MGM Resorts CEO says Las Vegas will be back at pre-pandemic levels sooner than expected
MGM Resorts International’s CEO believes its Las Vegas properties will be operating at pre-pandemic levels in the first half of 2022.
The company pointed out various signs of recovery during a Wednesday call with investors. Clark County operating restrictions are set to ease back this week, hotel occupancy rates are on the rise and group business is picking up. After a challenging year, things are looking up for the Las Vegas-based casino company.
“We’re very excited about the summer and fall,” CEO Bill Hornbuckle said. “We think the regionals return to ‘19 levels by end of year, and … come the first half (of 2022) of versus the second half, save international, we think we’re going to be back to ‘19 levels here in Las Vegas.”
Las Vegas occupancy rates on the rise
MGM Resorts reported $1.6 billion in net revenues for the first quarter, down 27 percent compared to the same period last year. The company has all of its Las Vegas properties up and running again, but took a hit from lower business volumes, midweek closures and COVID-19-related operational restrictions. Net loss was $332 million for the quarter.
In the Las Vegas market, MGM’s operations are inching closer to pre-pandemic levels. The company reported the best quarterly operating results among Strip properties since they reopened in June.
Net revenues among Strip properties were down 52 percent year-over-year, compared with a 66 percent drop in the fourth quarter. Casino revenues were down 16 percent, compared to a 38 percent drop in the prior quarter.
Occupancy rates for MGM’s Las Vegas properties were at 46 percent in the first quarter, a step up from the 38 percent occupancy rates seen the prior quarter but still down from the 88 percent seen the previous year. The number has continued to climb, hitting 62 percent in March and jumping up to 73 percent throughout last weekend.
Various positive metrics have led Hornbuckle to move up his estimation for when MGM’s Las Vegas properties would be operating at pre-pandemic levels once again. Whereas the company had projected their return in the back half of 2022, now, Hornbuckle anticipates to see these numbers in the first half of next year, excluding international travel.
“Our gross bookings in March were one of the best months in the company’s history, clearly backed by pent-up leisure and casino demand,” Hornbuckle said. “It’s been great to see Las Vegas come alive again to the vibrant destination that we’ve all come to know and enjoy.”
Business levels should continue to improve as operating restrictions are lifted. Starting Saturday, nightclubs will have the green light to reopen and a variety of Clark County venues — including pools and casino floors — will be able to operate at 80 percent occupancy, up from 50 percent.
Hornbuckle said the lifting of restrictions is “good news” for the company.
“It unleashes restaurants, (and) most importantly, one of our biggest restrictors has been the pools,” he said. “That opens it up dramatically.”
The return of conventions
Hornbuckle expects larger groups to return at scale next year, and said convention and group business in 2022 and 2023 is on pace for pre-pandemic levels. In turn, company executives believe MGM could start seeing 90 percent occupancies in early 2022.
To help fill the gap in the meantime, MGM Resorts is “proactively engaging” with fly-in and players aged 50 and above, Hornbuckle said.
“We’ve seen increased receptivity to travel from that group,” Hornbuckle said. “It’s been encouraging to see again our rated 50-plus and higher valued players begin to return as well, particularly in slots. … These trends are also continuing now into April.”
Hornbuckle pointed out numerous anecdotes showing that people of all ages are ready to get back to Las Vegas.
An upcoming UFC fight headlined by Conor McGregor at T-Mobile Arena sold 20,000 tickets in 22 minutes. Tickets for a Dave Chappelle show at the MGM Grand Garden Arena sold out in one day. And there are 45,000 waiting in queue to buy tickets for Bad Bunny tickets for his performance at the MGM Grand next year.
“As we look ahead, we expect the most leisure demand throughout the spring and summer months, hotel occupancies in the 90 percent range on the weekends,” Hornbuckle said. “Weekdays will increasingly be driven by meetings and conventions, and our group business remains solid in the back half of this year.”
Chief Operating Officer Corey Sanders added that room rates will likely stay below pre-pandemic levels for the majority of 2021.
“The fourth quarter we expect to see our rates up slightly — not significantly— from the 2019 levels,” he said. “Right now, the weekend pricing compared to last year, it’s up over $10 to $15. … It’s really the midweeks that challenge on pricing. And that will stay challenged until the convention business comes back.”
Challenges ahead
The company’s online sports betting and iGaming platform, BetMGM, also saw gains in the quarter. The company grew market share in the U.S. sports betting and iGaming market, with an estimated 22 percent market share across active jurisdictions in February.
The venture had an estimated $163 million of net revenue in the first quarter, according to an investor day presentation, and expects to make up 20 to 25 percent of the total U.S. market share long-term. It is projected to make at least $1 billion in net revenue next year.
Jonathan Halkyard, MGM Resorts chief financial officer and treasurer, said Wednesday that BetMGM has solidified its position as a top-three operator in U.S. online sports betting, is believed to have taken the no. 2 position in overall U.S. sports betting and iGaming based on February results.
Despite the overall positive outlook presented Wednesday, the hospitality and gaming industries still face challenges in the coming months. Midweek business is expected to lag until large group business picks up, and international travel still faces many roadblocks through travel restrictions.
Labor shortages pose another challenge for MGM in the short term. Hornbuckle said the company was “caught off guard” when interest in the Las Vegas destination began to take off in the middle of March.
“We probably have 1,300 openings,” he said, adding that it was typical for the company to have 1,300-plus openings pre-pandemic as well. “I think over the next 60 days … you’ll see us get back to the place (where) particularly service levels are where they want and need to be because we’ll be able to staff up.”
Looking forward
MGM Resorts has remained focused on maintaining a strong balance sheet throughout the pandemic. The company had $6.2 billion in cash and cash equivalents and $9.7 billion in total liquidity as of March 31, allowing it to begin returning capital to shareholders through share repurchases in the first quarter.
Hornbuckle also noted that MGM Resorts remains on track to deliver $450 million of cost savings.
“We refined our operating model in late 2019, increasing spans of control and simplifying organizational layers to accelerate decision making, bringing us closer to the guest and ultimately reducing costs,” Hornbuckle said. “We are confident that these sustained changes will enable us to deliver a full target of $450 million of cost savings when business demands return to 2019 levels.”
MGM shares closed down 0.3 percent Wednesday, trading at $42.09 on the New York Stock Exchange.
Contact Bailey Schulz at bschulz@reviewjournal.com. Follow @bailey_schulz on Twitter.