This is going to be a different look at the news from Las Vegas. We’re going to focus mainly on earnings from MGM Resorts and Caesars Entertainment before diving into a few quick hits. The earnings reports didn’t have much top-line news but they both touched on leisure travelers similarly, and that was interesting. (And, also a look at New Vegas….)
MGM Resorts Earnings
This has been a year of setbacks for MGM Resorts. During an earnings call earlier this year MGM CEO Jim Murren sounded like he needed a hug. Park MGM delays have taken a toll on this company in a way they never imagined.
Murren followed that earnings period up with a call that had a bad forecast for the third quarter. Looking back, Jimbo was probably sandbagging the numbers a little with hopes that the quarter wouldn’t be as bad as he made it sound.
Well, MGM Resorts reported third quarter earnings this week and it wasn’t as bad as projected. Everything is full speed ahead! The numbers weren’t great but they beat expectations. In fact, their convention business for the third quarter turned out to be the best third quarter for that segment in their history.
Leisure travel in Las Vegas was down for the quarter but that’s okay for MGM. The poor performance in Las Vegas was offset by record third quarters for casinos in Detroit, Mississippi, and Maryland. Additionally, MGM Springfield opened and brought more revenue to MGM Resorts.
Much of what MGM Resorts has been focused on is expected to show returns in 2019 and beyond. Park MGM will finally be finished by the end of the year. They’ve set up a good number of residencies at the Park Theater early next year to generate more revenue from the property.
Around the country, MGM Resorts is focused on expanded sports betting. Casinos around the country are already seeing as much money wagered as MGM’s luxury properties in Las Vegas. You can read more about that here.
“any pushback on fees?”
MGM Resorts is back to the confident company they used to be. However, their earnings call ended with a question from an analyst and an interesting answer. Here’s how I paraphrased the exchange:
Question: “Are you seeing any pushback on fees?”
Answer: “MGM pivots to convention guests and away from leisure guests. It’s not an issue with convention guests. ADR is still lower than Orlando and Chicago.”
This pivot is important and we’ll get to that shortly. You can reference the MGM Resorts earnings press release here.
Caesars Earnings
Caesars earnings calls have been incredibly boring since Mark Frissora became CEO. He mostly just reads the earnings presentation and offers very little insight. This quarter he offered less information than usual during the question and answer session since Frissora is leaving Caesars Entertainment.
It looks like those activist investors we’ve been reading about for a month got what they wanted. He’ll stay on to help make the transition to the next CEO easier. Caesars also confirmed that they won’t merge with the Golden Nugget.
Much like MGM Resorts, Caesars expected a weak third quarter. As we’ve been telling you since the last time Caesars reported earnings they’ve been proactive making sure there’s no weakness in the fourth quarter. There have been discounts and comp rooms available for just about every customer.
In fact, they’ve used Total Rewards promotions on full blast and expect to have 50,000 more room nights for the fourth quarter than last year. Even if the rooms are complimentary these guests will spend money elsewhere on the property and Caesars has good expectations. Between groups, conventioneers, and leisure travelers they also expect to see good numbers in the first quarter of 2019.
55 Million People
The Total Rewards database now has 55 million people. This isn’t about loyalty for Caesars. The database is more of a weapon now. They think that they can use the database to create extra revenue when there’s an expected dip in leisure travelers.
It was interesting to hear them discuss housekeeping. They say that even lower level complimentary rooms (that have a resort fee) essentially cover the cost of cleaning the room with the fee. The majority of Total Rewards member are Gold and Platinum and still pay resort fees so this can be a great tool for the company.
They were also asked if there’s been any pushback on fees. Again, they pivoted to the fact that rates for groups and conventions in Las Vegas are still a bargain after all fees compared to the rest of the country. That said, they did note that the company has been doing surveys to ensure they aren’t losing regional customers due to excessive fees.
#NewVegas – New Vegas
Resort fees started more than five years ago in Las Vegas. This was only the beginning as there are multiple fees added to the rate every night someone stays in Las Vegas. While the add-ons are obnoxious to deal with the total price of hotel rooms in Las Vegas are still less expensive than other cities around the country. That goes for business and leisure travelers.
Caesars and MGM resorts understand that the prices and are pushing the limits of what they can get away with charging guests. Groups and convention visitors may not mind the fees because the money doesn’t come from their pocket. Casinos want these guests because they spend more per night than people on vacation. Again, people with expense accounts don’t mind paying a little more for meals and drinks because that’s the price of doing business.
Leisure customers, unfortunately, have to deal with the fees by themselves. While the prices for meals and drinks are fine for business travelers, they can be a bit much for some tourists. It’s a challenge for the casino corporations to maximize revenue from both guests with the same prices.
New Vegas – Different Price Needs
We’re finally seeing casino operators in Las Vegas deal with the different price needs to some degree.
Both MGM and Caesars are starting to offer promotions for their loyalty club members. These customers are typically leisure travelers on vacation. They are now offering discounts like free parking, free resort fees, etc. This allows the corporations to get the most money from their business customers while offering their leisure customers a better rate.
The model is changing for these companies. Business travelers will still pay full rate for rooms and the accompanying fees for each trip. Leisure travelers that are part of a players club will have discounts so they still get the perceived value from the hotel rooms.
It’s easy to mock these companies for trying to extract the most money from their customers but that’s how they choose to do business. I’m not sure it’s how I’d run a company but that’s another story. These changes aren’t perfect but it’s a start. Like everything else in the world, Las Vegas is changing. It will never be what it was in the 1950’s, 1980’s and even early 2000’s. #NewVegas
New Vegas is different and it’s still fun. I’m reminded of that every time friends make their annual visits. It’s not the same but we’re also not out until sunrise every night/morning. We just visit new restaurants, bars, and consolidate the fun into the time that our old souls can handle.
Quick Hits:
Here are just a few more items from Las Vegas.
- Joey Lawrence will ring in the new year at Downtown Grand. WHOA! Read more here.
- The skeleton of Resorts World is up to 35 floors! Read more here.
- Wynn is green! Read more here.
- The world’s largest Marijuana dispensary is open! Read and see more here.
- Plans for The Sphere at The Venetian are moving even if construction crews aren’t. Read more here.
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