom Row Luxor • TI • The Mirage
3.
4. PUTTING THE
WHEELS IN MOTION $1.50
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‘04 ‘03
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demographic of the marketplace in an
EARNINGS PER SHARE NET RE
ever-changing world? We can, if we define From Continuing Operations
our company’s culture not in terms of
outdated political policies about people,
As we seek to implement our growth but based on a leading edge vision to
strategy in an ever more competitive create a value-based corporate community can be measured in many ways—
environment, we are constantly asking that recognizes and values the contributions tremendous revenue growth and industry-
ourselves, “What if?” It spurs us to consider of all people. leading profit margins, for example. But
solutions and alternative approaches that my personal favorite is the fact that
lead to innovation and success. All of these things and more have employee turnover in the legacy Mandalay
been happening within your company. As properties has reached an all-time low. It
What if... we merge with one of our a result of our employees’ creativity, hard became obvious to us that as individuals,
largest competitors and, by doing so, grow work and dedication, 2005 was a record- our new employees recognized the same
stronger together? We can, if we welcome breaking year in every sense. In addition, opportunity we saw as a company.
our new colleagues into a secure and stable we are perfectly positioned for sustained We also saw far beyond the immediate
working environment that is simultaneously growth throughout the coming years. positive impact of these newly acquired
comforting and invigorating. As we considered the merger resorts; we saw an enormous potential
with Mandalay Resort Group, we saw a for future development on the vast
What if... we create a new era in company that matched ours in many ways. combined real estate holdings of a merged
development for Las Vegas, and change By combining, we would be able to offer company—Mandalay’s real estate was
the way we think about this city forever? the widest possible array of choices for our vastly undervalued considering recent real
We can, if we assemble a team of the customers and position ourselves to better estate pricing trends along the Las Vegas
greatest architects and urban planners take advantage of the boundless oppor- Strip and the fact that we would now own
in the world. tunities for resort development on the Las most of the prime remaining development
Vegas Strip and elsewhere. To do so, we parcels on the Las Vegas Strip. On this
annual report 2005
had to be certain that our new colleagues land, in the years to come, your company
MGM MIRAGE
from Mandalay were made to feel welcome will continue to build exciting new projects
Opposite Page
and secure in their positions within that will further enhance both the Las
J. Terrence Lanni
MGM MIRAGE. The success of the merger Vegas experience and shareholder value.
Chairman and CEO • MGM MIRAGE
Bellagio
5.
6. “ We continually
reinvest in our resorts,
maintaining their
world-class status.”
7. Your company has assembled a team of
The opening of future projects will Our confidence in the Las Vegas real
Opposite Page
world-class architects never before imagined
be made all the easier as a result of the estate market was proven correct by the
From left to right
for one project: Cesar Pelli, Kohn Pederson
tremendous community of MGM MIRAGE exceptional sales performance of The
L’Atelier at MGM Grand Fox, Lord Norman Foster, Rafael Viñoly,
employees. Our pre-eminent family of industry Signature at MGM Grand. The first tower will
JET Nightclub at The Mirage Helmut Jahn, David Rockwell and Daniel
professionals positions us for growth as we soon open to the public, and almost all of the
Skylofts at MGM Grand
Libeskind. Few cities can claim to benefit from
have the most experienced workforce from 1,600 units at The Signature sold out faster
KÁ • Cirque Du Soleil
their individual contributions, let alone a single
which to develop new teams of property staff. and at higher prices than we had originally
Sensi at Bellagio
project on which they all collaborate. The best
As we considered options for our prime forecast. Even as I write this, only a handful
Joël Robuchon at The Mansion
builders, contractors and interior designers
parcel of 66 acres at the heart of the Las of units remain available for sale, at prices in
at MGM Grand
Vegas Strip between Monte Carlo and excess of $1,000 per square foot.
