The brand management story of a few years ago hasn’t materialized.
Was anyone wondering where those supposedly lucrative resort division and the CityCenter management fees were hiding? We were and we’ve discovered they reside in the $102.3 million revenue line item Management Operations. Not bad until you look at the profit, or should I say loss contribution of the division. Management Operations lost $3.7 million in the quarter. And we thought development fees and management contracts brought fat margins.
That is why we had a chuckle when one analyst suggested that MGM should look at spinning off that part of the business to get a Four Seasons multiple. Oh yeah? I don’t recall Four Seasons generating negative margins on their fee business. To be fair, no MGM branded hotels have opened yet so there is potential. However, MGM has a long way to go before their brand moves into the same category as Four Seasons. On second thought, MGM isn’t even known for non-gaming hotels so Sheraton would even be a stretch at this point.