MGM cuts room rates in preparation for a ‘volatile’ Q3

Updated August 2, 2018 - 5:42 pm

MGM Resorts International stock dipped to a 52-week low Thursday after the Las Vegas company’s earnings and revenues failed to meet analysts’ expectations.

Despite falling short of analyst expectations in the second quarter, company management said the financial results “came in better than we expected.”

Responding to a question about whether the effects of the Oct. 1 shooting are still affecting the company, MGM Chairman and CEO Jim Murren said operations at Mandalay Bay are still “about 80 percent back” from where they were before the tragedy.

The dip in stocks was largely due to the company’s weak projections for the third quarter, which came on the heels of a rival company’s reported similar outlook Wednesday.

Murren said the company was forced to cut hotel room prices during the second and third quarters to draw the transient leisure market because conventions didn’t fill enough rooms.

“(For the third quarter) the all-time record citywide in conventions was in 2016. The second best was last year. The third best will be this year,” Murren said. “This year’s not a bad convention quarter. It’s just up against these two incredible comps (comparable circumstances) in the last couple of years.”

He said the company thought it could fill rooms by marketing to small-meetings groups, but when that failed, it cut hotel room prices.

Typical for summer

Murren insisted a slower third quarter is typical.

“The third quarter is always volatile in Las Vegas,” Murren said.

Third-quarter results will be up against a tough comparison in 2017, when MGM hosted two boxing matches, including the high-profile Floyd Mayweather-Conor McGregor fight.

“The way we’ve been addressing it is to continue to bring content to Las Vegas. We brought in the Las Vegas Aces (WNBA basketball team), we sponsored the (National Basketball Association) Summer League last month. That’s going to be much bigger as an event next year than it was this year,” he said.

“We’re going to bring more content to the T-Mobile (Arena). The Raiders are going to finish the stadium in 2020. There’s an awful lot going on and there’s no cause to change the strategy when it has been working. What we need to do is when we have these pockets, do the best we can without degrading the customer experience, because if we do that, people won’t come back.”

Springfield opening

He noted the opening of the company’s MGM Springfield property in Massachusetts later this month and high-end luxury accommodations opening at MGM Cotai in Macau by the end of the year.

He also said that the transition of its Monte Carlo property to Park MGM would drive revenue when that project is completed.

He said MGM also has positioned itself well with its recently announced collaborations with Boyd Gaming, technology provider GVC and the NBA.

MGM will work with Boyd to offer sports betting in states where the company doesn’t have a presence. The deal with the NBA will enable the company to market its properties through the league and also could provide an inside track toward a future franchise for Las Vegas thanks to its existing relationship with the league with the Aces and the growing Summer League presence.

As a result, Murren said the company would provide more conservative estimates on revenue per available room in the future.

Frustrating calls

“We all get frustrated over RevPAR (revenue per available room),” Murren said. “When we meet or exceed RevPAR, it’s no big deal. When we miss, it’s a big disaster. We’re going to be much more conservative in our RevPAR guidance. I don’t like calls like this.”

A survey of 15 Wall Street analysts had projected an average earnings estimate of 29 cents a share for the second quarter, with 13 analysts expecting an average revenue estimate of $2.96 billion.

Murren said fourth-quarter projections are better and the company will be able to take advantage of its recent capital expenditures to drive greater cash flow, which would be shared with investors in the form of dividends and stock buybacks.

MGM reported a 41 percent decline in net income to $123.8 million, 21 cents a share, for its second quarter that ended June 30.

After seeing the stock tumble 9.6 percent Wednesday to $28.35 a share, the issue dipped further at midday Thursday on heavy trading. At one point, the stock fell to $26.86 a share, a low for the past year.

By the end of the trading day, MGM closed up 46 cents, 1.6 percent, to $28.97 a share, on volume about four times the average. After hours, the issue fell 7 cents, 0.2 percent, to finish at $28.90 a share.

Decline began Wednesday

The stock-market price decline began early Wednesday following remarks by Caesars Entertainment Corp. CEO Mark Frissora in that company’s earnings call. Frissora projected a rough third quarter for his company’s Las Vegas properties, and investors in Las Vegas’ six major casino company stocks — Caesars, MGM, Las Vegas Sands, Wynn Resorts, Boyd Gaming and Red Rock Resorts — retreated as a result.

Murren said MGM also is positioning itself to be a contender for a concession to build a resort in Japan.

“The recent passage of Japan’s Integrated Resort Implementation Act is another historic milestone and we believe we are well-positioned in that market,” he said.

The Review-Journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.