will also be on board. Of course, we also
As we were preparing to announce an
Bellagio, we quickly realized that the have an industry-leading management team
exciting new future for Las Vegas, we were
development formula of the past fifteen assembled for Project CityCenter to ensure
“AS WE SEEK TO IMPLEMENT OUR GROWTH STRATEGY,
WE ARE CONSTANTLY ASKING OURSELVES,“WHAT IF?”
stunned by the developments of Hurricane
years, successful as it has been, must be that operating results are as spectacular as
Katrina last August. Even before the water
re-engineered in order for Las Vegas to reach the buildings themselves. Where necessary,
had receded to the Gulf, we were underway
beyond its current paradigm. We envision we have hired top talent from outside
with planning the relief and rebuilding
the Las Vegas Strip as an even greater the industry, specialists in real estate and
resort destination and, more importantly, residential development, and engaged efforts. Teams of people from Las Vegas
an integral part of the next-generation Las outside experts to ensure we maximize were dispatched to set up an emergency
Vegas, a true metropolitan community with the potential of this once-in-a-lifetime command center, and Beau Rivage employ-
its own identity and character. Based on this development opportunity. We are readying ees were the first to receive paychecks, gain
concept, we formulated the plans for a new for a May groundbreaking and anticipate access to Red Cross support and Internet
urban metropolis—Project CityCenter. opening in late 2009. There is much to access to the Federal Government.
There are many superlatives that can be done between now and then, but the We were also the first company to initiate
be used when describing Project CityCenter. clean-up and rebuilding efforts and, as a
process itself is remarkable; one which
While it will be the largest single privately result, we intend to re-open a new and even
your company’s management and
funded development in the history of the better Beau Rivage on the first anniversary
employees are proud to be a part.
United States, that doesn’t tell the story of of Katrina, in August of this year.
Project CityCenter’s potential impact on
Las Vegas. Project CityCenter will redefine
the Las Vegas experience for years to come,
with stunning, iconic architecture as the
visual attraction, and a full slate of residences,
luxury hotels, casino, restaurants, retail shops
and entertainment amenities to fulfill every
need and desire of our residents and guests.
From left to right
Ken Rosevear President, MGM MIRAGE Development; John T. Redmond President CEO, MGM
Grand Resorts, LLC; J. Terrence Lanni Chairman CEO, MGM MIRAGE; Robert H. Baldwin President
CEO, Mirage Resorts, Inc., President, Project CityCenter; Gary N. Jacobs Executive Vice President,
General Counsel Secretary, MGM MIRAGE; James J. Murren President, CFO Treasurer, MGM MIRAGE
8. Your management and employees are
Your company is growing in Michigan, still asking “what if”—more now than ever.
where our new $765 million casino hotel We are energized by the possibilities before
Fontana Bar • Bellagio
us: new co-workers, new development sites,
complex is under construction. This 400-
new profit opportunities, new cities rising
room, 100,000-square-foot casino will be open
from the ground. We are feeding off the
sometime late next year or in early 2008.
The MGM Grand Detroit casino has momentum of 2005 to propel us forward,
performed magnificently since its opening in and I have no doubt that we will report many
Borgata
1999, and we have even higher expectations new and exciting ideas throughout 2006.
architects and relied on our experience
of our new multi-faceted MGM Grand Detroit In closing, the MGM MIRAGE Board of
in operating some of the world’s top resort
casino hotel. Directors sadly mourned the passing of two
properties to create and submit a thorough
The Mansion • MGM Grand
In Macau, the stunning MGM Grand of its members during 2005 – George Mason
proposal for an iconic resort, worthy of
Macau is rising from the ground soon to and Walter M. Sharp.
the unique Marina Bay location. Should
Mr. Mason, a Bear, Stearns and Co.
reach 34 stories and frame a new icon in the Singapore government choose the
executive and longtime member of the
this emerging center of tourism in China. MGM MIRAGE proposal, we stand ready
Along with our partner, Pansy Ho Chiu-king, MGM MIRAGE Board of Directors, passed
to assist them in achieving their goal of
we anticipate opening this resort in late away October 5, 2005. He previously served
increasing tourism.
