MGM Resorts International reported a stronger third quarter than it expected and projects better group business in the future.
LAS VEGAS—Quarterly results that came in better than expected made the third-quarter earnings call a bit easier for executives at MGM Resorts International compared to last quarter’s call.
The results came in ahead of expectations with solid overall performance, MGM Resorts Chairman and CEO Jim Murren said, and that’s despite tough year-over-year comparisons in Las Vegas.
MGM continues to have strong cash flows, he said, and is focused on allocating capital as it aligns with its overall strategic objective. The company is focused on bringing its consolidated net leverage down between three to four times by 2020 as it grows cash flows, he said.
Las Vegas attracted 120,000 fewer large-scale convention attendees in the third quarter, he said, which meant MGM Resorts had to rely more on its leisure channels. The summer months acted more like traditional summer months, he said.
“While our Las Vegas Strip (revenue per available room) was down year over year, it was ahead of our guidance, and we still achieved our second-best third-quarter RevPAR on record,” he said. “By the way, our convention mix in the third quarter was also our third best.”
The company launched its MGM Springfield property in Massachusetts, and the resort is already off to a good start, Murren said.
“While it’s still in its early days, we’re encouraged that the resort is performing in line with our expectations on both the gaming and non-gaming side,” he said.
MGM Resorts’ domestic hotel operating income reached $435 million during the quarter, according to a company earnings release, down from $545 million in Q3 2017. Domestic resorts’ adjusted property earnings before interest, taxes, depreciation and amortization fell 12% to $627 million.
As of press time, MGM Resorts’ stock was trading at $25.19, down 24.6% year to date. The Baird/STR Hotel Stock Index was down 12.65% for the same time period.
Group and convention business
The fourth quarter is shaping up nicely as MGM Resorts is already seeing the benefits from an expected increase of more than 80,000 large-scale convention citywide attendees, Murren said. This improving convention-based business should ease some of the competitive pressures the company has seen in the leisure channel, he said. Las Vegas Strip RevPAR is expected to be up 1% to 2%, and overall revenue up slightly.
Looking to 2019, group business is pacing ahead of previous years, Murren said. Group nights should be up again, he said, and he expects the company to gain market share, driven by MGM Park and the expansion of the convention space at MGM Grand.
“We’re also already having success placing groups in shoulder period, which we believe will allow us to better yield the rest of our portfolio,” he said.
Carlson Wagonlit Travel named Las Vegas the No. 1 North American destination in 2019 because of the strength of the U.S. economy and the market’s high-value experiences for larger meeting planners, Murren noted.
MGM Resorts expects group room nights to increase in both halves of 2019, COO Corey Sanders said. What the company has on the books now is pacing well, he said, and it should gain market share in the group room night area. The Las Vegas Convention and Visitors Authority projected group business to increase by 1% to 1.25% next year, but MGM believes it will do better than that, he said.
“The comfort there is we have about 80% of what we think is going to be on the books already on the books,” he said. “And that’s probably the highest we’ve been … ever since we really started our budgeting process.”
In particular, the Mandalay Bay Resort & Casino will see an increase next year in booked convention room nights, Sanders added. The numbers still aren’t quite where the company would like to see them, he said, but they are definitely up compared to this year.