MGM Resorts International's hotels on the Las Vegas Strip set performance records during the third quarter, and a robust events calendar gives executives optimism for further improvement.
On the company's third-quarter earnings call, President and CEO Bill Hornbuckle said its Las Vegas properties set records for revenues and adjusted property earnings before interest, taxes, depreciation, amortization and rent costs. Net revenue during the quarter was $3.4 billion, a 26% increase over the third quarter of 2021, while EBITDAR was $846 million, a 58% increase in the same period.
Helping boost those numbers was the Cosmopolitan Las Vegas in its first full quarter under MGM Resorts’ management, which continues to outperform expectations, Hornbuckle said.
“Net net, 2022 is shaping up to be a record year for many of our resorts ... [due to] we believe the fundamental change in people's perception of travel and the value that it brings to their lives in Las Vegas,” he said.
“Exceptionally strong” performance at the company's luxury resorts in Las Vegas was driven in large part by the ability to drive rates, he said, noting the highest hotel revenue was achieved in October.
Bookings for conventions are pacing above expectations, making up more than 90% of the room demand and with higher average daily rates year over year, he said.
Demand is also high from sports events in the market. Las Vegas will host the men’s NCAA West Regional for the Sweet 16 and Elite Eight rounds at the T-Mobile Arena in March. Formula One will hold its first race in Las Vegas the weekend of Nov. 16, 2023, which historically is one of the slowest weekends of the year given its proximity to Thanksgiving.
“We'll open our hotel calendar tomorrow for those dates and expect an exceptional demand based on our studies of other host cities,” Hornbuckle said. “We believe the prime positioning of our properties allows us to fully capture the benefits of this exciting race.”
Though optimistic, the company isn’t blind to the overall macroeconomic conditions, Hornbuckle said. MGM Resorts executives are actively monitoring business for indications of a slowdown as a result of rising inflation and concerns over a potential recession, he said.
Quarterly Performance
On the Las Vegas Strip, same-store net revenue increased by 18% while same-store adjusted property EBITDAR was up 8%, Chief Financial Officer Jonathan Halkyard said.
Occupancy was a major driver of the year-over-year improvement, reaching 93% during the quarter, the highest it’s been since the start of the pandemic, he said.
The main source of the occupancy gain was midweek demand, a segment that is returning to more normal levels as conventions and groups come back. The value proposition of group business has supported pricing power in the market, where ADR reached a record $227 during the quarter.
MGM Resorts is continuously working to optimize the guest demand mix at its properties, he said, noting high-rate bookings from business travelers was up several percentage points due to effective marketing of its casinos and loyalty programs.
Higher-rated conventions business is generally displacing the less profitable but still important leisure business, he said.
Regional Updates
MGM Resorts is drafting a proposal to set up commercial gaming in New York, where officials are expected to begin accepting casino applications by early January, Hornbuckle said.
In April, MGM Resorts, its development partner Orix and the city of Osaka submitted a development plan to the Japanese government for an integrated resort, he said.
“We are optimistic that we’ll receive certification in the near future,” he said. “I recently visited our development site, and we and the Orix team couldn’t be more excited by the opportunity to bring a fully integrated resort to Japan.”
In Macau, MGM China submitted its application for a new gaming concession in September and expects an answer by end of year, he said, adding the company remains committed to supporting Macau’s development as a world-class tourism and leisure destination.
By the Numbers
MGM Resorts reported consolidated net revenues of $3.4 billion in the third quarter, an increase from $2.7 billion in the third quarter of 2021, according to the company’s earnings release. The quarter benefited from including the operating results of the Cosmopolitan Las Vegas, acquired in May 2022, and Aria and Vdara, acquired in September 2021.
The company’s operating loss of $1 billion was a decrease from its operating income of $1.9 billion in the third quarter of 2021, which was attributed to "the non-cash amortization expense from a change in the useful life of the MGM Grand Paradise gaming subconcession resulting from new gaming laws in Macau," as well as a $2.3 billion gain on consolidation of CityCenter in the prior year’s quarter.
The net loss attributable to MGM Resorts was $577 million compared to attributable net income of $1.4 billion in the third quarter of 2021.
Consolidated adjusted EBITDAR was $950 million.
At its Las Vegas Strip properties, net revenues were $2.3 billion compared to $1.4 billion a year ago. Same-store net revenue adjusted for the acquisitions was $1.6 billion, up from $1.4 billion the year before. Adjusted Property EBITDAR was $846 million compared to $535 million in the prior year quarter.
The company’s regional operations reported net revenues of $974 million compared to $925 million during the third quarter of 2021. Adjusted property EBITDAR was $322 million, a 8% year-over-year decrease.
MGM China reported net revenues of $87 million compared to $289 million in the third quarter of 2021, a decrease of 70% due to COVID-19-related closures and travel and entry restrictions in Macau. Adjusted property EBITDAR loss was $70 million while adjusted property EBITDAR was $7 million the year before.