Though aware of a possible recession, executives at MGM Resorts International said they don’t see any signs of demand slowing.
“Looking ahead, we remain fairly optimistic about our domestic business outlook based on a number of tailwinds brewing in the coming year, including the rebound in our convention business, the return of international travel and the exciting event schedule in Las Vegas. Bill Hornbuckle, president and CEO of MGM Resorts, said during the company’s second-quarter earnings call.
In 2023, MGM Resorts expects to increase its mix of conventions and rates year over year, he said. The CES technology show will return to Las Vegas next year along with the ConExpo-Con/Agg trade show, which is one of the busiest events of the year with a historic attendance of more than 130,000.
International visits to Las Vegas accounted for 3% of visitors in 2021 compared to 10% to 15% in pre-pandemic years, Hornbuckle said. The company anticipates that international guests will return in force, as international flight capacity is expected to reach more than 80% of summer 2019 levels, and international customers have longer stay patterns than domestic guests.
Las Vegas’ upcoming events schedule is arguably the best the city has ever had, Hornbuckle said, adding that MGM Resorts’ scale and positioning will allow it to be the main beneficiary. The city is home to the Golden Knights NHL team and the Raiders NFL team. It will host the Sweet 16 and Elite Eight rounds of the NCAA men’s tournament next year, as well as its first Formula One race. In February 2024, the city will host the Super Bowl.
“When you put it all together, the business case is incredibly compelling for the continued growth and momentum of our business,” he said.
The preliminary results for July are an encouraging sign for the third quarter, Chief Financial Officer Jonathan Halkyard said. MGM Resorts properties in Las Vegas reported 94% occupancy with an average daily rate increasing 6% year over year.
The company now finds itself in “our toughest competition compared to 2021, given the strong reopening trend we experienced last year,” Halkyard said.
MGM Resorts bookings continue to be strong with occupancy growth in every month for the rest of this year, he said. Rates increase by double digits compared to 2021 in each month.
“In fact, during June we booked the most rooms per day so far this year,” Halkyard said. “Yes, we really like the prospect of Las Vegas demand.”
MGM Resorts took significant steps to streamline its corporate structure and complete the monetization of its real estate assets during the quarter, Hornbuckle said. The company closed the sale of its stake in its derivative real estate investment trust MGM Growth Properties to play REIT Vici Properties for $4.4 billion in cash. The company intends to use the proceeds to invest in its core business and pursue growth opportunities.
the company too closed on acquisition of operations at The Cosmopolitan Las Vegas, a $1.625 billion deal.
“I can’t say enough about the strength of the team at The Cosmopolitan and the culture of exceptional service that has been created there,” said Hornbuckle. “Our focus now is to integrate the property’s operations into the MGM Resorts portfolio and work together to maximize the future success of this world-class resort.”
MGM Resorts has also reached an agreement to sell the operations of the Gold Strike Casino Resort in Tunica, Mississippi, to Cherokee Nation Entertainment Gaming Holdings for $450 million, it said. The deal is expected to close in the early part of 2023.
“As a company, we thought this was an opportunity to sharpen our focus on Mississippi, at Beau Rivage [Resort & Casino in Biloxi]and take advantage of an attractive valuation,” he said.
company sale of The Mirage operations in Las Vegas for $1.075 billion to Hard Rock International is on track to close this year.
MGM Resorts executives are looking forward to applying for three additional casino licenses in New York state and eager to expand the MGM Empire City in Yonkers, Hornbuckle said.
Internationally, the company submitted its area development plan with its partner Orix to the Japanese government in April to obtain a gaming license to operate in the city of Osaka, it said. MGM Resorts is also making progress in bringing the MGM Grand to Dubai. It has a management agreement for an integrated non-gaming resort that is being developed in association with Wasl Hospitality and Leisure.
“The project has begun and work continues on the development progress,” Hornbuckle said. “We will be watching with great interest what does or does not happen around gaming in the region, hopefully in the near future.”
MGM Resort’s second-quarter consolidated net income reached $3.3 billion, an increase of 44% compared to 2021, despite the negative impact of $168 million from MGM China due to China’s COVID-19 restrictions and lockdown. of non-essential businesses in Macau, Halkyard said.
Net income attributable to MGM Resorts was $1.8 billion, a figure that benefited from a gain related to the sale of MGM Growth properties, according to the company’s report. earnings release.
Las Vegas Strip second-quarter net income was $2.1 billion, and adjusted property earnings before interest, taxes, depreciation, amortization and rental costs were $825 million, it said. Net revenue from the same store in Las Vegas, excluding Aria, Vdara and The Cosmopolitan, grew 60% compared to the second quarter of 2021.
Unlike what happened during the first quarter due to the omicron variant of COVID-19, second quarter occupancy, average daily rate and profitability were consistent, Halkyard said. Occupancy was 92%, maintaining the performance observed at the end of March. Prices remained strong with ADRs at a record $225. In the same store, its ADR of $201 was 34% higher than Q2 2021.
“Our pricing power is driven by a number of factors: the attractiveness and sophistication of our marketing efforts, relative value versus other destination markets, the return of midweek conventions, and the benefit of certain store renewals. rooms, including the Bellagio and Aria Sky Suites, which we complete in 2021,” he said.
Net income from regional MGM Resorts properties was $960 million, up 12% year over year, Halkyard said. Adjusted property EBITDAR was $340 million, up 7% from the same quarter in 2021. Margins were 35%, down some 200 basis points, as the company recovered more from its non-owned operations. games.
Net income in Macau was $143 million in the second quarter, down 54% year-on-year, it said. Adjusted property EBITDAR was a loss of $52 million compared to a positive $9 million last year.
“Public health policies remain a hurdle in the region as entry into Macau has been severely limited,” Halkyard said.
At press time, MGM Resorts shares were trading at $34.20, down 23.8% from a year earlier. The NYSE Composite Index was down 11% over the same period.
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