“Good quarter against low expectations” pretty well summarizes Wall Street‘s reaction to MGM Resorts International‘s 3Q18. (And we have to say that MGM leadership did a masterly job of minimizing anticipation well ahead of time.) JP Morgan analyst Joseph 
Greff admitted as much, while saying that Las Vegas Strip cash flow beat the Street’s projections by 5%. Looking ahead, “2019 expectations are reasonably set.” The full half of the glass includes better group business next quarter, increasing revenue from Park MGM and continuing recovery at formerly hexed Mandalay Bay. Greff tried to reconcile MGM’s stated goals of reducing leverage with a New York Post report that it covets Caesars Entertainment (which would create no end of redundancies, but let’s save that for another time). The glass is perhaps half-empty due to much-lower-than-expected Macao cash flow, thanks to a “very slow” (Greff) ramp up of MGM Cotai. Also, sadly, fourth-quarter comparisons will be easier in part because MGM business slackened notably after the Mandalay Bay Massacre late last year. This translated into $40 million less cash flow, lower room revenues, and weaker table game and slot handle.
MGM Cotai eked out $12 million in cash flow (absolutely terrible ROI), which the company blamed on low hold. But wagering volume of $1 billion was well in excess of Greff’s anticipated $650 million. Better still, original-flavor MGM 
Grand Paradise booked $294 million in VIP gambling revenue, against an anticipated $259 million. MGM Cotai is still hobbled by incompletion of its high-roller suites but, on a happier note, business is so good at MGM National Harbor that expansion of its casino floor is on MGM’s to-do list.
“Las Vegas is not falling off a cliff and 3Q Vegas results were better than feared,” was Credit Suisse analyst Cameron McKnight‘s take on the earnings call. “We think MGM is setting 4Q expectations appropriately … MGM Cotai is clearly taking time to ramp,” he added with masterly understatement. McKnight chalked up the soft 3Q18 as 
an aberration, a “perfect storm” of adverse market forces. “MGM confirmed that city-wide convention attendees will be up materially in Q4 … MGM reiterated its long term leverage and cash flow targets, appearing to talk down [acquisitions], which shouldn’t really surprise.” Like Greff, he was reassured by what management had to say. The fact that MGM produced such favorable reviews from Wall Street, speaks well to its damage-control: After all, cash flow was down 8%, Las Vegas cash flow fell 18% and room revenues dipped 4%. Not appears to have been said about newbie MGM Springfield, although it has been in operation for 37 days now.
As for the broader Las Vegas picture, in September hotels lowered room rates to an average of $147/night to counter lower visitation and room revenue of $130/night. Occupancy was 3.5% lower and the Strip had the worst of it, with room revenue dropping 6.5%. Convention bookings fell from 88% last year to 83% but weekend occupancy was flat, just an increment below 2017, offset by a tiny increase in available hotel rooms.
Speaking of low expectations, International Game Technology also benefited from them. Strong business in Italy and other overseas jurisdictions offset the postponement of a significant machine order. According to McKnight, domestic gambling and lottery 
revenues were off, due to “some tough comps and one offs.” North American revenues tumbled 12% but IGT has an installed base of 23,357 slots plus 2,998 replacement machines.
Nevada is coming off its best-ever month for sports wagering. $571 million was dropped at the wickets, with casinos keeping $56 million. Sports books did especially well on parlay wagering, holding 61%, rather than the usual 50%. “The staggeringly high parlay hold suggests more and more bettors are shooting for the moon as they attempt to get in on the sports betting dream,” theorized analyst Alex Kosin. Whatever the reason, it may not be good news for punters but it’s great news for the books.
