Jim Murren has fortified MGM Resorts International and positioned it for a new era of post-recession growth
It’s a safe bet there will never be a more challenging time to take the reins of a Las Vegas-based gaming company than December 2008, but that’s when Jim Murren found himself as the new chairman and CEO of MGM Resorts International after ten years at the company.
Having championed the $8.5 billion City Center project which was at the time seen as potentially detrimental to the company’s very survival, Murren could have been forgiven for feeling snake bit, but in addition to his own considerable talents he had the support of someone who was intimately acquainted with overcoming hardship: company founder and now director emeritus Kirk Kerkorian, who grew up dirt poor in the Depression, delivered Canadian bombers to the Royal Air Force in World War II, missions that were known as suicide runs, and had navigated every other economic crisis and disaster since.
Kerkorian would telephone Murren to talk about the business, but every call would start with the essential questions: How are you; how is your wife; and did you get your exercise in this morning?
“He would call, speak briefly, calmly, unemotionally but with tremendous empathy in his voice; I know what it meant to my wife Heather and what it meant to me,” said Murren. “That was the strongest outside influence that we had, particularly poignant when you’re going through that sort of time when everyone in the world has got an opinion-every armchair quarterback, every banker, every analyst, every consultant, every lawyer, every competitor, client and customer. They all know better than you and they all have a view as to what you should do and they’re all shouting over one another to get their point across. Cutting through all that like a razor was a very clear message that was calm, concise and consistent. And that was Kirk Kerkorian, and because of that, many rash decisions were avoided, many impulsive thoughts were eliminated and reason prevailed. He got us through this. I was the person that people saw a lot. But, in my opinion, it was Kirk Kerkorian who got us through the recession.”
With City Center now on firm financial footing and Las Vegas in recovery mode, Murren’s growing list of accomplishments as chairman and CEO of MGM came into full focus this year. Under his leadership, the company has continued to distinguish itself as the gaming industry leader in corporate social responsibility; reinvested and revitalized its Las Vegas Strip properties; built a first-rate loyalty program in M Life; won a land concession in Macau where it plans to build its second property, MGM Cotai; and launched MyVegas.com, a social gaming site that is attracting over 400,000 players a month. MGM also spread its North American developmental efforts to Toronto, Massachusetts and Maryland, where the company invested in and won an important political victory last month when Question 7, which provides for a new casino in Prince George’s County, was approved by voters, an achievement derived in no small part from MGM’s commitment to diversity and environmental sustainability.
It is for these reasons, among many others, that Casino Journal is proud to name Jim Murren Executive of the Year for 2012.
BETTING ON VEGAS
In the fall of 2011, as MGM does every year, Murren led the company through a robust strategic planning process which culminated in a presentation of three Las Vegas-based initiatives to the board. To start, Murren felt it was particularly important to invest in Las Vegas properties, particularly as the economy was sluggish but, even then, starting to show signs of improvement. “We felt if we waited until all the signs were there we would have missed an opportunity,” said Murren. “We made a commitment to invest in Las Vegas in a very significant way.” The second initiative was to find ways to better engage customers through loyalty programs. MGM committed to invest a considerable amount of money in IT and marketing in 2012 in order to drive more frequency to its properties in Las Vegas and to improve return visits. The third Las Vegas initiative was to make its properties more accessible to customers and to one another; to drive cross-market and cross-property play.
Las Vegas has shown growth in 2012 for the company. Convention business is up and visitor volume is up slightly. “People are spending a little bit more money when they visit us; they’re still value-conscious and I think that trend will continue into 2013,” said Murren. “But they’re willing to invest in unique experiences, and that has been our focus. We have been able to drive not only convention revenues but non-gaming revenues in general through higher occupancies and room rates, higher food covers in our restaurants, and better entertainment and retail revenue. I think that trend will continue into next year and it will be stimulated by our own capital improvements.”
MGM invested $160 million into the rooms at MGM Grand, which has been “a big shot in the arm” for that property. Other noteworthy additions have been a new show at Aria (Cirque du Soleil’s Zarkana) and new restaurants such as Javier’s (Aria) and Hyde (Bellagio).
“When you make that kind of commitment, customers know you care, that you want to be competitive and they respond with return visits,” said Murren. Other soon-to-be-completed major programs including Hakkasan at the MGM (“the ultimate in restaurant nightlife lifestyle”); two other new restaurants at MGM; renovation of the entire casino floor; improvements at Bellagio with Spa Tower (a $40 million room renovation) and a new private gaming area; and the Michael Jackson show at Mandalay Bay.
As for City Center, Murren said the project “started finding its legs” in a very difficult economy in 2010 and it has continued to improve.