2007. Our plan for continued growth is as a member of the Board of Directors for
Much of our continuing story of success
secured by your company’s substantial Mirage Resorts from 1973 to 2000, and
is attributable to the extraordinary men and
real estate holdings in Las Vegas and in key was a member of the Board of Directors of
women who make up our family of almost
markets in the U.S. and abroad. MGM MIRAGE from 2000 until his passing.
70,000 employees. In making them feel at
We are the largest gaming industry With his remarkable business instincts,
home and secure in their work, we also have
Shadow Creek • Golf Course
landowners in Las Vegas with current real George made valuable contributions to our
made great strides in emphasizing the need
estate assets in excess of 800 acres. Of this, Board of Directors.
for diversity in all that we do. As our nation’s
over 300 acres are either undeveloped or Walter M. Sharp, an icon of the
ethnicity changes, so too must we reflect
underdeveloped. Long after Project CityCenter California banking industry and longtime
the vast and varied backgrounds of our
has become the new standard for the Las member of the MGM MIRAGE Board of
guests. As I’ve noted on many occasions,
Vegas experience in the 21st Century, we will Directors, passed away December 22, 2005.
at MGM MIRAGE diversity is not defined
have numerous growth opportunities to ex- He served on the MGM MIRAGE Board of
in terms of EEOC reports, but rather in a
pand and improve your company’s holdings. Directors and previously on the MGM Grand,
philosophy and attitude that we incorporate
We are also the largest gaming industry Inc. Board of Directors from 1986 until
into our daily business plan.
landowners in Atlantic City with over 75 2002, when he was named to the honorary
In addition to the wonderful success
Centrifuge • MGM Grand
developable acres adjacent to Borgata, our position of Director Emeritus of the Board.
of your company financially this past
extraordinarily successful partnership with Although our friends are no longer with
year, we have taken great care to remain
Boyd Gaming. We envision for Atlantic City us, their contributions will endure well into
involved and responsive to the needs of
a project of similar impact to that of Project our company’s future.
the communities in which we are privileged
CityCenter in Las Vegas. to do business. Along with donations from
We eagerly await the decision of Sincerely,
our family of employees, MGM MIRAGE
the government of Singapore to find out made contributions to worthy charities
if we will have the opportunity to enter in excess of $7 million in 2005. We are
a second market in the rapidly mindful of the need to give back to the
developing Asian market- communities in which we live and work J. Terrence Lanni
place. We’ve enlisted in order to strengthen them for our Chairman and CEO • MGM MIRAGE
the talents of top
annual report 2005
families and future generations.
MGM MIRAGE
In all, 2005 was a landmark year
Opposite Page
for MGM MIRAGE. Now we find ourselves
MGM Grand
asking how to top this and make 2006
even better.
9. “ In all, 2005 was a
landmark year for
MGM MIRAGE.”
11. Project CityCenter
Conceptual renderings
INNOVATION OVERCAME
what if
THE IMPOSSIBLE?
I t seems as though Las Vegas reinvents We have created working partnerships Teams of company experts are strat-
itself every few years. As we contemplated with Cesar Pelli, Kohn Pederson Fox, Lord egizing on the project’s marketing, advertising
the possibilities for one of the most attractive Norman Foster, Rafael Viñoly, Helmut Jahn, and public relations programs, all of which
development sites in the world, at the heart David Rockwell and Daniel Libeskind. Along will combine to introduce this remarkable
of the Las Vegas Strip, it became clear to us with these creative forces, MGM MIRAGE will new concept to consumers in the coming
that a paradigm shift was in order. create a new development framework for Las months. Project CityCenter will not only
No longer would an expansive, sprawling, Vegas, one that will forever change the way represent an enormous opportunity for
low-rise development be justifiable given the world sees Las Vegas. growth and increased value for your
skyrocketing real estate values. Rather, we The nation’s best builders, contractors company, it will lead the way in redefining
envisioned something greater, based on the and interior designers are also part of our Las Vegas for generations to come.
successful models of sophisticated cities extraordinary team. The entire process is so
Project CityCenter
around the world. unusual and complex that we have already
Conceptual rendering of retail space
From this innovative approach came received numerous inquiries from Universities
the idea for a new urban metropolis— to document the project’s development.
