MGM’s past distinguished, future cloudy; Broken Winds

Yesterday, while noting MGM Resorts International CEO Jim Murren‘s impending departure, we were remiss in noting some of his accomplishments. On Murren’s 2008-20 watch, the company became synonymous with diversity, environmentalism, LEED certification and community outreach. With becoming modesty, Murren always deflected credit toward “the company” and its “team members,” whose accomplishment were showcased in the weekly “MGM Minute” (a viral innovation of the Murren administration). We thank him for that.

Of course you can’t say “viral” these days without thinking of coronavirus, which has caused MGM to pull all its 2020 earnings estimates. MGM derives 27% of its revenue from Macao, meaning it’s getting a big, fat zero where a quarter of its income used to be—and paying $1.5 million a day for the privilege. (Add MGM Cotai to the list of hotels that have been shuttered by the government.) Gaming revenue there was already troubled, trending down 8.5% in 4Q19. Nor has less baccarat play in Macao translated to more in Las Vegas, where profits from high rollers were down $100 million last year. Meanwhile, a new sports-betting partnership with GVC Holdings may not be in the black until 2025.

The shock on Wall Street was sufficient for one brokerage, JP Morgan, to suspend its coverage of MGM—and there were probably others. MGM blamed an “unpredictable” outlook for its earnings revision. Adds Bloomberg, “To placate investors, MGM announced a $3 billion share repurchase, including a $1.25 billion tender offer that started Thursday morning, and raised its dividend 15%. The company set the price range of the offer at $29 to $34 a share.”

Murren, who indicated he would continue to consult on Japan (a good idea), accentuated the positive. “Our growth areas of sports betting, Japan and entertainment have never looked better,” he said. “Our bench of management talent is deep.” True that.

* So much for a grand compromise on Connecticut sports betting. Both Foxwoods Resort Casino and Mohegan Sun asserted their claim of exclusivity at a recent forum. Characterizing sports betting as a casino game (we disagree but we also digress), they threatened to yank their 25% share of slot winnings from state coffers. The tribes were challenged by pro-compromise state Rep. Joe Verrengia (D), who also chastised them for stalling on Tribal Winds in East Windsor. “Litigation is to be expected, but you promised to proceed,” Verrengia said, alluding to MGM. “Despite assurances, you haven’t moved forward. … The state’s losing $25 million a year without East Windsor.” Tribal lawyer Aaron Bayer responded that none of the anti-Tribal Winds lawsuits have been successful, which only begs Verrengia’s question.

Mashantucket Pequot Chairman Rodney Butler, intervened to say Tribal Winds would have to redo its zoning process (which could take five months), followed by 1.5 to two years of construction, no inception date given. The Mohegan and Pequots took differing paths with legal weed, with the Mohegans wanting no part of it and the Pequots asking the Lege for “the ability to get involved.” Said Butler, “It’s extremely hypothetical.” Smoke ’em when you’ve got ’em, Rod.

* Eldorado Resorts has been cleared by Pennsylvania regulators to take over Caesars Entertainment, bringing with it Harrah’s Philadelphia. It occurs to us that the absurd horseracing subsidy is actually a pretty sweet deal for racinos like Harrah’s. They pay the state in theory but the money comes right back to them. No wonder companies like Caesars and Penn National Gaming have doubled down on racinos in the Keystone State. Speaking of the ponies, a Churchill Downs joint venture, $200 million Oak Grove Racing, Gaming & Hotel is about to open in Kentucky. It will have 1,200 slots, er, historical racing machines. It will also include a track where actual horses will race, although that’s more and more of a loss-leader these days. An Oak Grove without HRMs is economically unthinkable.

* Congratulations to Wynncore for being added to Forbes’ collection of five-star hotels. A recent room makeover may have pushed Wynn Resorts over the top, and the spa and Wing Lei restaurant clearly helped. How do you qualify for five-star status? The Daily Mail‘s Neil Simpson lays out the criteria. For instance, “Gone are the days when a hotel could claim five-star status just for having a pool or spa. Today the pool and spa staff must also be the best trained and most welcoming in the business.” Sounds like Vegas to us.

* It was tribes 3, Maverick Gaming 0 in Washington State‘s House Appropriations Committee as it overwhelmingly voted to send a sports-betting bill to the House floor. The winning bill (of three) restricts wagering to the state’s 29 tribal casinos. Two rival bills that would have

dealt in the state’s 44 card rooms (19 of which are owned by Maverick) went down to defeat. State Rep. Drew Stokesbary (R), the ranking Republican on the committee called the outcome “a reasonable middle ground,” adding, “It permits adults who are responsible to engage in an activity that doesn’t harm other people. But it doesn’t make it so prevalent or so pervasive in our society that we as a legislature have to worry about the morality and ethics of that.”

* The Las Vegas Valley has been named by Zillow as the fifth-best housing market in the West. Home values have appreciated most in the College Park neighborhood (8%) and in Blue Diamond (8%) to the south. Locals casinos owners have to be looking at those numbers and liking what they see.