How to convinced the Street that normal is not normal - low hold blamed for tough quarter (19.8% is pretty close to the midpoint of 18-22% normal range unless my calculator is broken)
CONF CALL
- Very robust mass market growth at MGM China
- Lower margins at Strip due to investments made to Delano, lower table hold, and increases in certain expenses
- MGM Cotai: on schedule to open in Fall 2016;
- Delano completed at end of September: has exceeded expectations
- Monte Carlo/NYNY: construction work disrupted performance
- MGM National Harbor opening Fall 2016
- MA: Confident on NO vote on Proposition 3
- Japan IR debate: remains active
- Strip REVPAR: 6% exceeded guidance of 5%
- Grew convention mix by 3% points; in 4Q, will increase convention mix by 2% points, will bring FY convention mix to all-time high of 17%.
- 4Q REVPAR guidance: 5%
- STRIP EBITDA: -$40m due to lower table hold, higher employee benefits, and marketing costs associated with Delano
- CityCenter: improved profitability at VDara
- Aria: lower EBITDA due to lower table hold %
- Vdara: 96% OCCU, 12% in REVPAR
- Crystals: another successful quarter
- $545m cash at MGM China
- MGM $1.2 bn: available liquidity; MGM China $1.4 bn available liquidity
- $404m cash CityCenter ($157m in restricted cash); total debt: $1.5bn
- 3Q: $103m capex (wholly-owned); $46 (National Harbor/MA), $98 MGM China ($17 at MGM Macau, $81m at MGM Cotai)
- MGM China
- Slot handle: 5%; revs: -7% due to lower hold
- Mass: drove 75% of profits
- Will continue to allocate tables to mass floor
- Las Vegas consumers: feeling better, lower gas prices; +4% visitation YTD
- Mandalay: will increase conv space in 2015 by 300k sq ft
Q & A
- -$40m breakout excluding low table hold impact: 70% related to changes in employee benefit side; 30% impact from Delano/Monte Carlo
- Flow through has been more volatile.
- MGM China margins:
- Controlling costs in tough revenue environment
- Mass business - pretty steady and consistent
- Convention 1Q 2015: pace continues to get better;
- 2015 convention mix should be higher than 17%; low single digit growth in convention business
- Goal is to increase REVPAR in every quarter in 2015.
- MGM China VIP/Mass margin pressures?
- Some operators have been discounting. Does not motivate customers. MGM China does not see need to discount.
- Premium mass outperforming in the Peninsula
- Highest EBITDA/per room in the industry
- Low Bellagio 3Q REVPAR: have started to push rates. Convention rates were lower than what they could have been.
- 3Q Low table hold: Mirage - largest decline on a YoY basis; MGM Grand (held well last year, held more normal this year); Bellagio table hold (being a little better this year at normal levels)
- REVPAR: luxury/core pretty consistent; revenue spend up 3-5% on luxury and core properties; consumers getting more healthy
- REVPOR was 6% in 3Q, strong performance
- 2015: convention business will be stronger in the city than 2014, will build share and benefit core properties
- 4Q: having a great convention quarter; mix up 3% points; but tough comps in 4Q 2013. Shake Shake coming in mid-December.
- F&B Vegas EBITDA: +9% in 3Q, driven by catering business driven by strong convention calendar;
- Excited about Genting project: will drive new customers to Las Vegas