Project CityCenter. The scope and scale
of this undertaking is almost unheard of
in its sheer magnitude. When complete,
Project CityCenter will encompass 18 million
square feet of resort, convention, retail and
residential space, far larger than any
privately funded development in our
nation’s history.
Key to the success of Project CityCenter
is the creation of synergy between the
components and unmatched energy and
excitement for the project. To accomplish
this we decided to enlist the talents of
the top architects in the world.
Project CityCenter
Opposite Page
12. THEhotel Shark Reef • Mandalay Bay Moorea Ultra Beach Lounge Monte Carlo
Mandalay Bay
what if
A DREAM TEAM BECAME A REALITY?
T he Mandalay merger adds tremendous Filling these 13,000 rooms would generate
assets to our company in the form of much-needed customer volumes and help
buildings, land and employees, but maximize profits in the casino, restaurants
more importantly the merger adds a and showrooms. By implementing MGM
significant intangible—potential. MIRAGE’s yield management strategies,
You can see it everywhere at Mandalay— combined occupancy at these resorts for the
employees excited about the future; second half of 2005 was 93% compared to
magnificent sites for future development; 88% in the 2004 period, without sacrificing
even walking around the time-tested room rates. This led to increased profits,
Circus Circus
operating resorts, we see potential for with combined EBITDA going up 13%.
future growth. In the same way we Consider the steps we took to immedi-
transformed MGM Grand Las Vegas, ately increase occupancy at Mandalay’s key
New York-New York and now The Mirage, resorts: Mandalay Bay, Luxor and Excalibur.
Opposite Page
we feel that similar changes at resorts These resorts generally get less walk-in
Mandalay Bay
like Luxor and Mandalay Bay will lead traffic due to their south Strip location.
to increased cash flow, and a new sense
of “Wow!” for our customers.
In bringing these companies together,
we are making changes large and small
to maximize the potential of this
powerful combination.
annual report 2005
MGM MIRAGE
Luxor
10 Excalibur
13. “ The Mandalay merger
offers a concrete
manifestation of our
business principles
in action.”
W H AT I F ?
2
No.
14. W H AT I F ?
3
No.
“Construction is
underway and we
anticipate opening
MGM Grand Macau
in late 2007.”
annual report 2005
MGM MIRAGE
1
15. YOUR VISION EXTENDED
Atlantic City
Renaissance Pointe
what if
ACROSS CONTINENTS?
M GM MIRAGE has built and operates some The prospects for growth have
of the most well known resorts in the world. emerged in other countries, including
Beau Rivage
This is the result of an innovative team of Singapore, where a spirited process is
professionals all blending their talents into underway to determine the company that
a strategic approach that is consistent and will build a new icon for the Marina Bay.
extremely difficult for competitors to copy. MGM MIRAGE is partnering with CapitaLand
We use our strengths to manage our on this venture, and we have hired famed
assets, train our employees and build our architect Kohn Pederson Fox to design
business in a way that leads to memory- the resort. We have submitted a dynamic
making experiences for our guests and proposal to renew and energize the heart
increased performance for our shareholders. of Singapore.
We continue to seek opportunities to Anticipating the passage of major re-
grow our company and increase shareholder forms to British gaming laws, MGM MIRAGE
Macau Casino
value. We do this not only by reinvesting has announced a series of strategic joint
in our existing family of resorts, but also venture partnerships with United Kingdom-
by seeking new jurisdictions in which to based companies to develop destination
establish operations. entertainment and casino complexes.
In June 2005, we broke ground on Given the opportunity, MGM MIRAGE
the spectacular MGM Grand Macau Hotel plans to bring our experience in developing
MGM Grand Detroit
and Casino. Along with our partner, Pansy world-class gaming and entertainment
Ho Chiu-king, we envision MGM Grand properties to support the development
Macau setting a new course for development of the most exciting, vibrant leisure
in this Chinese Special Administrative complexes in the United Kingdom.
