MGM Resorts International has pivoted on its view of being at the doorstep of the 65,000-seat Las Vegas Stadium scheduled to open next year.
MGM Chairman and CEO Jim Murren told investors in an earnings conference call Thursday that his company intends to offer pregame and postgame tailgating experiences before events at the $1.9 billion stadium being built by a subsidiary of the Raiders.
“The Las Vegas home of the Raiders’ stadium continues to shift the center of gravity down to the mid-to-southern end of the Las Vegas Strip,” Murren said. “The 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.”
Switch from September
The company took a different stance in September.
When the Raiders detailed their parking strategy of establishing four satellite parking lots and busing fans to the stadium to the Clark County Commission and the Las Vegas Stadium Authority, MGM President Bill Hornbuckle, a member of the authority board, said company officials feared that fans would instead want to park close to the stadium and “choke out” MGM customers.
“Despite that what would be perceived as an opportunity, I still remain … concerned by where we ended up,” Hornbuckle said at the time.
But Murren and Hornbuckle, who also participated in Thursday’s call, said the company is back to viewing the stadium’s proximity as an opportunity.
“When you get into this part of the year, you start thinking more and getting more information about next year,” Murren told analysts. “We had a very constructive point of view for quite some time on the year 2020 here in Las Vegas, and we have more data now to show that I think we’re going to be right. The Raiders’ stadium is going to open up. AEG is now booking that venue. They’re expecting over 40 events a year coming into that venue.”
Hornbuckle noted that the football championship game pitting the top teams from the Pac-12 Conference’s two divisions has been booked for the new stadium next year.
“This morning they announced that in ‘20 and ‘21 the Pac-12 football championship here in Las Vegas in December, which obviously for the community and the town is in a hole that you wouldn’t otherwise fill at that scale so it’s really exciting,” Hornbuckle said. “And, we’re reminding everyone it’s literally at our back door at Mandalay.”
Murren said the company is formulating plans on how to best take advantage of the three MGM resorts’ proximity to the stadium.
“How do we maximize the benefit of having the stadium? How do we maximize the foot traffic to Mandalay, Luxor and Excalibur and (create) this pedestrian experience because remember they’re going to shut down Hacienda (Avenue) to vehicular traffic so people are going to congregate around our properties, walk across Interstate 15 to the stadium and walk back,” he said.
In June, the Raiders announced that Los Angeles-based AEG Facilities, a division of venue and live-entertainment company AEG, will manage the Las Vegas Stadium when it opens.
Murren said he is confident AEG will be able to develop more than 40 events at the stadium, and Hornbuckle said it already has planned a new music festival this year.
The addition of new events is expected to create “compression,” higher demand for rooms that is expected to increase daily room rates.
Day N Vegas
“Maybe one other symbol that is going to cause the compression of rooms, which is great for the whole town but notably us,” Hornbuckle said. “Our friends at AEG booked a festival called Day N Vegas for the first weekend in November.”
Day N Vegas will bring several entertainers, including J. Cole, Travis Scott, Kendrick Lamar and Migos, for a three-day event starting Nov. 1 at the Las Vegas Festival Grounds at Sahara Avenue and Las Vegas Boulevard.
“It booked 60,000 tickets in a day and a half so the appeal and the draw of this community is still pretty incredible,” Hornbuckle said. “Obviously, 60,000 folks will cause a significant amount of compression on that weekend, not that that was a dead weekend by any stretch, but the compression will drive rates and the continued enthusiasm for coming here.”
While MGM’s second-quarter earnings showed a decline in net income and earnings per share, most of that was attributed to a pair of nonrecurring charges. Costs associated with the implementation of MGM 2020, the company’s cost-reducing operational restructuring plan, and expenses in the retirement of debt moved adjusted earnings per share from 23 cents to 8 cents.
MGM’s revenue for the quarter that ended June 30 increased 12.7 percent to $3.22 billion with strong results at MGM Cotai in Macau — revenue up 26 percent — and at the company’s regional properties, up 29 percent. MGM’s Las Vegas properties saw a 1 percent revenue increase with results affected by lower table-game hold, mainly in baccarat.
MGM 2020 producing
Murren said the company has begun seeing some of the results of the MGM 2020 program.
“We’re executing our MGM 2020 plan,” Murren said. “Our operating model transition is complete, and our headcount reductions as part of this transition is now behind us.”
Murren also noted that the convention calendar for the second half of 2019 is robust and that a real estate committee evaluating the company’s strategy for the sale of properties to MGM Growth Properties, the company’s affiliated real estate investment trust, is expected to report its findings within the next couple of months.
Bloomberg reported last week that the company is exploring a sale and leaseback plan for its Bellagio and MGM Grand properties.
Murren also emphasized Thursday that MGM has no plans to pursue the acquisition of any properties from Caesars Entertainment Corp. or Eldorado Resorts Inc. if Eldorado successfully acquires Caesars and the new owners divest Las Vegas properties.
MGM stock closed down 34 cents a share, 1.1 percent, on trading slightly below average volume on the New York Stock Exchange Thursday. In after-hours trading, shares rebounded by $1.89, 6.4 percent, to end at $31.26 a share.
MGM Resorts International
Second-quarter revenue and earnings for Las Vegas-based MGM Resorts International, operators of the MGM Grand, Bellagio, The Mirage, Mandalay Bay and Circus Circus among other Strip properties. (NYSE: MGM)
2Q 2019: $3.223 billion
2Q 2018: $2.859 billion
2Q 2019: $76.2 million
2Q 2018: $140.4 million
Earnings per share
2Q 2019: 8 cents
2Q 2018: 21 cents