MGM Resorts: Strength in Marriott Deal, Softness with Formula 1 in Vegas

Skift Take

America’s casino resort giant posts record revenues, buoyed by a recent loyalty alliance with Marriott. But Las Vegas’s Formula 1 fever appears to be cooling, casting a shadow over the fourth quarter.

Sean O’Neill

MGM Resorts International reported record second-quarter revenue on Wednesday, driven by a recovery in Macau and continued strength in Las Vegas. The casino and resort operator noted that a partnership with Marriott International boosted the company but that an upcoming Formula 1 race in Las Vegas isn’t leading to as many bookings as was hoped.

“In Las Vegas, benefits from the Marriott program will only continue to increase, particularly on the group side, unique to MGM,” said MGM Resorts president and CEO William “Bill” Hornbuckle.

Marriott and MGM Resorts tie-up

MGM Resort said it had seen benefits from a licensing agreement, which launched in mid-March, enabling guests at MGM properties to earn and redeem points through Marriott’s loyalty program.

• So far in 2024, 410,000 room nights have been booked through the Marriott partnership. About 60% of those bookings are for guests who have already stayed this year, and the rest are for reservations for upcoming months.

• The loyalty partnership is helping MGM Resorts grow yield (or boost its pricing power) rather than occupancy, as the group was already operating at 96% occupancy.

• The incremental benefit comes from two sources. First, a rate premium of about $100 per room night compared to displaced bookings. Second, increased on-property spending of about $50 per day from Marriott customers.

• MGM Resorts said the Marriott tie-up should add roughly between $65 million and $75 million in EBITDA within the first year.

• MGM Resorts executives revealed that the partnership with Marriott started a bit later than originally planned because MGM Resorts faced a cybersecurity incident a year ago, disrupting the project’s timeline.

• Earlier on Wednesday, Marriott International president and CEO Anthony Capuano said on an earnings call that his company was pleased with the early results of a partnership with MGM Resorts.

• “The short answer is it’s really going great,” Capuano said. “From both companies’ perspectives, we are elated at the volume of both transient and group leads that are coming through our systems, and with the number of folks that are considering linking their MGM rewards and Marriott Bonvoy accounts, and with the number of groups that are unique groups that are now available to the MGM portfolio.”

F1 softness at hotels

Last November, Las Vegas hosted an inaugural motor sporting event, the Formula 1 Heineken Silver Las Vegas Grand Prix. It was the biggest event in the history of Las Vegas.

Advance bookings for this year’s race have not been as strong as last year’s.

“Through our room rates, Formula One is showing some softness,” Hornbuckle said. “We are hoping and believing that this rate will continue to pace up. But that presents a potential headwind in the fourth quarter.”

“The real issue with Formula One is it’s off to a soft start as compared to last year where we had a lot of advanced pre-bookings,” the CEO said. “You can see some of our ADRs [average daily rates] are down — if you look at what we’re charging – 50%, give or take.”

It’s important for MGM Resorts to be able to take advantage of peak demand pricing for major events. In the past few years, the company has invested about $1 billion in refurbishing its Las Vegas properties, especially Bellagio. The company has submitted plans to local officials to connect three centrally located resorts: Bellagio, Aria, and Cosmopolitan.

MGM Resorts’ second-quarter

• Q2 consolidated net revenue hit a record $4.3 billion, up 10% year-over-year

• MGM China adjusted property EBITDAR surged 40% to $294 million

• As of June 30, MGM Resorts had $2.4 billion in cash and cash equivalents, with a total debt of $6.3 billion.

The company saw significant growth in its Macau operations, with net revenues jumping 37% to $1 billion. This surge reflects the continued ramp-up of operations following the removal of pandemic-related travel restrictions earlier this year.

Las Vegas Strip Resorts revenue increased 3% to $2.2 billion, primarily due to higher room rates and increased catering and banquet revenue. The company’s regional operations, including its resorts in Atlantic City, New Jersey, remained flat year-over-year, at $927 million.

Cosmopolitan loyalty merger

The Cosmopolitan of Las Vegas on Wednesday joined MGM Rewards, the group’s loyalty program. This integration lets MGM Rewards members earn and redeem points at The Cosmopolitan.

The Cosmopolitan will maintain its affiliation with Marriott Bonvoy’s Autograph Collection brand as part of the MGM Collection with Marriott Bonvoy.

Hornbuckle declined to say if the Cosmopolitan’s loyalty program, Identity, would eventually go away.

More broadly, MGM Resorts expects to carry its current momentum into the second half of the year, buoyed by a strong baseline of cash flow from domestic resorts, growth in its digital business, and the resumption of dividends from MGM China.

MGM Resorts CEO and President William Hornbuckle will appear on-stage at the Skift Global Forum in New York City in September 2024.

Accommodations Sector Stock Index Performance Year-to-Date

What am I looking at? The performance of hotels and short-term rental sector stocks within the ST200. The index includes companies publicly traded across global markets, including international and regional hotel brands, hotel REITs, hotel management companies, alternative accommodations, and timeshares.

The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number. See more hotels and short-term rental financial sector performance.

Read the full methodology behind the Skift Travel 200.