Casino operator MGM Resorts suffered a deep revenue blow in the second quarter of 2020 but margins improved thanks to its ongoing efforts to cut payroll to the bone.
Figures released Thursday show MGM generated revenue of just $289.8m in the three months ending June 30, down 91% from the same period last year. The company booked an earnings loss of over $492m versus a $764.3m gain last year while net losses attributable to MGM came to $857m versus net income of $43.4m in Q2 2019.
MGM’s Las Vegas operations, which only began reopening on June 4 after their lengthy COVID-19 closure, reported revenue down 90% year-on-year to $151m, while US regional operations were also down 90% to $89m.
However, when comparing post-reopening activity to the same periods last year, Vegas margins are up 450 basis points – of which around 100 points came via favorable table hold in June – while regional margins shot up 880 points.
In Macau, the MGM China joint venture saw revenue fall 95% to just $33m as travel restrictions to Macau from mainland China and Hong Kong cut off the supply of customers. Unlike the US ops, MGM indicated no margin surge in Macau, likely due to MGM’s unwillingness to annoy the local government by turfing staff en masse (particularly with Macau’s license renewal process very much in play).
Bill Hornbuckle, who was named MGM’s permanent CEO on Wednesday, put a brave face on things, noting the US margin improvements since reopening were thanks in part to the ruthless staff culls of the MGM 2020 plan as well as additional “modifications to our operating model.”
14 OPEN, FOUR MORE TO GO
On the ensuing analyst call, Hornbuckle noted that MGM had reopened 14 of its 18 US properties, and the MGM Grand Detroit is scheduled to open on August 7 (two days after the go-date set by Michigan’s governor yesterday). As far as regional ops go, that would leave just the Empire City property in New York but Hornbuckle noted how cautiously that state’s governor was proceeding with reopening plans.
Two Vegas casinos – Mirage and Park MGM – have also yet to reopen, and Hornbuckle acknowledged that they could remain closed through the end of the year. Much will depend on Nevada’s COVID-19 situation as well as deciding whether opening additional properties would cannibalize the other casinos while adding additional costs.
SUSTAINABLE CUTS AND TIME TO TINKER
Speaking of costs, MGM says it expects 2020’s will come in around $450m below 2019 and the company believes these cuts are “sustainable” going forward. The company is mulling permanent rollbacks on certain ‘lower-value amenities,’ including asking whether all properties require buffets or full room service.
MGM is keen to turn the COVID-19 crisis into an opportunity, believing “now’s the time to experiment” and that the risk of failing with some experiments is outweighed by the potential benefits. MGM also believes the pandemic “pushed us quicker into the digital world,” noting the rollout of fully digital check-in for room guests – currently being used by 27% of guests – as well as digital menus for restaurants.
MGM believes Vegas won’t return to its former glories until convention and live entertainment are allowed to resume operations. However, MGM clearly doesn’t expect that day to come soon, as the company issued notices to staff this week informing them that a “large majority” of staff who deal on the entertainment side of things will likely be permanently “separated from the company” if they haven’t been called back to duty by August 31.
MACAU LOOKING UP, BETMGM GETS AGGRESSIVE
In Macau, MGM cheered the recent easing of quarantine restrictions for gamblers returning to China’s Guangdong province. While China has yet to indicate when it might resume issuing Individual Visit Scheme (IVS) travel permits, Thursday saw Guangdong announce the resumption of non-tourist visas, leading MGM to believe the IVS scheme might resume in full as early as mid-September.
As for BetMGM, the company’s US-facing online gambling/sports betting joint venture with GVC Holdings, it’s on pace to generate revenue of $130m this year. The product is currently operating in some form in seven states, hopefully 11 by year’s end.
Last week, MGM integrated BetMGM into its MLife customer loyalty program and Hornbuckle offered an interesting insight into online-retail customer convergence. MGM’s Borgata was the last Atlantic City casino to reopen and Hornbuckle said the property’s first weekend back dovetailed with BetMGM’s best New Jersey iGaming results yet.
Hornbuckle said BetMGM continues to poach online market share from its New Jersey rivals, in part because of a new “understanding of what it will take to win the market.” And, tossing diplomacy aside, Hornbuckle said BetMGM was improving its fortunes because the JV partners finally “got aggressive.”