Region rich with history.
Opposite Page
From left to right
Macau Dancer
The Signature at MGM Grand
MGM MIRAGE Design Center
Macau Guest Room
Project CityCenter Model
New Asian Restaurant • Beau Rivage
MGM Grand Macau
MGM Grand Macau Construction Site
16. Kids to Kids Breakfast Clark County Reads Program
with Books Program
Clark County Reads Program
A COMPANY Hurricane Katrina • Job Opportunity Center at Beau Rivage
what if
COULD BUILD HOPE?
A t MGM MIRAGE, our employees are And the Human Rights Campaign administrative costs associated with the
our greatest resource. That’s why we are applauded our policies that are considerate Voice Foundation, enabling one hundred
diligent about investing in our people. of gay, lesbian, bisexual and transgender percent of our employees’ donations to reach
Leadership and development programs, employees. Our individual properties are their intended recipients.
top quality employee benefits, tuition distinguished for human resources In 2005 alone, our employees contributed
reimbursement, on-site daycare and health practices. New York-New York is recipient $3.6 million to the Voice Foundation. These
and wellness initiatives are examples of of the “healthy workplace” award from the contributions were donated to organizations
ways in which we address the needs of our Nevada State Psychological Association selected by our employees to benefit the com-
employees. This holistic approach led for maintaining an environment considerate munities where they live and work. We believe
to our being named among the Fortune of the psychological health of employees, that an investment in our employees is an
500 “most admired” companies for human and MGM Grand has been named the investment that can transform communities.
resources practices by Human Resource “best place to work” by the Southern The Voice Foundation played a critical
Executive magazine. Also, the Nevada Nevada Human Resources Association role following the devastation of Hurricane
Business Journal named our company as for its training, benefits and employee Katrina at Beau Rivage Resort in Biloxi, Miss.
one of the “best to work for” in the state. recruitment and retention programs. MGM MIRAGE created a special recovery
Both Hispanic Business magazine and We believe that when our employees fund to aid Beau Rivage employees starting
Black Enterprise recognized us for our thrive, so do the communities in which with a $1 million seed donation matching,
diversity leadership. they live, work and raise their families. without limit, every employee donation made
That’s why we also invest in the communities to the fund. Generous employees donated
where we operate businesses. $145,543 and the MGM MIRAGE match
Since its inception in 2002, the raised the total to $291,085 for the fund.
MGM MIRAGE Voice Foundation, our
employee-driven non-profit entity, has
raised more than $12 million to benefit
annual report 2005
a variety of non-profit programs and
MGM MIRAGE
causes. The company underwrites all
Opposite Page
Hurricane Katrina Devastation
The MGM MIRAGE Voice Foundation has raised
$12 million to assist not only MGM MIRAGE
14 employees, but entire families in the community.
17. “ Our greatest strength
is our people. This
strength is even more
apparent when you
look at the generosity
of our employees.”
W H AT I F ?
4
No.
18. YOUR FINANCIAL
what if
PICTURE WAS CRYSTAL CLEAR?
What if... you broke all the financial Our hotel revenues increased 19% on the world; continually reinvest in our resorts,
a same-store basis, owing to the continued maintaining their world-class and industry-
records, then broke them again? It seems
strength of room rates, additional capacity leading status; maximize operating cash flow
redundant to talk about record years. After all,
from the Bellagio expansion and upgraded through financial discipline; utilize free cash
last year we noted that 2004 had shattered
rooms at the MGM Grand Las Vegas. And flow and sound capital allocation strategies
our previous records for customer volumes,
the Mandalay resorts performed tremendously to maximize value for shareholders.
revenues and profitability. And yet we did it
under our new leadership, as we drove
again, carrying the positive momentum into
What if... we hired the best of the best?
significant gains in occupancy at the key
2005, and thus far this year.