“Aria has become one of the pre-eminent luxury casino hotels in Las Vegas, both in terms of its hotel revenue and its gaming revenue on the high end,” Murren said. “It’s number one in our system in terms of its slot revenue, and has become, through outside services like AAA and Mobil as well as internal surveys, one of the best casino hotels in the world.”
Other components of the resort are also doing well, according to Murren. “The convention center will be fully booked in 2013; the conference center is gold-certified and has been a big selling point,” he said. “Vdara has made more money as well. It was kind of a hidden jewel as a non-gaming, non-smoking hotel. It’s a favorite of some of the techie crowd of Silicon Valley and the entertainment crowd. They find that venue to be a great oasis and it’s having a record year. Crystals had a record year as well and we expect to do better in 2013 with two or three more stores opening. It’s almost completely occupied now and that started very slow in 2010. Mandarin, which was initially unprofitable, is now profitable.”
“Along the way, we have refinanced City Center, so it has no looming maturities whatsoever,” Murren added. “It has very little debt relative to its equity or asset value and the leverage it does have was extended earlier this year so it’s on very, very sound financial footing.”
An ex-Wall Street gaming analyst who still crunches the numbers, Murren’s confidence in the overall gaming market stems in no small part from an expected rebound in home prices. “There are many economic indicators that you can look at, but the one that has shown the greatest correlation to our business is housing,” he said. “If you were to take the Case Shiller Housing index and track it to our business you’d see an extraordinarily tight correlation. As housing is improving and people’s wealth is starting to return we’re seeing discretionary spending increase that extends to gaming.”
MGM never has taken the business approach that it needs to be in every market that allows for gaming, explained Murren. “That doesn’t mean that’s a bad business strategy, just one that is best suited for others,” he said. “Our strategy has been to find markets where we can develop resorts, broadly defined as destination integrated resorts, where we can grow a market and have a dominant market share as a result of being competitive, not simply because it’s a monopoly. That’s the case in Detroit, where MGM is the market leader because we have the most luxurious property.”
Murren expects Detroit will show growth in 2013 and so will Mississippi, both in Tunica and at Beau Rivage in Biloxi. “Both are outstanding properties, have benefitted from capital improvements and have great management teams,” he said.” Both have increased their market share in markets that held up well during the recession as did Detroit.”
MGM’s focus elsewhere in North America is primarily on new markets: Maryland, where the company is now favored to win the bidding process for the new casino in Prince George’s County, with an $800 million project on National Harbor that would be jointly developed with Peterson Cos. opening in 2016; Springfield, Mass., where Murren believes MGM “will be competitive and hopefully will prevail”; and Toronto, “where we’ll certainly be one of many that will be interested because the opportunity is so great in such an exciting, cosmopolitan city. They will attract the best of the best to try to build there.”
Outside the U.S., last year was a watershed year for MGM in Macau, when the company jointly listed MGM China on the Hong Kong exchange. In connection with that listing, it acquired an additional percentage of that company, which means that MGM Resorts is the majority owner of MGM China, which had a record year in 2011, and is on its way to another record year in 2012.
“We have invested a considerable amount of money into MGM Macau in the past 12 months, expanding and improving the gaming areas, and we have more opportunities to grow in that resort itself,” said Murren. Last month, MGM China was allowed to purchase the land concession to build the second MGM property in Macau, MGM Cotai, which will be a large, integrated $2.5 billion resort. The design is largely complete; construction drawings will be out soon and the company is hopeful the project will open in 2016.
“We spend considerable amounts of time overseas because we see other opportunities to utilize our development and management expertise,” said Murren. “In Vietnam, we’re acting as developer for an owner, and longer term, in markets such as South Korea and Japan and perhaps Taiwan. Globally, gaming is becoming more mainstream as it has in the United States, and the universe of quality gaming developers and operators is quite small, so it’s worth it us as a company to invest in the opportunity to bring MGM to new markets.”
“M” AS IN MARKETING
MGM’s Players Club became M Life in 2011, and the program now has over 30 million enrolled members, or over half of MGM’s database. Murren credits Bill Hornbuckle, MGM’s chief marketing officer, for bringing success to an area where the company had lagged.
“Our loyalty program, up until three years ago, was inferior to our competitors’; we had to candidly assess where we stood,” said Murren. “That’s where Bill Hornbuckle and his team came in. We also invested quite a bit of money in technology.”
Murren felt the old Players Club program was inflexible, since it was not based on a 360-degree view of customer spend. It also failed as an aspirational tiered offering due to its lack of transparency with members, who did not know precisely what value they had accumulated through their loyalty.
The whole program was revamped. It took a lot of technology, specifically middleware, which allowed management, financial and communications systems to share information. Customers can now see their total value, where they rank from a tiered perspective and what they’ll be eligible for as they gravitate up tiers. The program was rolled out to regional properties first; Mississippi and Detroit and then to Las Vegas.
