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MGM Resorts continues recovery after October shooting

Column: industry Tag: MGM Resorts,MGM Resorts International Published: 2017-11-10 10:57 Source: Author:

MGM Resorts International and its employees have been working together to recover following the shooting at the Mandalay Bay Resort & Casino in early October. (Photo illustration: Annamarie Hudson)

LAS VEGAS—Before delving into the details of his company’s third-quarter earnings?during a call with analysts, MGM Resorts International Chairman and CEO Jim Murren asked those listening to remember the people killed and wounded during the 1 October shooting at the Mandalay Bay Resort & Casino. He also thanked the first responders and law enforcement agencies for their work.

“In the days and weeks following, the outpouring of support we’ve received from fellow Las Vegans as well as our guests, partners and corporate leaders from across the U.S. has been heartening,” he said.

There were incredible acts of bravery that day, he said, including many performed by MGM Resorts employees, from security officers assisting police to employees transporting victims to the hospital. The morning after the shooting, 500 MGM Resorts employees from all properties on the strip arrived at the Mandalay Bay to staff the front desk, answer phones and help in other ways.

“I’ve never been more proud of the strength of our employees, who showed selfless dedication and spirited teamwork in the face of such unspeakable evil,” he said.

Despite the tragedy, Las Vegas continues to move forward, Murren said. Though his team expects there to be a near-term effect from the shooting, MGM is confident of the resilience of the community and its ability to remain a leading business and entertainment destination, he said.

MGM Resorts exceeded its guidance for the quarter. Net income for resorts came in at $149 million, and domestic same-store properties had the best earnings before interest, taxes, depreciation and amortization in more than 10 years, Murren said.

“Las Vegas did particularly well in the third quarter despite the city itself having fewer convention attendees,” he said.

He cited big events, such as two boxing matches, as well as a strong group calendar as demand drivers during the quarter.

As a result, the company saw a 4% increase in net revenue to $1.5 billion on the strip, and $514 million in strip EBITDA (+14% year over year), Murren said.

As of press time, MGM Resorts’ stock was up 14.7% year to date at $33.06 a share. The Baird/STR Hotel Stock Index?was up 33.9% for the same time period.

Effects of the shooting

Everyone on the strip took a pause in marketing after the shooting, Murren said. There was a spike in nongroup cancellations, which is more than double what the company normally sees, he said, and bookings declined immediately after the shooting. Those cancellations progressively subsided by the middle of the month, and booking pace returned to normalized levels almost immediately after the company resumed its marketing efforts, he said.

Mandalay Bay restarted marketing about a week later than the other properties, COO Corey Sanders said, and even then, it was done slowly to make sure there wasn’t any adversarial reaction. It has since grown to full force, he said.

“I would say that Mandalay, compared to the rest of our properties, probably has the most impact,” he said. “We know that 20% of the cancellations came from there. But … they're really close to where their booking pace was prior to the incident.”

Many of MGM Resorts’ executives met with the heads of its large group business clients, who all said they would still come to Las Vegas, Murren said.

“Some of the largest groups we’ve ever had, including at Mandalay, said that we’re going to not only stay, but we’re going to book again and again and honor the destination,” he said.

While booking pace for 2018 is “extremely strong,” half of the cancellations after the shooting were for October, which is normally the strongest month in the fourth quarter and usually one of the strongest months of the year, Murren said. As such, Q4 revenues and profitability will be affected, but should improve after the month, he said.

Looking forward

Heading into next year, MGM Resorts already has achieved 80% of the convention room nights that it wanted to sell for 2018, Murren said. The large annual Conexpo-Con/Agg convention, which was a demand boost in the first quarter of 2017, will not return to Las Vegas in Q1 2018. Murren said revenue per available room should grow in 2018.

Other demand drivers include the Vegas Golden Knights professional ice hockey team, which sells out tickets almost every home game, he said, and a WNBA team, which is moving to the city next year. The company has an active relationship with the NCAA, NBA, NASCAR, rodeos and other sports events, he said. The Oakland Raiders are also moving to Las Vegas.

“All these individual activities collectively make a difference in terms of increasing visitation and, more importantly for those who live here, create a community event,” he said.

MGM Resorts is investing in its properties, Murren said. The Monte Carlo is transforming into Park MGM and NoMad, he said, and many venues already have opened under the renovation. The work has affected cash flows, he said, but by the end of next year, everyone will see what the company has envisioned for the property.

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