Las Vegas Strip resorts, which in turn added Our management team consists of the best
We earned net revenues of $6.5 billion
customers to the gaming floor and other non- and brightest leaders in the industry. Two
in 2005, 53% higher than 2004. Even exclud-
gaming areas, such as restaurants, shows recent additions exemplify the leadership
ing the Mandalay resorts and Beau Rivage,
and retail shops. Property-level EBITDA was qualities we seek in our management.
our net revenues increased a healthy 11%,
an all-time record, over $2.1 billion, and even In April 2005, we named Lorenzo
providing an argument against some market
on a same-store basis profits were up 11%. Creighton as President and Chief Operating
observers who think that gaming is a mature
Officer of New York-New York. Lorenzo brings
industry with few prospects for growth.
What if... a company adhered to one us a wide-ranging perspective on business
$1.50
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$1
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00
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1. 7,
$1.21
$ $
the strategies that led to our success in 2005 as a gaming operator. Recently, Lorenzo was
$6,482
00
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continue to be the cornerstone strategies we honored as a recipient of the Trumpet Award,
.
$1 $6
have consistently followed. The key tenets of honoring outstanding accomplishments by
00
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our financial strategy are important to us, and African Americans in the fields of business,
$0.76 00
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worth repeating: hire the best operators in law, public service and entertainment.
$0 $5
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$3,863
00
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$ $
00
‘03 ‘05 ‘04 ‘05
‘04 ‘03
0
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EARNINGS PER SHARE NET REVENUE
From Continuing Operations
annual report 2005
MGM MIRAGE
James J. Murren
President, CFO Treasurer • MGM MIRAGE W H AT I F ?
5
1 No.
19. In 2005, we also made capital invest-
ments in The Mirage. To many, The Mirage
has always been the ultimate Las Vegas
resort. And while we too love the character
In October 2005, we hired George of this resort, we saw potential for greater
Corchis as the President of Beau Rivage, customer experiences. So we decided to
where he will lead the important work of add a category-defining new nightclub, JET.
rebuilding that great resort. George comes to We remodeled Kokomo’s, a quintessential
us from Horseshoe Gaming, where he spent Las Vegas steakhouse, and provided a lobby
many years in leadership roles with that lounge to go along with a fantastic new design
company’s properties in the South. George’s by Adam Tihany. We added new restaurants:
experience with the market, success with Stack, an American Grill; and Fin, an upscale
past development projects and great leader- Asian restaurant. We also upgraded our
ship qualities make him a perfect fit for our slots and table games high-limit areas for
long-term future in Biloxi. our premium customers. Finally, we continue
work on a new theatre for a Beatles-themed
What if... you never settled for good Cirque du Soleil show which promises to be a
one-of-a-kind when it opens later in 2006.
enough? Our operating strategy requires
capital investment. While others in our
What if... you could grow revenues and
industry seem satisfied with milking per-
ceived “cash cows”—resorts that have paid profits faster than your competitors, without
for themselves if only due to a lack of ongoing relying on increased room rates? For the
investment—we believe this short-sighted past couple of years, we have experienced
view is a losing proposition. Evidence of a solid run of REVPAR growth. Many market
our philosophy includes the success of the observers are wondering if these growth rates
Spa Tower at Bellagio, which has generated can continue. We understand that REVPAR
returns in excess of 20% and has added new growth is just one element of the equation. We
vitality, and more customers, to the resort’s also know that REVPAR doesn’t pay the bills.
existing gaming areas, restaurants and shops. More important to our business is ensuring
At MGM Grand Las Vegas, our invest- that the right customers are in our buildings
ments—KÀ, the acclaimed show by Cirque by properly managing occupancy and rate
du Soleil, the Skylofts and West Wing room mix; offering superior entertainment, dining
enhancements, two stunning restaurants and shopping experiences; and maximizing
by Joël Robuchon, new poker and race the overall profit of the resorts by controlling
and sports areas—have led many to view costs. Our investments in new experiences
this resort as a completely new version of and new technologies keep existing customers
its original self, and the results prove it. coming back, keep our hotel guests within
As recently as 2002, MGM Grand Las our buildings when they “go out” for the night
Vegas made $213 million in EBITDA; it and attract guests staying at other hotels to
earned $331 million in 2005. sample our offerings.
