MGM’s Murren Plans ‘Transformation’

The second quarter earnings call for MGM Resorts produced a new plan under which the company would undergo a “transformation,” said CEO Jim Murren. He explained how changing simple purchasing methods could result in higher profits. He also gave a preview of MGM Park (l.) on the Las Vegas Strip.

During a recent conference call, MGM Resorts International CEO Jim Murren discussed the profit growth plan the company has been working on for a year now, describing it as a “seminal internal transformation.” Part of that transformation includes buying food directly from farmers and ranchers and pricing shows and meals based on demand.

One other thing MGM has done is condensed the offerings of towels in the resorts. For instance, although Aria, the Bellagio, and the MGM Grand Suites are all luxury brands, each had different towels. Murren said, “There’s no reason for that.” Having just one towel type will cut down on inventory and laundry costs.

Employees will not be cut down, however. The 46,000 employees represent a 16 percent decline since 2007.

“It’s not sustainable. It’s not the right thing to do for the company morale,” Murren said. The company will shift people around though, with 1,000 open internal positions where they might be more needed. Murren said instead of having front desk trainers at every single property, MGM Resorts may just make a single training program.

The above-expected earnings will be used to pay down MGM’s debt, which was at $12.5 billion in long-term debt as of June 30. On Tuesday, shares of MGM Resorts closed at $21.75, up $1.90, nearly 10 percent.

Not surprisingly, MGM Macau revenue declined dramatically, a whopping 33 percent, as Macau gaming revenue as a whole continues to feel the pain from the government corruption crackdown. For the quarter ending June 30, MGM earned $97.5 million, compared to $110 million the year before. A $3.8 million income tax benefit this year was much smaller than the $51.9 million from a year prior.

Recently, the big rumor was linked to MGM Resorts looking to sell the Mirage, but Murren quickly dismissed that notion. “It’s an outstanding property we covet and respect dearly. We don’t put a ‘for sale’ sign on any property,” Murren said.

Meanwhile, while all of the buzz surrounding MGM Resorts International on the Strip seems to be about the massive multi-purpose arena being built right behind the New York-New York, it is far from the only thing MGM has up its sleeve. In fact, just next to it, MGM is building a $100 million project called the Park.

The Park will feature landscaping of native and desert-adaptive plants, alongside local-quarried sandstone used for the “microclimate”.  Everyone knows how brutal the summers can be in the desert climate, and MGM is tackling just that.

The 5.5-acre park will feature trees, shade structures and a misting system which will combine to lower temperatures by an expected 10 degrees, according to Don Thrasher, president of Park District Holdings LLC, a subsidiary of MGM Resorts International.

The entrance will be near the new Shake Shack restaurant at New York-New York, where foot traffic is 30,000 daily according to Thrasher. Running alongside the northern face of New York-New York, the park will also feature five food and beverage spots which will be linked to the casino, two of which are set to be owned by MGM Resorts, two by national brands, and the final by a local group. There will be eight kiosks in the park as well.

While the park will not have grass, there will be a native landscape fit for the desert climate.