Analyst: MGM partnership delay could impair Marriott value

November 2, 2023 12:11 PM
Photo: Shutterstock
  • David McKee, CDC Gaming Reports
November 2, 2023 12:11 PM
  • David McKee, CDC Gaming Reports
  • United States
  • Nevada

Details of a sweeping marketing alliance between MGM Resorts International and Marriott were supposed to be released last month. However, on October 28, the Las Vegas Review-Journal reported that the pact was on hold until 2024. This may impair the value of Marriott going forward, according to Deutsche Bank analyst Carlo Santarelli.

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Santarelli seems to have been clued into the adverse intelligence, telling readers that the delay wasn’t not “new news” in an investor note published today. Reporting “mixed 3Q23 results,” Santarelli lowered Marriott’s net-unit growth to “to reflect the delay of adding the MGM rooms to 2024.

“Net-net, we don’t expect the results to serve as a positive catalyst for the shares,” Santarelli opined. Marriott had expected 37,000 MGM rooms to be added to its inventory in late 2023. Without them, net-unit growth falls from 6.7 percent to 4.2 percent, employing the far end of Marriott’s guidance.

In other Marriott news, revenue per available room outpaced Deutsche Bank’s estimates across all company segments, “though flow-through to fees was weaker than expected.” Marriott beat its adjusted cash-flow guidance by $19.5 million or six cents per share.

“We assume the delay of the MGM partnership launch accounts for some of the implied 4Q23 revision,” Santarelli added. Marriott shares reacted to the pre-announcement by trending very slightly down to $27.20 per share.