annual report 2005
Top to bottom
MGM MIRAGE
From left to right
Gamal Aziz Frank Baldwin George R. Boyer III Joe Brunini George Corchis Lorenzo Al Faccinto, Jr. William J. Curtis Jacks William Tom Robert V. Moon
Creighton Hornbuckle McBeath Mikulich
President General Manager President President President President General Manager Chairman
MGM Grand Circus-Circus • Reno MGM Grand Detroit MGM Grand Resorts Beau Rivage President MGM MIRAGE President Colorado Belle President President MGM MIRAGE
National Marketing New York-New York International Mandalay Bay and Edgewater Bellagio TI Marketing
17
Marketing
20. What if... we found a better way to utilize Project CityCenter represents the
culmination of everything we have learned as
our assets to maximize return on investment?
developers, operators and financial engineers.
As we grow, it becomes even harder to find
With Project CityCenter, we are leveraging the
projects that “move the needle” in terms of
ultimate intangible asset for a real estate
positively impacting shareholder value. Yet
developer—location—into a growth project
we have our best development pipeline ever.
with compelling consequences, while
Here are just a few examples:
generating a return on investment superior
The Signature at MGM Grand opens two
to a resort-only development.
of its three towers this year, with significant
Project CityCenter also raises the bar
one-time cash profits to us, as well as the
for future Las Vegas development. In effect,
opportunity for ongoing revenues as we rent
it creates a new barrier to entry. Develop-
the hotel-condominium units and further
able land, especially prime land, on the Las
fill our largest resort with upscale, discerning
Vegas Strip is almost entirely spoken for and
visitors. The third tower will open in 2007
incredibly expensive. No company has more
and is selling at a rapid pace with prices
of this land than your company, allowing us to
over $1,100 per square foot; more residential
control our own growth well into the future.
projects are likely.
Overseas, MGM Grand Macau will soon
What if... you could turn the supply-
Furthermore, our margins lead the make a major contribution to our financial
industry, year-after-year. Our property- demand equation on its head? Recently,
results. In partnership with Pansy Ho Chiu-
level EBITDA margin in 2005 was 32%; on you may have heard rumblings about over-
king, we will create an icon for this burgeoning
a same-store basis it was 33%, consistent building on the Las Vegas Strip. I’ve been
tourist destination, with a resort that will be
with 2004. We expect our margins to not around this industry for 22 years, and I can’t
second-to-none when it opens in late 2007.
only stay strong in 2006 and beyond, but tell you how many times I’ve heard that the
With a total investment of $280 million in this
improve as we fully realize the synergies of Las Vegas Strip is over-developed or at risk for
venture, we expect returns well above 30%.
the Mandalay merger. overdevelopment. Let me make it clear that
The partnership also continues to seek oppor-
we are not only comfortable with anticipated
tunities for future developments in Macau.
supply developments but excited about them.
Top to bottom
annual report 2005
MGM MIRAGE
From left to right
Randy Morton Mike Poehling Michael Puggi Felix D. Mike Shaunnessy Scott Sibella William Smith Ben Speidel Richard A. Sturm Donald Thrasher Frank Visconti Renee West
Rappaport
President General Manager President General Manager President President General Manager President General Manager President President
Monte Carlo Railroad Pass Primm Valley President Gold Strike • Jean The Mirage MGM MIRAGE Slots-A-Fun MGM MIRAGE Circus-Circus • LV MGM MIRAGE Excalibur
Resorts Luxor Nevada Landing Design Group Sports and Retail
18 Entertainment
21. What if... we set new records next year?
Every time that compelling supply has
What if... we were able to combine two great companies into
Mandalay
Acquisition
been added to the Las Vegas Strip, the What if our Macau, Biloxi and Detroit
market has grown considerably and easily a powerhouse organization?