“We’re proud to say that we’ve had tremendous conversion,” said Murren. “We’re not asking anyone to convert, they’re doing so willingly; they’re grabbing the concept that this is a more robust, flexible, valuable program for them.”
In turn, M Life has provided MGM with insight on how to better differentiate its marketing packages. “We understood that we had far more to offer to our customers than most of our competitors because we had so many more amenities at our disposal,” Murren said. “We could create experiences for people because of what we own, not just try to induce them to come more often for a better deal on the tables or cash back on slot machines or discounted rooms.”
For example, M Life can offer its golf enthusiast members a round to remember thanks to its affiliation with Shadow Creek, one of Nevada’s top courses. “If you’re a golfer, there’s only one premier golf course in [in Las Vegas], and that’s Shadow Creek; others are kind of a distant and sad seconds,” Murren said. “If you enjoy theatrical entertainment, we have the exclusive relationship with Cirque du Soleil. For our architectural buffs, we can tell how we came up with the concept for the Mansions at MGM Grand, or for our art lovers, a docent tour of the art at City Center. We’re testing loyalty concepts such as giving backstage passes to see a performer at iHeart, or a private fountain show at Bellagio, or a private tour of the secret gardens at Mirage or a dolphin swim or shark habitat. Those types of loyalty moments-we call them M Life moments-are priceless in many cases, and have really grabbed the excitement of our customers and that’s why our market shares are moving up.”
MGM also plans to move forward aggressively with marketing partnerships that add value for both sides, such as the one it has entered into with Ameristar. When the company layered its data against Ameristar’s in their home markets, it found a remarkably low percentage of overlapping customers.
“We knew a tremendous amount of people in their market that they did not know and they knew a tremendous amount of people who visit Las Vegas that we did not know; it has resulted in tangible improvements in their business and in ours,” said Murren. “We’ve got similar partnerships with sbe Entertainment Group, an exciting lifestyle company in Southern California, and a very strong hotel partnership with Royal Caribbean Cruise Lines that’s in its final evolutionary stages. We have a couple of retail partners we will announce in the next few months and a couple of new entertainment partners as well.”
MGM and Murren have long seen the need for the U.S. gaming industry to expand its footprint into the regulated online space, the jurisdictional rollout of which remains an open question. Not content to wait, MGM teamed up with old friend Andrew Pascal at PlayStudios this summer to launch myVegas, an innovative social game on Facebook that offers the potential for tangible rewards.
“We’ve taken the view that online gaming is here,” said Murren. “It exists in many parts of the world and illegally in the U.S. It needs to be regulated and we think we can do that with federal legislation, that’s the best approach. If not that, it will be done state-by-state. But in the meantime, we felt that we could invest in the social gaming space. We did go out and look at a few acquisitions in the social media world. We felt we could create something if we had the right partner and the right partner came to us. We talked about how we could create a for-play social gaming experience that is superior to what was in the market; which is just hitting a button and playing a video poker and video lottery game on your smartphone or at home. It was Andrew’s idea to merge what was successful in the online gaming space with what was successful in the online social media gaming space and create a virtual Las Vegas players build like Zynga’s FarmVille, CityVille and others.”
MGM sees the demographics (age, income, gender, geographic dispersion, time played) of social gamers to be identical to its prime gaming customer. “We felt if we could reach out to them-and we’re doing so by the hundreds of thousands now on myVegas every month-and have them gain awareness about the MGM Resorts properties, their location and their amenities, we could develop a customer acquisition tool, which is proving to be the case.”
M Life members who play myVegas can accumulate points that can be converted into tangible value; tickets to shows, room upgrades, free restaurant accommodations, etc. “It has really been exciting for folks to see they’re playing something for a diversion that is different from a video poker game online, they can have a social experience with their friends, with interactions and networking,” said Murren. “They can literally build Las Vegas and as they develop that play and loyalty in that game they can see at any point in time what they’re eligible to redeem in our resorts.”
“I think it’s the tip of the iceberg,” Murren added. “I firmly believe in convergence between gamers and the gaming industry. We shouldn’t be intimidated by the gamers or social gaming; we should embrace it and find ways to make our experiences more interactive, more nimble, more flexible and more interesting for this increasingly socially and technologically more sophisticated customer.”
THE BEST POSSIBLE POSITION
His financial background is well known to many, but Murren was an art history and urban studies major at Trinity College in his home state of Connecticut. With a new four-year contract extension in hand, he is secure in a job that deploys the full use of his talents and interests.
