On a call to discuss earnings results with analysts, MGM President and CEO Jim Murren said the company is making good progress on its MGM 2020 plan and is expecting a “near-record mix” of convention business this year in Las Vegas.
LAS VEGAS—MGM Resorts International executives said the company had a strong second quarter, citing success with convention business and events in Las Vegas and progress of the MGM 2020 plan.
Speaking during the company’s second quarter earnings call with analysts, Jim Murren, president and CEO of MGM Resorts, said convention bookings for the rest of 2019 shaped up “very nicely in the second half of the year, and are actually tracking better than we expected earlier in the year.”
He added that the company is expecting a “near-record mix” of convention business in 2019.
“We’re benefiting from a couple of favorable group rotations, and our expansion at MGM Grand and Aria are helping drive momentum into next year,” he said. “Over the medium term, the Las Vegas Convention Center expansion is expected to drive even more citywide business to the city.”
Booking windows for leisure travel tend to be shorter, but Murren said those trends are improving, “especially as we progress through the summer months.”
“This is helped by the strong base of our group business, but we also continue to strategically manage our leisure mix to place the right customers in the right hotels at the right time and opportunistically lean in to fill in periods where we need to,” he said.
MGM has a strong entertainment calendar planned on The Strip for the year, and Murren said the company is “maximizing its leadership in strong entertainment and sports” with events such as the recent MGM Resorts NBA Summer League.
“Finally and excitingly, the Las Vegas home of the Raiders stadium continues to shift the center of gravity to the mid to the southern end of the Las Vegas Strip,” he said. “Raiders Stadium will be a catalyst for our south strip resorts, especially Mandalay Bay, as we will take full advantage of its location by hosting the most awesome tailgating experience before and after all of the events at the stadium.”
MGM 2020 progress
MGM’s 2020 plan is progressing, and while it is too soon to revise guidance for the initiative, “the progress we’ve made thus far gives us increased confidence that we will achieve our phase one goal of $200-million incremental EBITDA by the end of 2020,” Murren said.
“As I mentioned earlier, our operating model work is now complete,” he said. “While we have reduced our fixed labor, it is important to note that MGM 2020 is not just a cost-cutting exercise, we’re laying the groundwork to position the company for future growth, creating efficiencies and giving our properties the ability to (detail) key initiatives and best practices.”
Through the plan, the company “reduced headcount by 1,070 people” which resulted in annual savings of approximately $100 million, Murren said, adding that most of the jobs that were cut were supervisory and managerial roles.
“It was a 12% reduction of a base of around 8,700 positions with some more back-office departments seeing heavier reductions,” he said.
The company is on track to meet its goal of consolidated adjusted earnings before interest, taxes, depreciation and amortization of $3.6 billion to $3.9 billion, and pre-cash flow per share of $3.50, by the end of 2020, Murren said.
He said key drivers of that goal are the ramp-up of new properties and MGM 2020.
Revenue per available room for MGM’s hotels on the Las Vegas Strip increased 2.3% compared to Q2 2018, according to an earnings news release. Average daily rates increased 0.7% and occupancy increased 2.2%.
Adjusted property EBITDA for regional operations was $255 million, an increase of 34% year over year.
For MGM China, “adjusted property EBITDA margin was 24.2% in the current quarter compared to 21.4% in the prior year quarter, increasing primarily as a result of the continued ramp-up of operations at MGM Cotai and improved casino margins at MGM Macau,” the release states.
As of press time, MGM’s stocks were trading at $29.37 a share, up 16.6% year to date. The Baird/STR Hotel Stock Index was up 16.6% for the same time period.