The U.S. market was mostly a disappointment for MGM Resorts International in the fourth quarter, dampening a relatively strong performance from the company’s sole Macau casino.
U.S. revenue was up 5 percent to $1.9 billion, largely on the strength of MGM National Harbor in Maryland, which opened in December 2016 and delivered $186.9 million in revenue in the October-December period, good for fourth-best corporate-wide behind Bellagio and MGM Grand in Las Vegas and The Borgata in Atlantic City.
Backing out National Harbor, however, and domestic revenue was down 3 percent as total wagers and hotel room revenue all came in under results from the same period in 2016.
Clearly, fallout from the October 1 mass shooting on the Las Vegas Strip took a toll.
Revenue per available room, the industry’s principal measure of hotel profitability, was down 4.9 percent on the Strip as average daily room rates fell in response to a dip in occupancy compared with October-December 2016.
A 4 percent decline in table game drop year on year was partially offset by an increase in win percentage from 23.5 percent to 25.3 percent. Slot handle was down 5.6 percent, but hold was up 1 percent to 8.9 percent.
In commenting on the results, CEO James Murren acknowledged the quarter was affected by “clear challenges” in the wake of the massacre, in which a lone gunman holed up in a suite on the 32nd floor of the company’s Mandalay Bay rained automatic weapons fire on a crowd at an outdoor music concert, killing 58 people and wounding more than 500.
He added, however, that the company expected worse as the quarter was coming to a close, and he termed the final results “a touch better” than anticipated.
Total revenue was up 5.5 percent to $2.6 billion, but adjusted property EBITDA finished at $674.6 million, up only 0.6 percent. Net income was juiced by the Republican tax cuts to the tune of $1.4 billion, or $2.42 a share, compared with net income of $24.7 million, or 4 cents a share, in October-December 2016. Without the windfall, the company would have reported a 10-cent per share loss.
The bright spot was the company’s Hong Kong-traded MGM China Holdings subsidiary, where revenue was up 10 percent to US$548 million at the company’s MGM Macau casino hotel despite a 5 percent drop in revenue from VIP play.
Adjusted EBITDA was up 7 percent to $147 million, but a deferred tax liability pushed operating income down to $43 million from $72 million in Q4 2016.
The locus of the company’s future in the lucrative Chinese casino enclave, the $3.4 billion MGM Cotai, opened February 13 in time for the Lunar New Year, but it’s still phasing in key elements. It won’t open to junket-driven VIP play until the summer, and currently only 900 of its planned complement of 1,400 rooms and suites are on line. Notably absent from the mix are an exclusive set of high-end accommodations under MGM’s Mansion brand. Murren called them the “last piece of the puzzle for us to lock in,” but they don’t open until September.
“Every time a new property opens, it normally, you hope, would create an upward inflection in the visitation,” said MGM China CEO Grant Bowie, speaking recently to local media. “But the reality we’ve also seen is that these properties took a little bit longer to ramp up than the previous (ones).”
