MGM: HOLD WASN’T THAT BAD

Better hold you say? We had heard all quarter long that MGM held very poorly, but it wasn’t that bad – within their “normal” range. That didn’t stop management from mentioning hold 7x in one press release.

An astute client emailed me this morning that MGM used the word “hold” seven times in its earnings release.  After getting over my disappointment that I didn’t realize that first, I had a good chuckle.  This is, after all, the management team that decided a few years ago to provide a wide normalized hold range of 18-22% and get out of the quarterly hold blame game.  That strategy is no longer convenient, I guess, as management offered up that low hold impacted them by $20 million in EBITDA for the quarter.  Yet hold was still in the normal range, albeit at the low end.  Would management have been so transparent if hold had been at the high end of the range?

Probably not.  In fact, VIP hold percentage in Macau was about 70bps higher than that of Q2 2009.  Using the same hold VIP percentage as last year would’ve translated into $18 million less of EBITDA for the property, half of which would’ve accrued to MGM.  We didn’t see that discussion in the release.

So how were the numbers?  Well, despite the better than expected table hold in Las Vegas – we had expected hold well below the 18-19% actual - they slightly missed our EBITDA estimate which was below the Street.  So volumes were lower than we expected.  We aren’t even going to spend a lot of time talking about RevPAR since they can pretty much report whatever they want given the large number of comped room nights.  However, we will note that despite reporting higher RevPAR at almost every property that we projected, they still managed to report slightly lower revenue.  Put another way, higher "room revenues" were offset by lower "casino & other revenues."  We continue to believe that 2011 Street estimates need to come down.