“The original goal was to become an architect; I felt that was the next step,” he said. “But along the way I had done some internships at a bank in Connecticut, which led me to Wall Street in 1984. I still have a great passion for art and architecture and planning. I have a tremendous pride in teamwork; it’s something that was a core value in my family growing up and recreationally. The fact that I get to be part of a company and a great team, that has many teams within a larger team, to be able to work with tremendous visionaries of architecture and interior design, retail and entertainment, both within our company and the talent that we use from outside our company has been remarkable to me. I feel like I’m in the best possible position to utilize not only what I can bring to a company professionally, but my deepest interests, which are working with people, working with communities, working on the development of ideas, opportunities for people and growing this resort business.”
“I certainly can’t say that this is a path I envisioned when I was a senior in college, but it seems to have all winded around to a point where in hindsight it seems to make sense,” Murren added. “I think that my Wall Street experience was valuable to me as an individual. I am a huge proponent of a liberal arts education. I feel like that prepared me to communicate, to think strategically, to articulate thoughts. I know that going to Wall Street as a research assistant starting at the bottom, grinding through the analytical process and taught how to think analytically, how to critically assess situations and objectively evaluate business propositions and communicate those ideas in a way that would be compelling to investors was a great experience for me. It bridged my role as the CFO of the company when I came here in 1998.”
Murren is also quick to credit interaction with long-time MGM executives for smoothing out some of his rougher edges and prepping him for a leadership role. “The mentoring I had here, through Terry Lanni and, of course, Kirk Kerkorian and the great property presidents and marketing people, has rounded out my experiences and brought me full circle-to a point where I can help direct what is a tremendous company.”
SUBHEAD: Responsibility is its own reward…
MGM Resorts International has long distinguished itself as a socially responsible corporation, by any measure, and Jim Murren has cemented that reputation during his tenure as chairman and CEO. This fall, CR magazine, which calls itself the “voice of the corporate responsibility profession,” named Murren as one of 30 finalists for its annual “Responsible Chief Executive Officer of the Year” award, citing achievements that are familiar to many in the gaming industry.
Indeed, Murren has played a key role in the MGM’s Diversity & Inclusion program since its inception in 2000; and has led the expansion of the company’s leadership in corporate and social responsibility to include environmental sustainability as well as community engagement and philanthropy. His leadership has helped MGM reach a variety of major social responsibility accomplishments. These include graduating more than 11,000
Diversity Champions through its Diversity Champion training workshop and increasing the overall representation of women (42 percent) and minorities (38 percent) in the diversity profile of its management team; spending a cumulative total of nearly $3 billion with minority-owned, women-owned and disadvantaged business enterprises; contributing to a combined total of more than 500 nonprofit agencies in Nevada, Michigan and Mississippi through its corporate giving program; and donating nearly $50 million to nonprofit organizations through The MGM Resorts Foundation since its founding in 2002.
At more than 18 million square feet, CityCenter is the largest LEED Gold certified development in the world, earning six LEED Gold certifications from the U.S. Green Building Council. Additionally, MGM Resort has reduced electricity consumption by 120 million kilowatt hours per year, enough to power 10,450 homes each year, and water usage by 500 million gallons per year, enough to fill more than 750 Olympic-size swimming pools. In 2011, Newsweek magazine ranked MGM Resorts as the most “green” resort and casino company.
All of those attributes served the company well in Maryland, and not just in the most obvious way. When you’re asking employees to help the cause by taking a bus ride from Detroit to the Washington D.C.-area and they exit the bus with enthusiasm, well, people only act that way when they believe in something worthwhile.
Murren said the Maryland effort was a process of communication and conversation with elected officials, unions, social groups, faith-based communities, economic development corporations, minority business, contractors and marketing partners. “Along the way, what clearly emerged in the consciousness of the voters of Maryland was not that MGM is a gaming company or even a resort company, but that MGM is a collection of men and women that form a socially responsible company and have a set of core values that resonated with the people we met,” he said. “MGM does care about the environment, does care about and spend effort and time on diversity and does understand the challenges of having a small, local, minority-or women-owned business. They saw that MGM did listen to and want to be part of communities and wasn’t trying to impose its own set of values or ideas on a community but was respectful of their desires and what they wanted to see their community evolve to.
“This didn’t happen overnight,” Murren added. “It happened in countless meetings, in small groups and larger settings, from Redskin games to economic development meetings to minority business roundtables to tele-town halls on diversity. I saw some folks I didn’t know in our company and those that I did know I saw in a very different light. People broke out of their traditional responsibilities, were willing to explore different opportunities; get out of their comfort zones and rally together. We had a bus from MGM Grand Detroit come on down. The enthusiasm of those 30 or 40 folks after a 10-hour bus ride coming down into National Harbor, popping off the bus…they were educated, motivated, and excited.”