Operating under 35% capacity limitations for much of the year’s first three months, MGM Resorts International’s Las Vegas properties delivered $545 million in revenues and $108 million in cash flow during the quarter.
The attention centered on the last few weeks of March.
Nevada loosened its COVID-19 capacity limitations on March 15, allowing resorts to increase occupancy to 50%.
With the company’s Strip business trends showing a recovery – MGM said the first quarter was its Las Vegas operations best three months since the pandemic gripped the casino industry a year ago – CEO Bill Hornbuckle said Wednesday the focus is returning to pre-pandemic levels.
He sees that happening by the first half of 2022, almost a year ahead of when analysts had previously forecasted.
The sentiment among the investment community now seems to favor Hornbuckle’s opinion.
“Business trends built through the first quarter, with demand surging during March, management indicated the trends will carry the second quarter, said Macquarie Securities gaming analyst Chad Beynon. “MGM continues to highlight a solid conventions and events calendar, and our room rate survey work points towards healthy pricing in the second half of 2021 as well.”
Strip resort will increase to 80% on Saturday. Nevada gaming regulators and Clark County officials said the gaming industry will be allowed 100% occupancy once 60% of all area residents have received the COIVD-19 vaccine.
“We’re doing our part to help the city get back to 100% (capacity),” Hornbuckle said Wednesday. MGM Resorts has opened up COIVD-19 vaccine clinics in Las Vegas to inoculate the company’s workforce, family members, as well as the company’s entertainers.
Filling up the rooms
Truist Securities gaming analyst Barry Jonas said weekends have fueled the Las Vegas recovery, with lower room rates attracting 90% occupancy. MGM Resorts, which operates the most hotel rooms on the Strip through its 10 resorts, said its average daily room rate was down almost 30% during the quarter.
“The second-quarter rate environment might be a bit challenging with more rooms recently coming back into circulation,” Jonas said. “But August should be the first positive month of room rates versus pre-pandemic. Fourth-quarter room rates should be up year-over-year.”
MGM Resorts told analysts its March hotel room bookings exceeded expectations. The company expects to achieve 90% occupancy over the spring and summer months and is hopeful improved group bookings will increase midweek occupancy.
In the quarter, the company’s Strip occupancy was 46% overall, however, weekend occupancy was a little less than double midweek occupancy. The company said its March occupancy rates were at 62% overall, with weekend occupancy topping 83%.
J.P. Morgan gaming analyst Joe Greff said MGM Resorts was able to tap into its casino database to fill rooms under the capacity limitations.
“With capacity restrictions being lifted, with nationwide infection rates moving lower and vaccinations moving higher, we expect a continued ramp in (cash flow) through the summer and into the fall,” Greff said.
Credit Suisse gaming analyst Ben Chaiken said the expanded occupancy limits will allow MGM Resorts’ key non-gaming segments, like pools and restaurants, to begin to ramp up, which he said was a key to a full recovery.
“Keep in mind, Strip-wide, non-gaming accounted for roughly 75% of 2019 revenue and has lagged other portions of the recovery at MGM Resorts,” Chaiken said.
Conventions coming back
Hornbuckle said MGM Resorts is seeing bookings for conventions and meetings slowly increase with much of the focus on the back half of 2021. He said 2022 and 2023 projections are beginning to resemble the pre-pandemic figures of 2019.
MGM Resorts operates some of the larger convention and meeting facilities on the Strip, including MGM Grand, Mandalay Bay, and Aria.
Deutsche Bank gaming analyst Carlo Santarelli said the actual size of the groups “will linger as a question mark” for the investment community.
“We believe group rooms, catering and banquets, and entertainment associated with group and convention guests, likely accounted for about 30% of 2019 Las Vegas Strip (cash flow) for MGM,” Santarelli said.
Shares of MGM Resorts closed at $40.39 in trading Thursday on the New York Stock Exchange, down $1.63 or 3.88%.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
