Strengthening domestic demand drove MGM Resorts International's earnings to new highs during the fourth quarter of 2022.
During the company’s fourth-quarter and full-year 2022 earnings call, MGM Resorts President and CEO Bill Hornbuckle said Las Vegas and regional resorts saw record earnings before interest, taxes, depreciation and rental costs during the fourth quarter. The Las Vegas Strip properties saw adjusted property EBITDAR grow by more than 80% year over year.
“These outstanding results are evidence of our focus on optimizing growth in our business and operations as well as our strategic vision of becoming the world's premier gaming entertainment company,” he said.
A Full Calendar
Many of the performance drivers from 2022 should continue into 2023, Hornbuckle said. MGM Resorts is positioned to weather a variety of challenges due to the company’s diverse portfolio that includes nine properties on the Las Vegas Strip, eight regional domestic properties and two integrated resorts in Macao, China.
The event calendar is lining up for a strong year in Las Vegas, Hornbuckle said. CES had 115,000 attendees in January, up from 45,000 in 2022. CONEXPO-CON/AGG next month appears to be “the best ever,” he said.
Regarding college sports, the NCAA’s March Madness, Sweet 16 and Elite 8 games will all be in Las Vegas this year.
“Together, the calendar in March is positioned to have the best hotel revenue month, we believe, in our history,” he said.
The Formula 1 Las Vegas Grand Prix scheduled in November is expected to bring $1 billion in economic value to the city, Hornbuckle said.
Allegiant Stadium brought in 40 events and more than 1.5 million visitors to Las Vegas in 2022, he said. The stadium and its calendar is expected to bring more visitors and higher quality events in 2023, driving more spend, particularly at MGM Resorts’ properties at the southern end of the Strip.
MGM Resorts will also benefit from overall visitation trends, he said. The Las Vegas Convention and Visitors Authority expects domestic flight capacity to reach 120% of 2019 during the first quarter of 2023. International flight capacity will reach 80% of 2019 by then as well. In 2022, the Harry Reid International Airport received 52.6 million passengers.
Because of the events calendar, MGM Resorts' room rates are sustainable, Chief Operating Officer Corey Sanders said. The forward-looking bookings show that for midweek, the convention business is getting better, as is the entire city’s convention business.
“So, the pricing that we’re seeing today, we should be able to sustain given where the economy is today,” he said.
Rebound in Macao
While China’s COVID-19 restrictions affected MGM China’s performance in 2022, things have turned around this year, Hornbuckle said, referencing the government’s reversal on lockdowns and other pandemic rules.
“We are experiencing a rebound in 2023 as our guests are returning in force, just like they did in Las Vegas when restrictions were lifted here,” he said. “In fact, quarter to date, we are excited to report that MGM China’s combined properties are the highest earning businesses within our company.”
As part of the concession renewal process to continue operating in the region, MGM China has committed to bring nongaming entertainment events to Macao, he said. Those events drove strong visitation during the Lunar New Year, validating executives' confidence in the recovery and the long-term viability of the market.
MGM China also secured 200 additional gaming tables as part of its new gaming concession, which the company expects will drive market share into the low to mid-teens, he said. During January, the market share was 16% compared to high single-digit market shares prior to the pandemic.
By the Numbers
During the fourth quarter, MGM Resorts reported consolidated net revenues of $3.6 billion, a 18% year-over-year increase, according to the company’s earnings report. It reported an operating loss of $2 million compared to operating income of $369 million in the prior year quarter.
The Las Vegas Strip properties reported $2.3 billion in the fourth quarter compared to $1.8 billion in the fourth quarter of 2021. They had adjusted property EBITDAR of $877 million, a 26% year-over-year increase.
The resorts reported occupancy of 91%, up from 86% in 2021. Average daily rate grew from $201 to $260 year over year, and revenue per available room increased from $173 to $238.
For the full year 2022, MGM Resorts reported consolidated net revenues of $13.1 billion, a 36% year-over-year increase. Operating income for the year was $1.4 billion compared to $2.3 billion in 2021.
The Las Vegas Strip properties reported net revenues of $8.4 billion in 2022, up from $4.7 billion in 2021. Adjusted property EBITDAR was $3.1 billion, up from $1.7 billion the year before.
MGM Resorts intends to invest approximately $800 million in its domestic capital expenditures plan this year, up from $727 million last year, said Jonathan Halkyard, chief financial officer and treasurer.
The company will spend $600 million on maintenance capital. The year will include room remodels in the Bellagio Spa Tower, Borgata’s Water Club and the completion of the New York New York Hotel & Casino room renovation, Halkyard said. Since 2019, the company has reduced the average age of its rooms by 3.5 years, and the room age will continue to decrease as the company keeps refreshing room offerings.
The remaining capital expenditure budget is growth capital for projects that include the Mandalay Bay Convention Center remodel, a new pedestrian bridge to connect The Cosmopolitan to Vdara and investing in new customer-facing technology, he said.
As of press time, MGM Resorts' stock was trading at $44.46, up 32.3% year to date. The NYSE Composite Index was up 5% during the same period.