Officials for both MGM Resorts International and MGM Growth Properties shared a positive 2017 outlook during their first-quarter earnings calls.
LAS VEGAS—While most U.S. hotel companies are talking about weathering tougher conditions as the cycle winds down, MGM Resorts International officials reported strong year-over-year growth for Q1 2017.
Speaking during company’s Q1 earnings conference call, MGM Resorts Chairman and CEO James Murren said previous guidance for the first quarter predicted 7% year-over-year revenue-per-available-room growth for properties on the Las Vegas Strip, but actual Q1 growth for those properties reached 8.6%, benefiting from the Conexpo-Con/Agg trade show and calendar shift.
Officials were initially concerned about the upcoming third quarter, he said, but that was before putting a Microsoft conference on the books. Having the Microsoft conference scheduled puts the company ahead of convention roomnights in Q3 2016, COO Corey Sanders said, so the convention rate is a little higher now.
“There’s peak times (in summer) when there’s decent convention business,” Sanders said. “When there’s not, we’ll always fill the rooms, but the rates are always a little bit of a challenge.”
The recently opened MGM National Harbor in Maryland has already become a market leader in its first quarter of operation, Murren said, and the only property with a fair share of premium.
“We see the opportunity to continue at National Harbor to grow revenue, grow margins and cash flows, and we intend to do so,” he said.
The newly acquired Borgata in Atlantic City is the “undisputed leader” in the market, Murren said, and has strong top-line numbers.
As of press time, MGM Resorts’ stocks were up 7.6% year to date to $31.01 per share. The Baird/STR Hotel Stock Index was up 23.7% for the same time period.
Performance in China
The MGM Macau continues to capture more than its fair share despite new competition in the changing marketplace, Murren said.
“We continue to see growth and opportunities in our mass business supported by premium mass,” he said.
The company is progressing on the construction of the MGM Cotai, Murren said, a 1,400-room property scheduled to open in late 2017.
Building anywhere in the world is complicated, said Grant Bowie, CEO and executive director of MGM China Holdings, and was just as complicated in Macau. The company is committed to doing something different in the market, he said, and the key aspect quarter after quarter is getting it right.
“We will be launching in the not-too-distant future a very significant marketing program that starts reinforcing and building on (those) brand values … That’s what’s critical for us, making sure we get the property right, get the messaging right, get all the activities that we need put in place,” Bowie said.
MGM Growth Properties
In its second earnings call since spinning off from MGM Resorts, real estate investment trust MGM Growth Properties officials said they would consider further acquisitions after purchasing the Borgata in 2016 but were not prepared to go into detail at this time.
The REIT is in active dialogue with a number of people in the industry where transactions could develop, MGM Growth Properties CEO James Stewart said, calling it normal business activity.
There are some assets on the Las Vegas Strip that could be “potentially interesting,” Stewart said, but it’s too early to have any meaningful discussion on any of them. REIT officials have a unique insight into the market given MGM Growth Properties’ headquarters in Las Vegas and its ties to MGM Resorts, he said. As opportunities come up, they’ll want to pursue them.
When asked about expanding beyond gaming properties into a broader leisure space, Stewart said they would consider something they were knowledgeable about as long as it could sustain the dividend.
As of press time, MGM Growth Properties’ stocks were up 12.9% year to date to $28.58.