MGM Resorts International executives are pinning high expectations for strong performance in the second half of 2023 on a 20-year licensing agreement with Marriott International and a strong events calendar.
During the company’s second-quarter earnings call, MGM Resorts President and CEO Bill Hornbuckle said the agreement to create the MGM Collection with Marriott International's Bonvoy loyalty program opens up MGM Resorts’ 17 domestic properties for the more than 180 million Bonvoy members to book rooms and earn and redeem points.
The agreement will enhance MGM Resorts’ profitability by driving lower customer acquisition costs and a better mix of higher average daily rates and on-property spending, he said.
“By 2025, our expectation is that the Marriott customer base represent a meaningful segment of our hotel mix at premium rates,” Hornbuckle said.
In Las Vegas, MGM Resorts fills approximately 12 million room nights each year, said Jonathan Halkyard, chief financial officer. Based on data from the Cosmopolitan of Las Vegas — which is already an Autograph Collection hotel — and from Marriott, MGM Resorts expects to replace approximately 5% to 7% of its lowest yielding rooms with Marriott direct bookings. That’s roughly 600,000 to 800,000 rooms per year.
“Upgrading these lower-yielding room nights with Marriott brings a lower customer acquisition cost, higher ADR and a higher-yielding customer with more on-property spend,” he said.
The company expects to increase profit per room by about $100 per night, Halkyard said. That will drive $60 million to $75 million in annual profit once stabilized, which doesn’t include any further upside from regional operations, group or occupancy lift.
Looking Ahead
MGM Resorts' forward bookings pace is up year over year for every month remaining in 2023, Halkyard said. The real strength is in the luxury segment, which the company defines as its properties that have a higher ADR than the Las Vegas Strip average of $185.
That segment represents approximately 65% of its rooms and more than 80% of its earnings before interest, taxes, depreciation, amortization and rental costs in the second quarter, he said.
The events calendar in Las Vegas is robust during the third quarter, Hornbuckle said. That includes the Black Hat 2023 cybersecurity conference at the Mandalay Bay Resort & Casino, the Magic fashion trade show at the city’s convention center and Beyonce’s upcoming performance at Allegiant Stadium.
Formula 1 comes to the city in November, and the Las Vegas Raiders football games will draw in travelers from Green Bay, Wisconsin; Pittsburgh; Kansas City and New England, he said. The Formula 1 race itself has already driven twice the occupancy and four times the average rate as November last year.
The pace for the first quarter of 2024 is also coming together as the Super Bowl will be held at Allegiant Stadium in February, Hornbuckle said.
“We're already seeing stronger rates than in a typical Super Bowl weekend, with exceptional early business from sponsors and media that has led to three to four times higher room rates on the books,” he said.
Hornbuckle said MGM Resorts executives are excited about the possibility of the Oakland Athletics baseball team moving to Las Vegas, where a proposed 30,000-seat ballpark could bring in an additional 2.4 million guests every year during baseball season.
The Raiders and Stanley Cup champion Golden Knights hockey team have shown Las Vegas to be a destination for fans of visiting teams, so Hornbuckle said he expects the A’s would be no different.
By the Numbers
MGM Resorts reported consolidated net revenue of $3.9 billion, a 21% year-over-year increase primarily due to the end of COVID-19-related travel restrictions in Macau, according to the company’s earnings release.
Operating income was $371 million compared to $2.4 billion in the second quarter of 2022 due to the $2.3 billion gain that year from the sale of its spinoff real estate investment trust, MGM Growth Properties, to Vici Properties. There was also an increase in rent expense related to its Vici and Cosmopolitan leases.
For MGM Resorts’ Las Vegas Strip properties, the company reported net revenue of $2.1 billion, flat compared to the second quarter of 2022. Same-store net revenue amounted to $1.8 billion, again flat compared to last year.
Adjusted property EBITDAR totaled $777 million, a 6% year-over-year decrease. Same-store adjusted EBIDTAR came to $662 million, an 8% year-over-year drop.
The company reported adjusted property EBITDAR margin of 36.2%, a decrease of 244 basis points compared to the second quarter of 2022 due to an increase of payroll-related expenses.
Domestic regional properties posted net revenue of $926 million, a 3% year-over-year decrease primarily due to the sale of the Gold Strike Resort & Casino in February 2023. Same-store net revenue came to $926 million, a 2% year-over-year increase.
Adjusted property EBIDTAR amounted to $294 million, a 14% drop compared to last year. Same-store adjusted property EBIDTAR came to $294 million, a 7% decline.
For the company’s two properties in Macau through MGM China, it reported net revenue of $741 million, a 418% year-over-year increase. This was also a 5% increase over the second quarter of 2019.
Adjusted property EBITDAR totaled $209 million, up from a loss of $52 million a year ago as well as a 21% increase over 2019.
As of press time, MGM Resorts' stock was trading at $49.26, up 46.9% year to date. The NYSE Composite Index was up 6.5% for the same period.