For those who missed the memo, the US gambling industry is about to embark on a journey into the unknown. There was a time, in the not-so-distant past, that just the mention of “online gaming” caused land-based casino executives’ hearts to skip a beat. Not anymore, though, and changes are coming. MGM Resorts International isn’t anywhere close to being ready to give up on its land-based casino operations, but is ready to place more emphasis on the iGaming segment, as well as the growing sports betting market.
MGM Resorts Sees Earnings Boost
MGM Resorts, which just announced that it’s giving its MGM Growth Properties real estate investment trust (REIT) to VICI Properties for $17.2 billion, has provided a financial update subsequent to that announcement. In it, the company’s CEO and president, Bill Hornbuckle, highlighted the company’s $2.3 billion in net revenue for the second quarter of the year. That was a 683% year-on-year gain, although last year’s performance isn’t a fair comparison because of COVID-19. Net income improved considerably, as well, jumping from an $857-million net loss last year to a positive gain of $105 million this year.
Just under half of the net revenue, $1 billion, came from MGM’s operations on the Las Vegas Strip. However, even as the operator is increasing its focus on “maximizing growth” of its core business, it is also “pursuing opportunities that align to our long-term vision.” To that end, MGM’s boss indicated that the company is “simplifying” its corporate structure as one measure to “become asset light.” Hornbuckle didn’t expand on when MGM will have reached that goal.
Sports Betting, iGaming to Be Emphasized
Hornbuckle also indicated that MGM, which is looking to hire thousands of new employees in Vegas, will be able to “achieve Strip margins well above 2019 levels long term.” He acknowledged that conventions and hotel occupancy are key to that goal; however, the return of COVID-19 is going to cause issues. Just as it seemed Las Vegas, and the rest of the world, was emerging from the pandemic, the arrival of the Delta variant is threatening to dissolve all the hard work. Vegas has already seen a dip in arrivals as a result, and there could be more on the way.
What COVID-19 showed the gaming industry is that there is real value in exploring online alternatives, and iGaming is going to continue to expand. It still only draws a small percentage of the overall market compared to land-based operations, but this is going to change over the next few years. Casino operators who once shuddered at the idea are now beginning to see the light.
MGM is one of these companies. Admitting that there is significant value in online gaming – in both casinos and sports betting – the operator is going to dedicate more resources to the segment. Hornbuckle alluded to this in connection with the earnings release, emphasizing that the company is firmly behind BetMGM and its future. Equally as important, though, was the fact that he highlighted Caesars Entertainment and its commitment to the online space. He called the company “a real competitor” and asserted that its focus on the online space is going to be “challenging” to MGM. That is enough to show that MGM will likely try to match Caesars play-by-play as the online segment expands.