MGM coming off tough week

Last week was a difficult week for MGM Resorts International, starting with the loss of long-time executive and former CEO J. Terrence Lanni, who died from cancer, followed by ongoing negative publicity surrounding The Harmon hotel tower, which remains unoccupied with alleged design flaws, and capping off with reports about the outbreak of Legionnaire’s disease at the Aria resort.

Lanni retired as chairman and CEO in 2008 after spending years at MGM as one of the key architects behind the transformation of Las Vegas into a entertainment hub from a more narrowly focused gaming town. 

He joined Caesars World in 1977 and rose to president before joining MGM Grand in 1995. He was responsible for the purchase of Mirage Resorts and in 2004 engineered the acquisition of the Mandalay Resort Group. He also helped in the planning for CityCenter.

It is The Harmon that is located at the CityCenter complex — the unfinished hotel that has been object of finger pointing and lawsuits between builder Tutor Perini Corp. and MGM Resorts.

MGM has been claiming the building is unsafe, recently saying it could not withstand an earthquake. Perini says the building could be fixed but claims MGM does not want to repair the tower because of the difficult operating environment in Las Vegas.

Local government officials want MGM to come up with a plan for the structure and reported gave MGM until August 15 to submit a plan. Attempts to get comment from MGM for this article were unsuccessful.

“The Harmon is a sad situation,” Mike Leven, president and COO of neighboring Las Vegas Sands Corp., told HOTELS. “Eventually someone will make MGM take it down. It is a matter of MGM having the money to remove it. The real story is not coming out due to legal ramifications.”

Finally, MGM Resorts is recovering from a spate of bad publicity surrounding an outbreak of Legionnaire’s Disease at its Aria resort at CityCenter. Management is contacting guests who stayed at the hotel from June 21 to July 4 at a time when water tested detected elevated levels of Legionella bacteria in several guestrooms.

According to published reports, six people who have stayed at Aria in the last two years have come down with the disease, though there were no major outbreaks and no deaths as a result of the illnesses. Aria management has also stated that after treatment, the water systems at the hotel no longer show any sign of the disease.

Despite these issues, gaming industry analyst Amit Kapoor of Gabelli & Co., New York City, remains upbeat on MGM Resorts’ prospects. “Looking beyond near-term news flow, investors will continue to focus on MGM as a company with high quality assets, a proven management team, presence in the high growth Macau market and operating leverage as the Las Vegas market rebounds,” he said.

With a little different perspective is Anthony Curtis, publisher of the Las Vegas Advisor. “The nightclub Eve (at Aria) also closed. But with the exception of The Harmon, I think it was a lot of little things all at once. The Legionnaire’s incident seemed more precautionary than anything, and Eve never got traction,” he said. “The Harmon is something else and monumental almost in importance, as it represents a big chunk of that US$9 billion project. It sounds like they have to knock it down. That was 97% of the bad news pie last week.”