developments yield attractive returns? What
absorbed the new capacity and, in fact, if the power of combining MGM MIRAGE
It is not an easy task to complete a merger and integrate two large
there is currently very little capacity being and Mandalay is manifested in higher levels
companies, all while operating at peak efficiency and turning in record
added to the Las Vegas market. Even with all of profitability? What if we deliver on the
operating results, but that is what our management and employees
reasonable development expected between promise that is Project CityCenter? These
accomplished this year. The Mandalay merger offers a concrete manifesta-
now and 2010, hotel room supply in Las Vegas opportunities are becoming realities and add
tion of our business principles in action. Behind the scenes, significant
will grow only an average of 4% per year. to the great work already underway that has work has been underway since the merger, with a focus on providing a
This is far below the historical rate at a produced record financial results and platform for future growth; growth not just for the next several years, but
time when Las Vegas’ popularity is at a record created significant shareholder value. for the next several decades. We are developing new ways to leverage our
high and rising. Finally, there are only a hand- As shareholders, we expect management to powerful brands, superb operating talent, significant financial resources
ful of credible, financially strong developers continually improve and look for innovative and unmatched real estate assets.
in the market, and with long development ways to deliver on the promise of quality
What if... we gave people what they want?
lead times and the expected closure of older financial performance. We are clearly on the
resorts, we should have no trouble maintain- right track, and I feel confident that we know
It’s nice to think that you can always offer your customer the best of
ing our pricing advantage given this appealing how to best accomplish our ambitious goals.
something yourself. For example, our philosophy at MGM MIRAGE has
market backdrop and our superior assets.
been to own our restaurants so that we could control quality of food and
Sincerely,
service. But when it comes to coffee, I guess there’s just no substitute
What if... the financial markets
for Starbucks. At minimal cost, we are converting several of Mandalay’s
recognized our industry leading
coffee outlets into Starbucks locations at several of the Las Vegas Strip
margins, asset quality and track record?
resorts. Our estimated ROI for this change is well over 20%.
Your company has earned the respect of the
financial markets. Last year, we closed on What if... technology did what it was supposed to?
the largest ever bank facility in the industry’s
James J. Murren
history and we were able to borrow fixed rate When we were one of the first companies to implement cashless slot
President, Chief Financial Officer
debt at historically low levels in both 2004 technology (ticket-in, ticket-out, or TITO) several years ago, many weren’t
and Treasurer • MGM MIRAGE
and 2005. And our equity performance sure if customers wanted their winnings reduced to a ticket – after all,
coins and bills built this industry. But want tickets they did. And the
over the last several years has reflected our
technology enhances the customer experience while allowing us to
strong financial results and solid financial
raise our service standards with less staff. So once we acquired Mandalay,
position. As an example of your company’s
we knew TITO was one of the first things we should do. You should see
financial prowess, in the first eight months
increased slot revenues throughout 2006 at the Mandalay Resorts, as
after the Mandalay merger we reduced
you have for the past several years at the legacy MGM MIRAGE resorts.
debt by over $400 million, invested over
$600 million in our resorts and development
What if... everyone bought the same eggs?
projects and repurchased over $200 million
of our common stock. Purchasing is perceived as perhaps the ultimate white elephant in most
gaming companies. Other industries have mastered to varying degrees the
art of getting everyone to use the same supplies and materials. In hospitality
companies, and in particular gaming companies serving multiple customer
segments, it is particularly difficult. Yet we believe this “final frontier” offers
great potential for increased efficiencies and profits for our company.
We have hired a Chief Purchasing Officer, a new position for our company.
Together with our operating personnel and third-party consultants, she will
annual report 2005
be reviewing every aspect of our current spend, our future needs and our
MGM MIRAGE
operating processes. We believe we can save tens of millions of dollars on
an annual basis. Just getting every chef across our company to buy the
same eggs, a step we took in 2005, will result in annual savings of $1
million. Now that’s a lot of dollars for such a simple switch – of course,
19
we buy a lot of eggs.
