MGM Resorts International had another record quarter, posting consolidated net revenues of $4.3 billion thanks to strong domestic and international performance.
During the company’s second-quarter earnings call, Chief Financial Officer Jonathan Halkyard said success during the quarter was underpinned by MGM's luxury resorts, which were responsible for the majority of its top-line growth in Las Vegas.
“We invest meaningfully in our Strip luxury offerings as this is where we see the most opportunity for profitable growth,” he said. “In fact, 75% of our 2024 domestic property capital budget will be focused on these properties.”
These investments include room remodels that are currently underway at the MGM Grand and suite updates across its Las Vegas portfolio, he said. The company also has completed the integration of the Cosmopolitan of Las Vegas into its MGM Rewards loyalty program.
MGM Resorts’ strategic relationship with Marriott International contributed to Las Vegas performance in the quarter with more than 410,000 room nights booked, he said.
MGM Resorts’ Las Vegas Strip properties reported net revenues of $2.2 billion, up from $2.1 billion in the second quarter of 2023, according to the company’s earnings release. The increase was primarily due to an increase in rooms revenue driven by increases in average daily rate as well as catering and banquets revenue.
In its regional properties, the company reported net revenues of $927 million, flat compared to last year. MGM China reported net revenue of $1 billion, up from $741 million last year due to the continued ramp up of operations after the end of COVID-19-related restrictions on travel and entry to Macau.
As of press time, MGM Resorts' stock was trading at $38.65, down 15% year to date. The NYSE Composite Index was up 11.4% for the same period.
Looking Ahead
The future for hotel bookings in Las Vegas is bright, Halkyard said. Room rates on the books in Las Vegas are up year over year for every month in the third quarter. Group rooms on the books are pacing up mid-single digits for the rest of 2024 and 2025.
That group pace is anchored by the refreshed space at Mandalay Bay, President and CEO Bill Hornbuckle said. There are favorable supply dynamics in the market with the closing of the Mirage and Tropicana properties, removing roughly 1.5 million room nights from the circuit.
During the third quarter of 2023, MGM Resorts was the target of a data breach, so year-over-year comparisons will be favorable, he said.
During the fourth quarter, however, the room rates are indicating some softness related to the next Formula One race, Hornbuckle said. The Las Vegas Grand Prix returns to Las Vegas November 21-23.
“We are hoping and believing that this race will continue to pace up, but I think you can see that and so we're a little focused on trying to make that the best event that it can be, but that presents a potential headwind in the fourth quarter,” he said.
The real issue with Formula One is that it’s off to a soft start compared to last year when MGM Resorts had a lot of advanced pre-bookings, he said. Some of its average daily rates are down about 50% give or take.
The good news is that there’s also an NFL game, so the South End of the Las Vegas Strip that ran occupancy in the 60s last year will fill up, he said.
They’ll have to wait to see the overall impact, but he’s hoping it fills up later and MGM Resorts can yield it back up again, he said.
International Updates
MGM China’s revenues grew 37% year over year, achieving a market share of 16%, Halkyard said. Adjusted property earnings before interest, taxes, depreciation, amortization and rent costs reached $294 million, a 40% increase with margins at 29%.
During the quarter, the company strengthened MGM China’s balance sheet by extending its maturity profile through issuing a new $500 million seven and eight-notes due in 2031, he said. The proceeds from this were used to pay down outstanding debt under its revolving credit facility.
MGM China continues to hold its market share and margins against a competitive market, Hornbuckle said. Its MGM Macau property in particular is the top producer on the peninsula side, a position the company wants to hold and will thus make further investments into it.
Hornbuckle said he had just returned from Japan to see firsthand the company’s integrated resort project in Osaka.
“We are in the ground as we speak, and we hope to start pylons by May or June of next year with a target date still of middle of 2030 for opening,” he said.