ad-high_impact_4
Business
Bellagio, MGM Resorts International’s luxury hotel turns 20
The more than 3,000-room Bellagio hotel is situated on the site of the former Dunes Hotel. The Dunes was imploded in 1993, and construction of the Bellagio started in 1996. It cost $1.6 billion to build, making it the most expensive hotel in the world at the time. The Bellagio was former Wynn Resorts Ltd. Chairman and CEO Steve Wynn’s second major casino on the Strip after The Mirage. MGM Resorts International acquired the property from Steve Wynn in 2000. (Tara Mack/Las Vegas Review-Journal)
Facial recognition software at G2E – Todd Prince
Shing Tao, CEO of Las Vegas-based Remark Holdings, talks about his facial recognition product. (Todd Prince/Las Vegas Review-Journal)
Former NBA player, Shaquille O'Neal, speaks about his new Las Vegas chicken restaurant
Former NBA player, Shaquille O'Neal, speaks about his new Las Vegas chicken restaurant. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Bobby Baldwin to leave MGM
MGM Resorts International executive and professional poker player Bobby Baldwin is set to leave MGM.
Caesars has new armed emergency response teams
Caesars Entertainment Corp. has created armed emergency response teams. They are composed of former military and law enforcement officials. "These teams provide valuable additional security capabilities,” Caesars spokeswoman Jennifer Forkish said. Caesars is hiring Security Saturation Team supervisors, managers and officers, according to LinkedIn. The company did not say how many people it plans to hire for the units. (Las Vegas Review-Journal)
Las Vegas, airlines prepare for CES
CES in January is expected to attract more than 180,000 attendees. (Las Vegas Review-Journal)
AGS partners with Vegas Golden Knights
AGS is the nation’s second-largest manufacturer of Class II slot machines used primarily in tribal jurisdictions. It announced a marketing partnership with the Vegas Golden Knights NHL team. (Las Vegas Review-Journal)
Lehman Brothers bet big on Las Vegas
Lehman Brothers collapsed 10 years ago, helping send the country into the Great Recession.
Fremont9 opens downtown
Fremont9 apartment complex has opened in downtown Las Vegas. (Marcus Villagran/Las Vegas Review-Journal) @marcusvillagran
Ross & Snow launches in Las Vegas
Luxury shoe brand Ross & Snow has opened in Las Vegas, featuring "functional luxury" with premium shearling footwear. (Bailey Schulz/Las Vegas Review-Journal)
Remote Identification and Drones
DJI vice president of policy and public affairs discusses using remote identification on drones. (Bailey Schulz/Las Vegas Review-Journal)
Drones and public safety in Nevada
Two representatives in the drone industry discuss UAV's impact on public safety. (Bailey Schulz/Las Vegas Review-Journal)
Frontier Airlines to launch flights from Las Vegas to Mexico
Frontier, a Denver-based ultra-low-cost carrier, will become the first airline in more than a decade to offer international service to Canada and Mexico from Las Vegas when flights to Cancun and Los Cabos begin Dec. 15. (Rick Velotta/Las Vegas Review-Journal)
MGM Resorts International CEO Jim Murren addresses Oct. 1 lawsuits
MGM Resorts International Chairman and CEO Jim Murren addresses criticism his company has received for filing a lawsuit against the survivors of the Oct. 1 shooting. (K.M. Cannon/Las Vegas Review-Journal)
MGM Resorts International opens the doors on MGM Springfield
Massachusetts’ first hotel-casino opens in downtown Springfield. The $960 million MGM Springfield has 252 rooms and 125,000-square-feet of casino. (K.M. Cannon/Las Vegas Review-Journal)
MGM Resorts International prepares to open MGM Springfield
Las Vegas-based MGM Resorts International gave news media and invited guests a preview of the $960 million MGM Springfield casino in Massachusetts. The commonwealth's first resort casino will open Friday, Aug. 24. (K.M. Cannon/Las Vegas Review-Journal)
A Walk Through Circus Circus
It only takes a short walk through Circus Circus to realize it attracts a demographic like no other casino on the Strip: families with young children. (Todd Prince/Las Vegas Review-Journal)
Morphy Auctions, a vintage slot machines seller, wants gaming license
Vice president Don Grimmer talks about Morphy Auctions at the company's warehouse located at 4520 Arville Street in Las Vegas on Thursday, Aug. 16, 2018. (Rick Velotta/Las Vegas Review-Journal)
Nevada's venture capital money doesn't stay in state
Zach Miles, associate vice president for economic development for UNLV, said there’s venture money in Southern Nevada, “but trying to find the right groups to tap into for that money is different.” According to a 2017 report from the Kauffman Foundation, Las Vegas ranked number 34 out of 40 metropolitan areas for growth entrepreneurship, a metric of how much startups grow. With a lack of growing startups in Las Vegas, investment money is being sent outside of state borders. The southwest region of the U.S. received $386 million in funding in the second quarter, with about $25.2 million in Nevada. The San Francisco area alone received about $5.6 billion. (source: CB Insights)
Neon wraps can light up the night for advertising
Vinyl wrap company 5150 Wraps talks about neon wraps, a new technology that the company believes can boost advertising at night. (Marcus Villagran/Las Vegas Review-Journal) @brokejournalist
Nevada on the forefront of drone safety
Dr. Chris Walach, senior director of Nevada Institute for Autonomous Systems, talks to a reporter at NIAS's new Nevada Drone Center for Excellence of Public Safety, located inside the Switch Innevation Center in Las Vegas. K.M. Cannon Las Vegas Review-Journal @KMCannonPhoto
Motel 8 on south Strip will become site of hotel-casino
Israeli hoteliers Asher Gabay and Benny Zerah bought Motel 8 on the south Strip for $7.4 million, records show. They plan to bulldoze the property and build a hotel-casino. Motel 8 was built in the 1960s and used to be one of several roadside inns on what's now the south Strip. But it looks out of place today, dwarfed by the towering Mandalay Bay right across the street.
TOP NEWS
News Headlines
Add Event
Home Front Page Footer Listing
Circular
You May Like

You May Like