MGM, Cosmopolitan Las Vegas And Loyalty Programs
The MGM Cosmopolitan Las Vegas acquisition was a game-changer for the company. Not only did MGM solidify its position on the west side of the Strip but it also picked up one of the hottest properties with a higher ADR (average daily rate for a room). Its sale of Mirage will help finance the purchase. In the realty world, it’s pretty straightforward. MGM is now the owner of Cosmo-Vegas operations.
What Will Happen to the Loyalty Programs And Partnerships? – Cosmopolitan Las Vegas And Loyalty
For the rest of us, though, there remains a bigger question about what MGM intends to do with its, and Cosmo’s, partnership.
First, Cosmopolitan’s loyalty program Identity. It’s destined for the dustbin of rewards programs. We don’t know the timing on when, but MGM is eventually going to get rid of it. It’s probably time to start thinking about whether you should credit your spending to MGM or Cosmo if you do decide to go to Cosmopolitan Las Vegas before the transition. (Bethany at Bougie Miles does a good analysis.).
Hotel partnerships are more interesting. Right now, Cosmopolitan has a relationship with Marriott Bonvoy, and it’s a strong one. Bonvoy members can earn and burn points, get elite benefits and even use Marriott gift cards to pay for their final folio balance. Platinums, Titaniums and Ambassadors also have access to the Autograph Lounge, which can speed up your check-in, or get you some peace and quiet (and coffee!) during the day. Gold members can use the invited guest line.
It has worked out great for Cosmo, since it gets their hotel into the largest hotel network in the country, while Marriott has benefited by being able to offer a near-luxury property in the center of the Strip. And gamblers may be incentivized to gamble there, since Marriott and Cosmopolitan Identity members can transfer points between the two programs. Of course, that will end when MGM shuts down Identity.
Problem is, MGM has a partnership with Hyatt and arguably, that one’s stronger than the Cosmo-Marriott marriage. There’s reciprocal earning between the two and your Hyatt points can get you a room at one of about a dozen MGM Strip hotels, including the luxury properties such as Delano or Bellagio. But the most important perk might be the status match between the two.
There’s a lot of value in status matching, particularly if you are going from Hyatt to MGM. World of Hyatt’s entry level Discoverist status, which requires only 10 nights, gets you MGM Pearl, which entitles you to free parking. Explorist, which takes 30 nights, translates to Gold, which results in waived resort fees, which can be as much as a midweek room rate. You can also go the other way (MGM->Hyatt), although the value of the benefits isn’t quite as high.
Did MGM Get a Good Deal? How Would We Even Know? Numbers to Geek Out Over.
Gaming company transactions are often valued as a multiple of EBITDA, which stands for “Earnings before interest, taxes, depreciation and amortization.” Just think of it as “earnings before all the annoying accounting and government stuff gets taken out.” In this case, MGM paid 8X EBITDA, which is generally a pretty good value. Two things to note, though:
Numbers to Geek Out Over
- The number is “inclusive of expected operational synergies and identified revenue growth opportunities.” That means that they’re assuming that they’ll fire people but still find new ways to make money.
- MGM does not actually own the land. They rent it from a group of partners that do. They bought the operations of the hotel and make their money there, paying rent to the owners. Even if the casino never generates a penny (obviously a worst-case scenario, like a global pandemic or something), they’ll still get a rent bill.
- Upon the sale, Blackstone gave every Cosmo employee $5,000.
What’s a Casino to do? For Now, not much of Anything.
For now, MGM has stated that it plans to maintain the Marriott relationship with Cosmopolitan. Without seeing the legal documents, I can’t state for certainty that Marriott is locked in for a certain period of time but, given the speculation that has always surrounded Cosmo, I doubt that Marriott would have made it easy for them to get out of an agreement on a change of ownership.
Does MGM Actually Need to Bring Cosmo Into the Hyatt Partnership?
Assuming that MGM even could bring Cosmo into the Hyatt partnership, does it have any real urgency to do so? Probably not. The integration, even of a single hotel, is going to be particularly messy, and MGM likely views the partnership issue as a very small tail that is wagging an awfully large dog.
