We listen to earnings calls so you don’t have to™. Halfway through the MGM Resorts first quarter earnings call, I tweeted this:
There’s no way to sugar coat MGM Resorts first quarter earnings. I opened the quarterly MGM Resorts earnings presentation as soon as I woke up and saw a slew of red down arrows. After a cup of coffee and actually spending time reading the why there were red arrows it’s easy to see that MGM Resorts just had a bad quarter. Occupancy, average daily room rate (ADR), and revenue per available room (RevPAR) in Las Vegas were down. More on that later.
This was a rough earnings call. Jim Murren, CEO of MGM Resorts, put his tail between his legs and just delivered the news – most of it was bad. After the presentation, he was respectfully beaten up with a barrage of questions from analysts. It was so ugly I had to go out for fresh air and more coffee (of course).
Here are some quick summaries from today’s MGM Resorts earning call:
More Park MGM Construction Delays
The transition of Monte Carlo to Park MGM has been pushed back again. You may remember that completion was pushed back during the last earnings call. MGM Resorts now expects construction to continue through the end of the year on Park MGM. This was previously slated for the 2nd and then the 3rd quarters. There was no clarification if NoMad would be finished in the same time frame. This was previously scheduled to be finished by the end of the year.
Stunning Admissions About The Park MGM Conversion
MGM Resorts expressed surprise that construction at the main entrance on the Vegas Strip and porte-cochère would have such a negative impact on guests. Seriously. While much of the casino floor is coming along nicely, the construction on the main entrance will continue for the rest of the year.
The construction isn’t only affecting the bottom line. Reviews for Monte Carlo/Park MGM have been awful because of construction. The name change is also confusing customers. When you combine all of this there was a very sad tone around the slow renovation process.
No More Monte Carlo > Park MGM Style Renovations
This was a surprise. The renovations at Monte Carlo/Park MGM are dragging the company down so far that Jim Murren said they will not renovate a property like this again. He previously said that we should expect more top to bottom overhauls like this in the future. This is a somewhat stunning admission of failure.
Look For Additions To Mandalay Bay, Luxor Or Both
When pressed on what kind of non-gaming investments they are considering, MGM Resorts brought back a rumor that’s been making the rounds for a couple of years. MGM Resorts is considering non-interruptive non-gaming additions at Mandalay Bay, Luxor or both.
This makes sense since there will be plenty of people going to the new football stadium that is directly behind Mandalay Bay. Specific details weren’t released but we might see that during their stockholders meeting in May.
MGM Resorts 1st Quarter Financials
Hotel room occupancy in Las Vegas the first quarter of 2018 was 89%. It was 91% same period last year. The Average Daily Rate (ADR) in the first quarter of 2018 was $168. It was $172 same period last year. The revenue per available room (i.e. rooms being renovated are not included) was $150 in the first quarter of 2018. It was $157 during the same period last year. Not good.
Finances aren’t my thing so I recommend you check out The MGM Resorts Earnings Presentation for more information. There are arrows and pictures to make the information easy to digest.
More Notes From The Call
Call this the quick hits of earnings. I’m not going to dive into any of these points but they’re interesting enough to share.
- Mandarin Oriental has been sold.
- Bellagio had its best quarter ever. MGM Resorts high-end customers are a strong point for the business.
- It was noted that Aria is seeing higher catering margins because of large groups visiting the new conference facilities.
- MGM Resorts focus is strictly on gaining more high-end customers and large groups. Alternatively, low to mid-tier travelers aren’t the focus.
- The cancellation of the GGG vs. Canelo boxing match on May 5 is putting a strain on the second quarter already. Big fights still bring in high-end customers and drive gambling revenue. Meanwhile, Vegas Golden Knights games bring mid-tier customers. Murren expects the GGG vs. Canelo to be rescheduled for September.
- Leisure customers are staying away from Mandalay Bay and bookings around the anniversary of the October 1 shooting look very bad. Most of the business at Mandalay Bay is coming from conventions or from deep discounts. The latter might hurt the bottom line more than it helps.
- Monte Carlo was seen as a value property for MGM Resorts. New York-New York is the beneficiary of cancellations but most customers are looking to other value properties on the Vegas Strip. Sounds like Caesars might see a small increase here.
- MGM Resorts didn’t buy Wynn or Wynn Boston Harbor. Murren doesn’t comment on rumors but says they believe in the Springfield market and expect to make money. Even though he doesn’t see any deals happening he did leave the door open a little. Murren said any new acquisition would have to be an extraordinary and unique opportunity. Buying a Wynn property would fit both of those needs.
[8.24.18] They’re excited by MGM Springfield opportunity and announced the opening date today.