MGM Resorts International reported record hotel revenue for the Formula 1 weekend in Las Vegas and is likely to set a record for the month, the company’s chief financial officer said Tuesday.
Jonathan Halkyard, speaking at the Bank of America Leveraged Finance Conference, also highlighted MGM’s plans to invest in its three properties across the street from the planned $1.5 billion A’s baseball stadium at the south end of the Las Vegas Strip that will open in 2028.
As for F1, Halkyard said they had “very high expectations” for the event, particularly during what’s normally one of the slowest weekends in Las Vegas. MGM invested heavily in creating an experience for casino and retail customers in front of Bellagio. The stage in front of the Bellagio fountains hosted the top three finishers for an interview on ESPN shortly after the race.
“The race met every one of our expectations,” Halkyard said. “It was the highest grossing weekend for us in hotel revenue in the company’s history. The second highest was CES in 2019. When you think about other events that have happened in Las Vegas over the years and the scale of our company, it’s quite something to have a record weekend on what otherwise is the slowest weekend of the year. With this event, we expect to post November as the record month in hotel revenue in the history of the company.”
Halkyard said the weekend also met expectations in terms of casino volume and food and beverage. Guests and employees had a good experience over the long weekend.
“This event had a lot of friction in the months leading up to it,” Halkyard said. “Some of that will be recurring, but a lot of it will not be as dramatic in the coming years. Over the course of a year, F1 and the (the county) got the (Strip) ready for this event. F1 invested hundreds of millions in their paddock. That, along with what we invested to build this hospitality experience, we’ll reuse. I’m very optimistic that this is going to be a fantastic event in the years to come.”
Halkyard, who has lived in Las Vegas on and off for about 25 years, said the biggest change he’s seen in the market is the city’s relationships with professional sports, such as the Golden Knights, Raiders, Aces, F1, and the relocation of the Oakland A’s.
“In our MGM Resorts campus, we have within a mile or so Allegiant Stadium, T-Mobile Arena, the F1 paddock, and eventually the A’s stadium. We have 30,000 hotel rooms in the vicinity. Our company is uniquely situated to capitalize on this new interest.”
Las Vegas is a different market when it comes to these sporting events, Halkyard said. When the Raiders play at home for their eight or nine games a year, half of the fans are from the visiting city and make the entire weekend part of their experience. “These events turn what our CEO calls ‘turning a three-hour game into a three-day weekend.’That happens routinely. With a company like ours that has a database in Denver, Baltimore, New York, etcetera, it can be a very attractive proposition for us to have those kinds of fans travel.”
With plans for a 33,000-seat A’s stadium on the south end of the Strip, Halkyard said they’re looking at how to invest in their three properties across from it – MGM Grand, Excalibur and New York New York.
“The first thing we’re looking at is circulation among the different properties. In a market like Las Vegas, we know that all of our guests make several stops,” Halkyard said. “They will stay at one place, but go to several others. Winning that second, third, or fourth stop is really critical to winning in market-share spend. Improving circulation among those four corners will be an important part of our investment, because that will increase our ability to get that second and third stop.”
Las Vegas’s casino performance has been strong coming out of the pandemic, but Halkyard talked about how the nature of it has changed. For example, in the summer 2021, it had no group business, but plenty of casino and transient business. That changed in late 2021 and early 2022 when groups started coming back and MGM dialed back marketing, he said in talking about the economy.
“I’m concerned about the general macro-economic environment and overall demand being impacted, but I also think this market has changed a lot. I say permanently,” Halkyard said. “Allegiant Stadium does eight or nine Raiders games, but 45 or 50 events over the course of the year. The group business continues to get stronger and stronger as we win business from other cities. Transient business enabled by air lift, which stands at 120% of where it was back in 2019, has also really helped the market grow visitation.”
A lack of growth in hotel rooms over the last decade also augurs well for continued strong performance of the Las Vegas market despite the Fontainebleau Las Vegas opening in mid-December on the north end of the Strip.
“It will be attractive for those going to the Convention Center and I suspect they’re targeting some of the customers we serve at the Cosmopolitan, but I think the location is a bit difficult in its distance from the center of activity on the Strip,” Halkyard said. “I wouldn’t write it off at all. It’s going to be a new large resort, but I wouldn’t expect it’s going to have much of an impact on our business. Resorts World didn’t (when it opened in June 2021). It’s a huge market and there hasn’t been much supply entry.”
Prior to its acquisition of the Cosmopolitan late last year, Halkyard said they knew about the property’s longstanding partnership with Marriott. As they did their due diligence, they learned 15% to 20% of the rooms there were delivered through the Marriott distribution channel. Subsequently, MGM reached a partnership with Marriott for all of MGM’s resorts.
“Almost half of MGM’s 12 million room nights a year in Las Vegas are coming through transient customers and not through the casino or groups,” Halkyard said. “About two-thirds of that are coming from our proprietary MGM Resorts distribution channels. The other third is coming from other channels; we don’t know those customers as well and they don’t come at high rates and they come at a meaningful cost. Marriott and Bonvoy and their 180 million members can really help us remix that business and drive very high-value transient customers that from our experience with Cosmopolitan spend more while on property. These are fantastic customers for MGM Resorts.”
As the partnership is introduced, Halkyard said guests will be able to book into Bellagio and other properties directly through the Bonvoy distribution channel.
“It’s going to be a pretty meaningful component of our transient segment,” Halkyard said. “It can increase our EBITDA per room night by about $100 for every room night we can shift from an online travel agency to Bonvoy. I expect it to be meaningful in 2024.”
In a discussion about the cyberattacks that hit MGM Resorts in September in Las Vegas and nationwide, Halkyard said the $100 million impact spread into October, because they were unable to get out marketing offers for regional markets. Occupancy was down in early October, but came back quickly in Las Vegas and has been back to normal for well more than a month, he said.
“There will be some capital costs next year as we strengthen our operating environment. Our expectations are that all of our costs in this incident will be covered by our cyber insurance carriers.”
