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MGM eyes India as ripe for 5-star resorts

Dec 2, 2008 5:10 PM

Gaming Insider by Phil Hevener |

MGM Mirage is among the hospitality companies taking close looks at India, including the west coast city of Mumbai, the target of last week’s violence that has become known as the country’s commercial center.

"We have people on the ground there but our information is that they are all safe," an MGM official was explaining, speaking on the condition he not be identified. His comments came as officials continued their cleanup in the wake of last week’s attacks by Muslim extremists that left about 180 people dead.

MGM’s game plan calls for using some of its high-profile non-gaming brands in locales such as Mumbai as the basis for development deals that would involve the presence of the brands themselves and the company’s operational expertise but no capital investment.

India is being targeted by high profile hotel companies because of the country’s booming economy and a shortage of the five-star product preferred by the dealmakers who have been swarming across the country.

Former MGM chairman Terry Lanni who was officially out of the company as of 12:01 a.m. Monday has previously noted that in all of India there are only about 110,000 hotel rooms. That’s fewer than on the Las Vegas Strip. The number of first class hotels, such as those attacked during the Mumbai violence is far fewer, less than 20,000.

Lanni and his successor Jim Murren view the company’s plans for taking its brands around the world as a potential gold mine that could eventually result in the new MGM Hospitality division being spun off as a separate company.

Murren and Lanni have noted that pure hospitality companies usually trade at much higher multiple than gaming companies. Neither do they require a billion dollars worth of capital spending every time a new hotel is opened. But what they do require, of course, is the product with a reputation that takes time and money to create.

MGM has already announced development deals in China and recently added Vietnam to the list of countries where plans for planting the MGM flag are in the works.

Wynn Resorts is another of the high profile gaming and entertainment companies with a global reputation that might benefit from some version of the MGM strategy. That’s the conclusion of sources outside the company with a reputation for accurately predicting the shape of things to come.

But Wynn has yet to address such possibilities and probably has his hands full for the time being as he oversees major development projects in Las Vegas and Macau. His Las Vegas Encore is headed for an opening later this month and, like its neighbor The Wynn, will feature the restaurants and hotel rooms that get high marks from Mobil and Michelin.

These high marks feed the reputations that make licensing or development deals possible.

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