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Takeaway: A Q3 miss and sluggish Q4 RevPAR guidance. While management asserted that trends have picked up in Q4, they said the same thing last Q.

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance

OVERALL

  • WORSE:  EBITDA was worse than expected and we expect Q4 will be no different.  Management did say that trends were better thus far in Q4 but they said the same thing on their Q2 conference call regarding Q3 - and look how that turned out.

LV REVPAR

  • WORSE:  Most Strip properties reported a slight decrease in REVPAR for 3Q which was expected.  However, management had previously indicated that Q3 was an anamoly.  However, MGM says 4Q REVPAR will only be flat to slightly up for 2012, depending on Sandy impact.
  • PREVIOUSLY:  "We also experienced slower than anticipated in the year, for the year convention bookings during that brief period. And based on these current trends, we expect RevPAR in the third quarter will be slightly down."

LV TRENDS

  • WORSE:  August was a rough month, but in the second half of September, business rebounded and that trend has continued into October.  Despite a 1% increase in hold on the Strip, casino revenue only increased 2% YoY. Slot revenue was up 1%. 
  • PREVIOUSLY:  "We've already seen an improvement in customer trends here in the third quarter....So, we think the trends will be moderately up year-over-year for the balance of the year on visitors."

CONVENTION BOOKINGS

  • SAME:  There will be 15% more arena events in 2013 vs 2012. 2014 booking trends are stronger than that seen in 2013.  Convention bookings pace is up 10% YoY for 2013.
  • PREVIOUSLY:  "The softness we experienced during the second quarter for convention bookings in the year, for the year has not impacted long-term bookings. In fact looking out into 2013, we're encouraged to see convention bookings, the pace being up year-over-year and although it's still early, 2014 pace is even stronger."

ROOM RENOVATIONS

  • SAME:  MGM Grand remodel program was completed in September.  Bellagio's Spa Tower remodel will be finished in mid-December. 
  • PREVIOUSLY:  "Our MGM Grand room remodel continues to progress with approximately 3,300 rooms completed. The project is on schedule for a September completion date. In the fall, we will begin the remodel of the Bellagio Spa Tower rooms, which will cost us approximately $40 million and is included in our full-year capital budget. The room remodel will begin here in August and be completed right before the holidays later on this year. We will begin remodeling the rooms of THE hotel in mid 2013. And through the Light Group, a subsidiary of Morgans, we will be introducing three new restaurants and a cutting-edge new nightclub, injecting some fresh energy into Mandalay Bay."

CAPEX 2012 TARGET

  • SAME:  MGM continues to expect $350-360 million in FY 2012 capex for the US - $80 million for MGM Macau and $80 million for MGM Cotai, which includes $56 million paid for the land concession contract.
  • PREVIOUSLY:  "We continue to expect our CapEx for the full year to be approximately $350 million." 

LEVEL TWO GAMING EXPANSION

  • BETTER:  At the end of September, MGM completed their VIP gaming expansion project on Level Two and opened the business just before the government week holiday. During the holiday period, our VIP business generated several record single-day volumes with the addition of the space.
  • PREVIOUSLY:  "On the gaming front, we are working to complete our Level Two expansion. This project will deliver a high-quality product to house over 40 VIP gaming tables. The project is expected to be completed in early fourth quarter."

COST MANAGEMENT

  • BETTER:  FTEs fell 2% in 3Q.  Stock comp, D&A, and interest expense all came in better than expected (chart below)
  • PREVIOUSLY:  "So, I think you saw that we're getting decent flow through at some of our properties, especially if you kind of figure out the hold on it. Our FTEs are flat. We're managing our expenses in other ways where we can, and we're very, very focused on driving free cash."

MGM 3Q REPORT CARD - ASCA2