Yesterday, a few hours after MGM Resorts International announced a transaction that has huge implications in the gaming market, the operator held its second-quarter investors’ call.
And while that transaction, in which real estate investment trust Vici Properties will acquire MGM Growth Properties for $17.2 billion was mentioned, it was hardly the focus of the call.
“In driving our vision, we have long discussed our goals of simplifying our corporate structure and monetizing our real estate premium valuations to become asset light,” said MGM CEO and President Bill Hornbuckle. “We’ve been busy on this front. And over the past 90 days, we’ve meaningfully advanced this strategy. “
The CEO outlined previous company transactions that include selling MGM Springfield (and leasing it from MGM Growth Properties), the purchase of Infinity World Development’s 50% stake in CityCenter, and according to Hornbuckle, “soon becoming full owners of the Aria and Vdara,”
CityCenter on the Las Vegas Strip comprises the Aria Resort & Casino and Vdara Hotel and Spa.
“Combining these transactions grants us greater financial flexibility by the means of $11.6 billion in domestic liquidity and importantly, allows us to intensify our focus on maximizing growth in our core business and pursuing opportunities that align to our long-term vision,” Hornbuckle said, adding that the company remains committed to BetMGM, its sports betting and igaming joint venture with Entain Holdings.
Net revenue for the quarter was $2.3 billion, an increase of 683% compared to the same quarter in 2020, which was affected by closures mandated by the COVID-19 pandemic. Of that net revenue, $1 billion was generated by Las Vegas Strip properties, a 566% increase compared to the prior year quarter, but a decrease of 31% compared to the second quarter of 2019. Regional properties accounted for $856 million in revenue, an increase of 859% compared to the same period in 2020, and MGM China saw an 836% increase of net from the previous year to $311 million.
The net income for the second quarter was $105 million, compared to a net loss of $857 million in the second quarter of 2020.
“I know that we have further upside in overall profit dollars as our top line continues to rebound with group business and entertainment,” said MGM Resorts Chief Financial Officer Jonathan Halyard. “I’m also confident that our focus on operational excellence and cost-efficiency efforts will allow us to achieve Strip margins well above 2019 levels long term.”
Hotel occupancy at MGM’s Vegas Strip properties was 86% in July. But getting back to the 90% occupancy threshold is dependent on the return of conventions to its Las Vegas properties.
“We’re seeing some pretty positive bookings and trends in 2022,” said MGM Chief Operating Officer Corey Sanders. “So it could be as early as the first or second quarter of 2022 that we’re at ’19 levels, especially on the non-gaming revenues.”
The gaming industry labor shortage that’s a national concern also is affecting MGM. Hornbuckle said the labor shortage, and some supply chain issues, are “not critical, but they are important.”
“We’ve done incentives and other things to motivate people back to work,” Hornbuckle added. “I think we all believe come the end of September, we’ll hopefully see some increase in terms of people’s willingness between the negotiations here, particularly with the legislature in Nevada, and unemployment, hopefully, weighing in some respects. But we’ve been managing through it and effectively.”
Hornbuckle acknowledged that Caesars Entertainment’s commitment to online and mobile sports betting will be challenging. On Tuesday, Caesars Entertainment CEO Bill Reeg said his company was committing $1 billion during the next two and a half years to build its online customer base.
“They’ll be a real competitor,” Hornbuckle said of Caesars Entertainment. “And if you think about what they do and what we do, they’re our most likely competitor in the context of same-store loyalty, presentation, ability to omni-channel and monetize across a broader platform, brick-and-mortar, as well as digital. We are heavily into our loyalty push.”
