Corporate earnings calls are important for investors to understand how and why a business they’re investing in has been performing. When you’re not invested in a company a lot of the information could seem boring. The investing community has certain interests that customers don’t. We’ll look at that shortly.
When listening into an earnings call for Caesars Entertainment last year, I learned that rooms in five Las Vegas hotels would be renovated. Investors cared more about the revenue it might generate but as a customer, I look at the information from the other side. Sure, renovated hotel rooms would bring more money for the business but they’re great for the guest. New hotel rooms can give a fresh feeling to a hotel and casino that might feel dated. Low and behold, half of those renovations are completed and room rates are slowly climbing at those hotels.
The most recent earnings call for Caesars Entertainment discussed how successful self check-in kiosks have been for their Las Vegas hotels. Earlier this year the technology expanded to include Caesars Palace and Flamingo. The next Caesars Entertainment hotel that will introduce self check-in kiosks is Paris Las Vegas. Expect this to expand across most remaining Caesars Entertainment properties next year.
You can find more information on Caesars Entertainment’s earnings in this presentation.
MGM Resorts International also held their quarterly earnings call this week. Sadly, the call didn’t provide as much new information as I hoped for. While MGM Resorts will see greater cash flow in 2017 thanks to The Park, T-Mobile Arena, Park Theater at Monte Carlo, MGM National Harbor (Maryland), Borgata (Atlantic City) and more MGM Resorts didn’t disclose exactly how they’d use the money. They hinted at a dividend for investors but the majority of their customers aren’t investors. Moving along…
Hotel room rates continue to rise this quarter in Las Vegas and that should continue into next year. MGM Resorts is expecting record large group bookings next year. They’re already booking rooms at a 95% capacity level, so it wouldn’t be a surprise to see fewer hotel rooms available. Less available rooms usually mean higher prices. Consider this a heads up.
Focus On Luxury
MGM Resorts has a specific focus on customers with high margins. The high-end customer is considered to be everyone from the big baccarat player to someone that just wants to spend a weekend in a Bellagio suite. In fact, in July, Bellagio had their best month of EBITA (Earnings before interest, taxes, and amortization) since opening.
They note that there’s been a resurgence in high-end customers visiting Las Vegas from Asia in the past three months. This is helping the bottom line for all of MGM Resorts’ luxury properties. If you look at the earnings report it seems as if the resort on the bottom of the totem poll, Circus Circus, is dragging some of the overall numbers.
In the casino, MGM Resorts claims to have the highest table game margins for normal (not high rollers) customers. They tout discouraging low margin players and encourage recreational players. This can be best seen in the change from paying 3:2 for blackjack (smaller margin for casino and better for players) to now paying 6:5 in blackjack (better margin for casino and worse for players). Expect MGM Resorts to take a page from Wynn Resorts book and reduce craps odds in the future as they look to expand those margins.
Frankly, this isn’t anything new. Casino operators are just speaking about it freely now.
East Coast Expansion
MGM Resorts is positioning MGM National Harbor in Maryland as a more luxurious experience than most other east coast casino resorts. It will open in December and MGM Resorts says to expect major entertainment around the opening.
Borgata in Atlantic City is officially an MGM Resorts property as of this week. Integration between the two companies is just getting underway. Expect to see some streamlined services as Borgata merges their systems with MGM Resorts. At the same time, look for better entertainment as MGM Resorts plans to use their connections to help with booking.
Most notable about Borgata and MGM Resorts is that their customer databases only have 5% overlap. Borgata customers should expect to see plenty of offers to visit Las Vegas. You should also look to see when/if the Borgata Players Club changes over to M Life Rewards. Being able to earn rewards in New Jersey and use them in Las Vegas should really help expand MGM Resorts’ customer base.
Not Heard
I was hoping to hear about new developments for Las Vegas in 2017 and beyond. Sadly there wasn’t anything surprising discussed. Rumors about Excalibur have ranged from a retail area around the property to implosion and a new casino resort. This time last year, MGM Resorts also discussed potentially adding convention space at Luxor. That’s still up in the air. Perhaps we’ll get those details on the next earnings call.
