MGM has reported strong revenue year-over-year (YOY), occasioned by the strategic sale of the Bellagio Resort and overall business model that has helped the company achieve a 9.6% increase.
Amid great results for the hospitality and gaming company, MGM had to shrink its targets for the Asian market due to the 14-day ban issued to Macau casinos and the outbreak of coronavirus, a new strain of highly contagious and often deadly virus.
The casino sector contributed the most generous chunk of the $12.90 billion revenue, posting $6.52 billion or a 5% increase YOY. Hospitality, and specifically hotel rooms, was the second-highest source of revenue with $2.32 billion and food and beverages bringing in as much as $2.22 billion.
Results were strong across all of the company’s properties, including those located in the Las Vegas Strip, which collectively drew $5.83 billion in total revenue, another 2.1%.
MGM Grand Las Vegas and Mandalay Bay Resort did take a small hit, down to $1.16 billion, or a 2.2% drop, but that didn’t stop the company from obtaining better results across the board. Park MGM Resort bolstered a whopping increase worth 91.1% reaching $407.5 million.
Elsewhere in the United States, MGM posted similar results with the overall results hitting $3.55 billion thanks to the company’s Ohio and New York Properties, the MGM Northfield and Empire City Casino respectively.
Divesting from Real Estate and Boosting Overall Results
Operating expenses also declined by 13.1% and were posted at $9.08 billion over the period. The reason behind the positive development in expenses was the sale of the Bellagio, a smart move with which the company wants to stop taking care of physical properties itself, but rather focus on its brand and what it has to offer as a product.
Meanwhile, casino costs amounted to an estimated $3.62 billion for the company and administrative costs amounted to another $2.10 billion. MGM had to cover some expenses on hotel rooms as well, shedding $829.7 million there, plus $464.6 million on corporate-related expenses.
The End of an Epoch
Even though MGM has posted impressive results across the board, not everyone was pleased with the results, including Jim Murren, the hitherto CEO of the company. Murren announced that he was stepping down on Wednesday, February 12, after 12 years on the job.
Nevertheless, Murren acknowledged that the company had made significant progress over the period and he argued that MGM had made important course correction that would hopefully lead to better results.
He also commented on baccarat results in Far East, explaining that the results had been much lower than the company expected, particularly in Q4, 2019. Murren also said that in light of the recent real estate sales, MGM is more seriously focusing on an asset light approach, which, as explained, means that the company will leverage its brand instead of holding onto land-based properties.
Nevertheless, Murren did mention that MGM is fully focusing on monetizing its real estate assets. The company was happy with the results achieved so far, but Murren noted that MGM will effectively be correcting its targets for Asia in light of the coronavirus which has already caused damages worth millions to the industry.
According to experts, these numbers could quickly tip into billions.