“Viva Las Vegas” was the headline on Credit Suisse analyst Ben Chaiken‘s recap of 4Q21 earnings from MGM Resorts International. Wall Street expected $2.8 billion in revenue and $705 million in cash flow. MGM delivered $3.1 billion and $821 million, respectively. With Aria and Circus Circus backed out of the picture, revenue was up 4% and cash flow shot up 36%. “It sounds like trends in Vegas are recovering again following some Omicron related weakness in January, particularly in the group business,” wrote Chaiken, adding that management saw positive trends building toward the Grammy Awards (at the Green Monster) and NFL draft. Regional casinos performed as expected, delivering $309 million worth of cash flow. BetMGM was projected to generate $1.3 billion in net revenue this year, as it expands to Illinois (March) and Ontario (April).
Making the best of a bad situation in Macao, MGM brass noted that Chinese New Year visitation was up 30% over last year and mass-market play was solid, with MGM’s Macanese market share hitting an all-time high of 14%. Little was said about Japan, but Chaiken observed that the lion had $9 billion “in dry powder” that he expected to go into BetMGM and New York City (“potential high ROI projects”). BetMGM lost $211 million last year and will not be ROI-positive until 2023.
“The beats continue,” chimed in Truist Securities analyst Barry Jonas, applauding the strong Las Vegas Strip performance and adding that “BetMGM remains an interactive winner, though we’d still prefer MGM to own 100%.” Only one of MGM’s 17 domestic properties (MGM Springfield perhaps?) failed to set a cash flow record last quarter. As for all-important group business, “management noted the CES convention was the most telling datapoint with attendance down -70% from prior years. Though cancellations have been elevated in the new year, management noted there has been little effect past March with [January] being the highest forward booking month since March 2021 (and better than any single month of 2019).”
Even current performance is strong on weekends, with occupancy averaging 91% on Fridays and 98% on Sundays on the Strip. “Further, cancellations are declining and group volumes are normalizing as hotel bookings have stabilized above 2019 levels in recent weeks.” Baby Boomers are back in pre-pandemic numbers and can look forward to $2 billion in capex reinvestments, including room renovations at Beau Rivage, MGM Grand and New York-New York. Covid-caused deferred maintenance is also on the docket, as are technological upgrades.
The company’s stellar financial performance was attributed to cost-cutting (read: less service) and a shift of focus toward high rollers. “Management will bring back non-gaming amenities as demand and resources permit, and margins could compress as non-gaming revenue mix increases.” In other developments, MGM Growth Properties should change hands by July, ditto the purchase of The Cosmopolitan of Las Vegas. But Hard Rock International may not be able to take the keys to The Mirage until late this year. The timeline remains vague, especially as the Seminole Tribe ought to have some difficult regulatory questions to answer.
As everybody in the world knows, yesterday was Super Bowl Sunday (in which the Los Angeles Rams exceeded our expectations and won), which prompted a fit of pearl-clutching in the mainstream media. New York Times columnist Russ Douthat issued a Victorian shriek of high dudgeon, pining for the days when casino gambling was restricted to Nevada and sports betting was the province of Lefty in the back alley. Douthat takes the ubiquity of gambling to be a signifier of irreversible moral decline in America and pines to turn back the clock. Not to be outdone, Politico weighed in, gloomily predicting “a national crisis of problem gambling is coming.” Of the ubiquity of sports-betting ads, author Jack O’Donnell frowned, “This has not happened by chance. It is a strategic and methodical effort to make sports betting seem no different than going to the grocery store to pick up a loaf of bread.”
O’Donnell used to work for Steve Wynn, Donald Trump and Merv Griffin in C-suite roles, so he’s talking out of his butt like Douthat. And he does cite some concerning statistics, such as a rise in calls to the National Problem Gambling hotline from 14,800 a month in 2020 to 22,500 last year—although this does not ipso facto prove that sports betting is the problem. But there’s no zealot like a convert and O’Donnell wants to see advertising for sports betting banned, as is the case with cigarettes. For that matter, he pines for the days when casinos couldn’t advertise gambling. The logical endpoint of O’Donnell’s argument would be the banning of sports wagers (and gambling) altogether. Not very realistic.
Speaking of sports wagers, while we’ll refrain from commenting on Super Bowl ads, we’re pleasantly astonished to see that DraftKings has upgraded substantially from the primitive production values (surprising from so free-spending a company) of its humorless, early TV spots. Perhaps customers had tired of Jessie Coffield screaming at them to “Make it rain!”
As for the Rams, they won but committed the most grievous sin in sports betting by failing to cover the spread, undoubtedly ruining the night for millions of viewers with skin in the game. Sports books made out like bandits, with Station Casinos reporting its biggest Super Bowl haul since forever. BetMGM was also counting its greenbacks, indicating a seven-figure haul on the Rams/Cincinnati Bengals tilt. Prop bets were costly for books, though, thanks to Odell Beckham Jr.’s early touchdown catch and Joe Mixon‘s surprise TD pass for Cincy. The biggest loser was John “Mattress Mack” McIngvale, who is $9.5 million poorer today, although he claimed watching the game with PTSD-afflicted veterans at Camp Hope put it in perspective. We hope so.
Jottings: A scrum of bills have been introduced in the Hawaii Lege, proposing every form of gambling—casinos, sports betting, lotteries, DFS—under the sun. However, as this is an election year don’t get your hopes up … The Nevada casino industry better prepare to get soaked again. Global Gaming Business reports that an increase in the GGR tax polls favorably. Silver State residents, however, are fed up with sales-tax increases—and rightly so … Kudos to Las Vegas Sands. It just donated $300,000 to the International Center for Responsible Gaming. That’s walking-around money for Sands (which just wasted $73 million on a Florida ballot drive) but it’s a good start … Adele claims she “100 percent” plans to fulfill her Caesars Palace gig but also intends to have Rich Paul‘s baby next year, so don’t make any (new) itineraries yet. If Adele cancels again, at least you can almost certainly count on a free consolation ticket to Legends in Concert … Programming note: We’ll be in transit to Chicago all day tomorrow to deal with a family crisis, so no S&G on Tuesday and spotty coverage from now until Feb. 24. Our apologies for that.
Hope your family crisis Chicago trip ends well.
I agree with those expressing concern with the proliferation of sports betting, far too many of us have not yet learned to gamble responsibly, many will learn the hard way about controlling your emotions and looking at yourself honestly. And billionaires get to run these books. The Rams brought me my second Super Bowl title in my 62nd year of life, I did not bet a single cent, but I bet I got more emotional than most everyone. The refs gave the Bengals a free 75 yard touchdown, two refs are assigned to look at pass plays along that sideline, both watched the Bengals player yank the Rams defender down by his facemask and did nothing. That is abysmal, it’s reason enough to not bet on sports, a regular Joe wagering on a game that took the Rams and gave points lost out because of blatant incompetence sprinkled with cowardice. The refs lacked the courage to throw the aptly colored yellow flag, no thank you on risking my gambling bankroll on sports I have zip control over…