Remembering Jimbo’s Days At MGM Resorts
By now you should know that MGM Resorts chairman and CEO, Jim Murren, informed the company’s board of directors that he will step down from his positions before his contract expires. He’s still employed at MGM Resorts International and will help the company look for a new CEO before he updates his LinkedIn page.
Murren’s tenure at MGM Resorts has had its ups and downs. He started with a small casino company and helped make it into a billion-dollar international corporation. For better or worse, he’s done a lot for MGM in more than two decades with the company.
This paragraph from the press release about Jim Murren leaving the company says a lot about his time and impact on MGM Resorts.
“Mr. Murren has served as Chairman and CEO of MGM Resorts since 2008 and has been with the Company since 1998. His impact and leadership has shaped not only MGM Resorts, but also Las Vegas as a whole. He was instrumental in the establishment of professional sports in Las Vegas, and he was deeply involved in the building of T-Mobile Arena and bringing the Vegas Golden Knights, the Las Vegas Aces and the Las Vegas Raiders to the city. Mr. Murren was an early and strong supporter of diversity, inclusion, and sustainability in Las Vegas. As CEO of MGM Resorts, he oversaw a period of responsible construction unique to the industry. CityCenter remains one of the world’s largest green developments, specifically designed to reduce energy consumption, and MGM has been recognized 14 consecutive years by Diversity, Inc. as a top company for diversity. Mr. Murren also has led the MGM Resorts’ expansion in Asia, with the opening of two properties in Macau and the current effort to obtain a license in Osaka, Japan.”
Consolidation on the Vegas Strip
Murren started working at MGM Resorts in 1998 and ascended to the top position in 2008. He was the President and CFO (Cheif Financial Officer) when MGM Grand purchased Mirage Resorts in 2000. This was a massive business deal that was the beginning of a consolidated Vegas Strip. Today, MGM Resorts operates nine casinos and 13 hotels on the Vegas Strip. Between MGM Resorts and Caesars, the two companies operate 16 of the 26 casinos on the Vegas Strip. Two companies operate more than half the properties on the tourist corridor of Las Vegas.
Consolidation might be good for business (that’s debatable) but it’s rarely good for consumers. The limited competition allows companies to implement business strategies that might otherwise send customers elsewhere. Customers can go elsewhere but other operators on the Vegas Strip often follow the leaders.
When it comes to Las Vegas, we’re talking about hospitality – hotels, casinos, restaurants, spas, shows, etc. There’s no perfect casino-resort option and that’s partially because of the limited options. I’ll touch on this shortly.
Two companies operating more than half the casinos on the Vegas Strip is why many older visitors to Las Vegas look back at the past so fondly. It’s also why many are migrating to casinos off the Strip and in downtown Las Vegas.
Las Vegas started to change – a lot – in the late 1990s and early 2000s thanks to the expansion of Harrah’s (now Caesars Entertainment) and MGM-Mirage (now MGM Resorts International). This was the beginning of the end of the personal touch than many loved about Las Vegas. The Vegas Strip was now overrun with corporations.
Corporations are accountable to shareholders. Everything one of these companies does has to be accounted for. This was a different way of doing business in Las Vegas. Previously casinos were operated by individual owners and the mafia bosses. Corporations report earnings quarterly and they have to be more profitable than the previous year to make shareholders happy. Happy shareholders mean that employees can keep their jobs. Higher stock prices also mean that the top tier employees make more money.
The salary for Jim Murren, like most corporate CEO’s, was tied to stock performance. In 2018 his base pay was $2 million. After bonuses and stock awards, his total pay was almost $13 million, according to Salary.com.
Yes, higher share prices mean that Murren made more money. Keeping a job and getting paid more is a good reason to focus on higher stock prices. Welcome to corporate Vegas.
Welcome To The Show – Changing Las Vegas
Jim Murren and heads of other casino corporations have changed Las Vegas for better and worse. While I might enjoy what #NewVegas offers, it’s understandable that not everybody feels that way. It’s useful to understand the motivation for corporate officers when looking at how businesses change. It might not change anyone’s feelings but it helps explain why certain things are done.
