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CFO of MGM Grand Speaks on Expansion Plans

The CFO of MGM Grand Hotel and Casino, John Shigley, visited HBS last Tuesday as the guest speaker in the EC course “Competing and Winning through Customer Information.”

Shigley joined MGM Grand in 2005 after spending three years at the New York, New York Hotel and Casino. His prior experiences include executive positions at Caesars Palace, Caesars World Business Services and Caesars Tahoe and Primm Valley Resorts.

MGM Grand’s parent, MGM Mirage, saw sales increase by 53% in 2005, to $6.5 billion, and net income increase 27% to $443 million. In the second quarter of last year, MGM Mirage closed its merger with the Mandalay Resort Group, thereby acquiring the Mandalay resorts such as the Monte Carlo and Mandalay Bay. MGM Grand, currently the largest casino resort in the world with over five thousand rooms, is the jewel of the group, generating $1.025 billion in sales and $332 million in EBITDA earnings in 2005. Over the last 5 years, the hotel focused its attention on its non-gaming activities. Changes include the revamp of many of its restaurants, renovation and relocation of its Race and Sports book, and the opening of a new poker room.

The Harbus spoke to Mr. Shigley after class on Tuesday. Highlights from the interview:

Harbus: What are the key issues facing MGM Grand which keep you awake at night?

Mr. Shigley: One of the questions I am focused on is how we can innovate and constantly evolve our product to meet the future demands of our customers, to make us more of an attractive destination compared to our competitors. This also relates to how we can create the culture of innovation to drive the constant change and constant innovation which will drive profits in this industry.

Harbus: If the culture of innovation is paramount, how does MGM maintain its culture?

Mr. Shigley: We set our goals very high. Each of our executives set their own goals and strategies and we reward people based on the achievement of those goals. We expect people to be on the cutting edge, to take risks and be rewarded for doing so.

Harbus: MGM spent $20 million building the MGM Grand University and $1.4 million last year on the training budget. Why is there a need for an in-house training facility?

Mr. Shigley: In our industry, you need good employees to have happy customers. What we invest in is having the best employees and that is the key reason we created our own university. We have programs ranging from English as a second language to classes on Microsoft Office, so that employees can develop their work and personal skills. We also offer Weight Watchers and more serious classes related to our manager training program.

One of the programs we are proudest of is the Leadership Institute, meant for our middle to upper level managers, where we expose them to senior executives of the company and local politicians. This allows them to become familiar with the senior management and the company’s strategy in order to groom them for promotion and take them to the next level.

Harbus: How has MGM’s merger with Mandalay Resorts turned out so far?

Mr. Shigley: There have been tremendous benefits from the merger. We have grown EBITDA on the [Mandalay] properties and found hundreds of opportunities for the employees of these hotels. We were able to consolidate functions and save some expenses. For example, the Luxor and Mandalay Bay staff use our MGM Grand University for training. Mandalay properties also use our recruiting and credit collection functions. Overall, there have been a lot of opportunities for synergies.

Harbus: What are MGM’s current expansion plans?

Mr. Shigley: We have several big things going on. We have a bid for the casino in Singapore and we will find out in June if we have won it; we have great plans to develop the property there. We are building a casino in Macau right now and we are starting to build the executive team for that. Finally in Las Vegas, we are working on the largest private development in the history of the country, called City Center, a 4000 room hotel casino with at least three other connected hotels. This is currently in the planning stage and we plan to have it ready by 2009. This is an exciting time for MGM.

May 1, 2006
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