What Will MGM do (Eventually)? How about Harmonizing Hotels with Hyatt – Cosmopolitan Las Vegas And Loyalty
In a Las Vegas Advisor blog, Stiffs and Georges, David McKee quoted Deutsche Bank Lodging and Gaming analyst Carlo Santarelli, one of the more experienced analyst. Mr. Santarelli recently met with MGM Resorts management, who indicated that the integration was going better than expected and that the partnership with Marriott was a profitable one, leading him to suggest “‘in our view, makes sense to potentially expand further, given the benefits relative to a traditional OTA channel.'”*
Consumer expect a certain amount of consistency. Interacting with multiple partners that offer different benefits is confusing, and MGM recognizes that. They will eventually move Cosmopolitan over to the MGM Rewards program, which will mean the end of one of the most valuable Cosmopolitan Identity features, the ability to transfer points to Marriott Bonvoy.
Logically, it makes sense that MGM will merge Cosmopolitan into the Hyatt relationship. I guess I could argue that having both Marriott and Hyatt in the system gives MGM access to two programs instead of just one, or that the Marriott network offers far more potential customers than Hyatt does. Both are true. But the costs of maintaining a separate partner just for Cosmo, both real and in terms of customer confusion, are going to be pretty high, and Hyatt is already well-integrated into the system. The ultimate game would be to wait until the Hyatt contract expires and play them off against each other, but MGM will have way more leverage over Hyatt than it does with Marriott, and the juice likely isn’t worth the squeeze for our friends in Bethesda.
Cosmo Plus Marriott Does Have One Big Advantage: Marriott’s Stars and Luminous Program
One area where the existing structure has an advantage is when it comes to booking.
Cosmopolitan is part of Marriott’s Autograph Collection, a group of hotels that are managed by Marriott but don’t carry the brand’s name. As an upscale property, it participates in Marriott’s Stars/Luminous program, which is open only to qualified travel agents, including TravelZork Travel. When you book your stay through one of these select agencies, you should receive the same price as if you book online but also some amazing complimentary benefits. Not every full-service property offers these benefits, particularly at the Sheraton and Westin level, but anything more luxurious likely does. Even better, you’ll still receive miles and elite benefits.
Perks vary by property, but Cosmo is a pretty good example. You’ll receive daily breakfast for two, a $100 resort credit, a welcome amenity and complimentary WiFi. And forget the long-check-in lines, since you’ll be able to check in at the Autograph Lounge (open 8am-8pm, subject to change). You would also be eligible for a room upgrade, as well as early check-in or late check-out, if available.
Virtually every chain offers something similar.** Hyatt’s is Prive and Hilton (which offers benefits only at Waldorf, Conrad and LXR). Again, benefits are similar.
Despite it’s partnership with Hyatt, though, MGM does not participate in Prive (although you can still book with a qualified travel agent to receive benefits through an agent network such as Virtuoso). If MGM were to fold Cosmopolitan into its Hyatt partnership, we’d probably lose those additional benefits. Of course, with yet another luxury property in the portfolio, MGM might decide that the Prive benefits would be a great marketing tool after all…
Hyatt is the Logical Partner for Cosmopolitan Las Vegas
There are certainly reasons to keep Cosmopolitan in a parallel network, but it seems to me that the logical thing to do is to fold it Hyatt partnership. Hyatt would be thrilled to have an additional luxury property on the Strip and MGM wouldn’t have to deal with the hassles of running multiple programs. In particular, it would avoid confusing MGM’s customers, who would be able to bank (or use) points within a single hotel network the same way that they will eventually be able to use their casino loyalty points at any MGM property. There’s no rush to make big changes because of the MGM Cosmopolitan acquisition, but it could change down the line.
*In the history of Wall Street, no analyst has ever met with a company and then stated that integration was going worse than expected, knowing that it could be detrimental to their firm’s investment banking revenue.
**These perks are also available at luxury properties around the world when you book through a qualified agent. Four Seasons offers particularly attractive benefits. Take a look at the TravelZork Travel page to get an idea of the types of properties that participate.