Jim Murren and MGM Resorts have done a lot over the years to change Las Vegas from a gambling town to whatever it is today. Coincidentally, non-gaming revenue has been greater than gaming revenue since Murren joined MGM. The revenue gap continues to increase and MGM Resorts now considers itself an entertainment company. Last year about 30% of revenue for MGM Resorts came from gaming.
Under Murren’s leadership, MGM Resorts has leaned into being more than a gambling business. Over the years MGM Resorts has upgraded restaurants, bars, clubs, hotel rooms, etc. At the same time, the company has constantly downgrading gaming. MGM Resorts helped usher in 6:5 blackjack (from 3:2) and 000 roulette (from 0 and 00). They also have some of the worst video poker games in Las Vegas.
Growing Profit For MGM Resorts
Gamblers aren’t the only people to feel the corporate pinch. Every inch of a casino has to be monetized in corporate Vegas. Everyone staying at an MGM Resorts property now pays a mandatory nightly resort fee in addition to the advertised room rate.
If a guest wants to check in early, there’s a fee for that. MGM Resorts properties were the first to welcome guests driving to its properties with a parking fee. The fees don’t stop there. MGM Resorts must charge a lot for rent because some bars and restaurants operated by outside vendors at its properties will charge a service fee on any given night.
Fees are one way to increase revenue. Another way to increase profit is to cut expenses. In 2016, MGM introduced its Profit Growth Plan (PGP). Expenses were cut and so was some of what made individual MGM Resorts properties unique.
I loved the oatmeal soap bar at Mandalay Bay and the toiletries at The Mirage because they were different. PGP meant that MGM Resorts would buy fewer different products giving the company increase buying power and lower prices. For example, MGM Resorts now only buys products for lower-tier properties (Excalibur, Luxor, etc.) and higher-tier properties (Aria, Bellagio, etc.).
The MGM 2020 program started in 2019 as another way to save money. This plan uses automation and creates digital efficiency. Drink monitoring at video poker bars, robot bartenders, and better apps are just some ways MGM Resorts is looking to reduce expenses.
So Long Jimbo – MGM Resorts CEO Jim Murren
I enjoy MGM Resorts’ earnings calls more than most casino corporations because Jim Murren (AKA Jimbo) is pretty emotional. It’s easy to read his mood. Two years ago, it sounded like Jimbo needed a hug during an earnings call. It was a bad call and we could all hear it in his voice. There have been earnings calls where he was upbeat because MGM Resorts had a great quarter. During this last earnings call, Murren had zero emotion. The call was robotic with little emotion.
I don’t know it Jim Murren left on his own or was asked to leave. The writing might have been on the wall for Murren when MGM Resorts formed an ad-hoc committee to evaluate its real estate portfolio. The company started selling assets to raise money for a casino in Japan and to pay down debt to appease shareholders. This would, in theory, increase the stock price.
In the past year, MGM Resorts has sold the real estate assets of Bellagio, Mandalay Bay, MGM Grand and all of Circus Circus and Las Vegas festival grounds. It wouldn’t be a surprise to see MGM Growth Properties and the rest of CityCenter assets sold before Murren leaves.
Don’t fret for Jimbo. He’ll receive a sweet goodbye package.
What’s Next For MGM Resorts?
Murren will supposedly help MGM Resorts find a new CEO. Chances are that the person will come from a company outside of the gaming world. MGM Resorts will likely continue to sell assets while the company looks to expand into Japan.
I’m not sure how much the company will be changing how it does business in Las Vegas. Jim Murren said they don’t have plans to acquire new properties in Las Vegas during the most recent earnings call. He also said the company doesn’t have any capital expenditures planned for Las Vegas.
The plan could change but it’s likely the investors will look to this period to increase profits. This should be a profitable year as MGM Resorts will take in revenue, streamline expenses (MGM 2020) and keep spending to a minimum.