MGM Lost $500 Million Last Quarter

MGM Resorts like many casino operators in the business reported losses totaling more than half a billion dollars in the 3rd quarter of 2020. MGM reported a revenue drop of $1.12b in the 3 months leading up to September 30th. This was a two-thirds drop from the same period last year.

MGM Resorts recorded an operating loss of $495m and a net loss of $535m compared to last year’s $37m net loss in Q3 2019. Last year’s loss was attributed to non-cash impairment linked to the sale of its Vegas properties. This year, the losses have largely been attributed to the pandemic, the effects of which are still being felt today and will probably be for some time to come.

The hit has been felt hardest by Las Vegas, where the revenue was down 68% year-on-year to $481m. The earnings in Sin City, before rent was paid to its REIT landlords, plummeted 97% to a mere $15m thanks to reduced operational capacity. Table games and slots handle also dropped by 41% while hotel occupancy dwindled 48 points to a sad 44%.

MGM’s operations in the rest of the country seemed to have fared slightly better than the Vegas operations. Revenue in the regional operations went down 40% to $557m while earnings fell 46% to $146m. In Macau, MGM China’s operation recorded a revenue drop of almost 94% with a significant earnings loss of $96m.

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MGM has been recording operational losses all through the year.  MGM, which is the largest operator and one of the best-reviewed in the Strip as we’ve discussed here, has not managed to fill its hotel rooms owing to reduced travel. The convention business which used to drive the Strip has all but dried up. Not surprisingly, MGM has sought ways to reduce expenses.

It has gone through with hiring freezes and enacted furloughs and reduced the number of staff members.  Just recently, it announced a fresh round of layoffs in MGM Grand and Park MGM. All these layoff notices will enable the company to fulfill its plan to realize $450m in cost savings before the year comes to a close.

Shares of MGM Resorts International have also felt the blow and have dropped owing to the negative effect of the contagion. Although things are looking rough right now, the situation isn’t going to persist forever. As the biggest operator and best employer in the gaming industry as discussed here, the company has always been financially sound.

Additionally, its regional properties, especially those situated in the Midwest and the South, are already showing promise post-re-opening. Finally, there is BetMGM, which is what has allowed the operator to keep its head above water during these unprecedented times.

 

BetMGM continues to win even as MGM Resort’s brick and mortar casinos struggle

Things may be looking bleak for MGM Resorts, but its sportsbook is shining and thriving. New Jersey-based BetMGM is currently on track to generate revenue as high as $200m before the end of the year, which is a boost from its initial $130m projection. BetMGM is currently available in 4 states with plans to launch in Tennessee soon.

BetMGM also boasts retail sportsbooks in 5 states (Colorado, Indiana, Nevada, New Jersey, and West Virginia) with the newest market to launch in New Mexico. BetMGM’s online operations should be ready for its Michigan market before the end of the year. The company also recently received approval to open shop in Pennsylvania from the state’s Gaming Control Board. It also offers iGaming in New Jersey while it awaits regulatory approval in Michigan and Pennsylvania.

BetMGM may be in 8 markets today but analysts believe that by 2025, the market will have grown to include 28 states with legal sports betting and 13 for online gaming, which translates to a lot of expansion opportunities. Even though MGM’s brick and mortar verticals have suffered through the pandemic, this isn’t the case for the operator’s sportsbooks.

In fact, BetMGM’s continued expansion has hardly been impacted by its struggling brick and mortar casino revenue. Rather, BetMGM has gained considerable momentum this year even in the face of reduced live sports coverage. Just the other day, it was named the official sports betting partner of the Las Vegas Raiders.

This partnership will allow BetMGM to cement its footing in the industry even further. And this isn’t the first deal of this magnitude that it has made this year.

Thus far, BetMGM, which is a joint venture between MGM Resorts and GVC Holdings as discussed here, has inked other such landmark deals with the National Lacrosse League, NASCAR, the PGA Tour, sports betting network VSiN and many more.

As you have probably deduced, BetMGM has little to complain about, unlike its parent company. The New Jersey sports betting market as a whole will only keep getting bigger and better. And BetMGM will be right in the thick of things ready and willing to reap the benefits.

 

Final Thoughts

It hasn’t been a good year for the brick and mortar casino industry. As such, operators such as MGM have felt the pinch and will likely continue to do so in the coming months. The company has continued to incur substantial operating losses all through the year and doesn’t expect any substantial improvement this year.

The duration and the severity of the outbreak are still unknown so the company’s properties will continue operating at a reduced capacity until the situation is remedied. Despite the challenges, BetMGM has stepped up as a savior. And because of this thriving sportsbook, MGM just might roar as loudly as it once did. It’s just a matter of time.

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