After a slower start to the year, MGM Resorts International bounced back in the rest of the first quarter due to stronger demand and progress on several deals still in the works.
During the company’s first quarter earnings call, MGM Resorts President and CEO Bill Hornbuckle said the company has benefited from a quick recovery in leisure as well as business and group demand — trends expected to continue through the year.
He also outlined the latest developments in the company's ongoing transactions, starting with the closing of a deal to sell spin-off real estate investment trust MGM Growth Properties to gaming REIT Vici Properties.
“Our transaction with Vici allowed us to fully deconsolidate MGP from our financial reporting and also netted us approximately $4.4 billion in cash, which we will use to invest in our core business,” he said, adding the company will also seek meaningful growth opportunities.
One such opportunity was MGM Resort’s tender offer to acquire global online gaming company LeoVegas for approximately $607 million, Hornbuckle said. LeoVegas’ strong technology platform and growth pipeline presented a compelling opportunity for MGM Resorts to grow its online gaming business, BetMGM.
Another is its pursuit of a commercial gaming license in New York with the state’s fiscal year 2023 budget including provision for the issuance of up to three new licenses, he said. The company is eager to begin the process and share its vision for the future of a property in Yonkers, New York, he said.
In Las Vegas, MGM Resorts has made progress in its acquisition of operations of the Cosmopolitan of Las Vegas, and the deal is set to close this quarter, Hornbuckle said. MGM Resorts’ leadership has met with the team at the Cosmopolitan over the past few months, and the team at the property has been impressive, he said.
Similarly, the company is still working on its sale of the operations at the Mirage Hotel & Casino to Hard Rock International, he said. The team is working with regulators to ensure a smooth transition, and the deal is expected to close in the second half of the year.
In terms of international growth, MGM Resorts submitted its area development plan with its partners at Orix to the government of Japan and the city of Osaka in pursuit of a license, he said.
“We continue to work closely with the national government to obtain a license that will be hopefully awarded later this year and bring a fully integrated resort into Japan,” he said.
Improving Trends
MGM Resorts’ Las Vegas properties maintained strong margins in the first quarter thanks to sustainable operational practices, strong weekend occupancies and rates driven by a robust event calendar, Hornbuckle said.
“We see that trend continuing into the second quarter,” he said.
Midweek demand shows occupancy still behind 2019 levels, but an improving mix of business and group base will allow the company to ramp up in the remainder of the year, he said. The company expects convention room nights to reach 90% of 2019 levels by the back half of 2022. The Las Vegas Convention and Visitors Authority expects international flight capacity to return to 80% of pre-pandemic levels by this summer.
Group spending levels, as well as revenue from catering and banquets, have increased at the Las Vegas properties year to date, he said.
A strong events calendar helped drive business during the quarter. The MGM Grand Garden hosted the Grammy Awards this year, and its Allegiant Stadium hosted South Korean boy band BTS for four sold-out shows. The Las Vegas Strip hosted the NFL draft as well.
Looking ahead, the city will host the NCAA men’s basketball regionals in March 2023, a Formula 1 race in November 2023 and the Super Bowl in February 2024.
“All of these big events show the incredible progress the city has made as an entertainment and sports destination,” Hornbuckle said.
MGM Resorts' properties in Macau continue to face headwinds from China’s COVID-19 public health policies, Hornbuckle said. Despite those challenges, MGM's market share is 13% higher than it has been historically, and the properties are well-positioned to capture premium mass business as demand returns. The company’s license renewal process is underway.
By the Numbers
MGM Resorts’ first quarter net revenue amounted to $2.9 billion, and its net loss was $18 million — an improvement compared to net revenue of $1.6 billion and a net loss of $332 million in the first quarter of 2021, Chief Financial Officer Jonathan Halkyard said.
Net revenue on the Las Vegas Strip totaled $1.7 billion, and adjusted earnings before interest, taxes, depreciation, amortization and rent costs was $594 million, he said. Net revenues were down 1% on a same-store basis because of 343,000 fewer occupied rooms, mostly in January. However, same-store adjusted EBITDAR was $472 million, up 21% compared to the first quarter of 2019.
Occupancy was a different story each month, Halkyard said. The omicron variant of COVID-19 resulted in 65% occupancy in January, but that grew to 78% in February and 90% in March. In April, occupancy has reached 92% so far. Average daily rate was $197 and followed the same monthly trend as occupancy.
“Simultaneous increases in volume and pricing improved our financial performance dramatically as we went through the quarter,” he said.
As of press time, MGM Resorts' stock was trading at $41.97 per share, down 7.7% year to date. The NYSE Composite Index was down 9.4% for the same period.