Skift Take
Don’t call it leaving Las Vegas so much as MGM Resorts taking advantage of inflated real estate prices to get into your pocket, by way of the increasingly lucrative online gaming business.
Cameron Sperance
Selling off old-school gambling halls is paving the way for MGM Resorts, operator of properties like Mandalay Bay and the Bellagio, to have one of the largest online gaming platforms in the U.S.
Company leaders claimed Wednesday their BetMGM online gaming platform is now the second-largest platform for sports betting and digital gaming in the U.S. FanDuel has the top ranking, an MGM spokesperson later clarified to Skift.
The rapidly growing platform, expected to clear $1 billion in net revenue next year, presents an opportunity for MGM Resorts to reach customers beyond the walls of its traditional casino resorts. But selling off those properties is helping to pay for the infrastructure required to beef up BetMGM.
“The idea omnichannel can and will work and not be cannibalizing is something I’m excited about moving forward,” MGM Resorts CEO William Hornbuckle said on a company investor call Wednesday.
Hornbuckle tried to downplay any concern the rise of sports betting and online gaming would come at the expense of brick-and-mortar casinos. He pointed to company data showing MGM’s Detroit casino has built up in its Michigan market share over the summer while BetMGM maintained a leading online gaming presence in the state.
Wednesday’s earnings call came hours after MGM Resorts announced plans to sell most of its stake in its lodging real estate trust, MGM Growth Properties, to Vici properties for $4.4 billion. The deal values MGM Growth at $17.2 billion and includes 15 resorts across Las Vegas and elsewhere in the U.S.
MGM Resorts will retain a roughly 1 percent stake in the lodging trust, pending the deal’s expected closure sometime in the first half of next year.
The sale is the latest in the ongoing asset-light model push at MGM Resorts, which has offloaded properties like the Bellagio and Circus Circus in recent years. The Bellagio deal was a sale-leaseback where MGM Resorts continues to operate the resort on behalf of current owner Blackstone.
The casino operator announced a similar deal with Blackstone last month for its CityCenter complex, which includes the Aria and Vdara resorts.
The overall strategy enables MGM Resorts to devote more resources to other growth division, like BetMGM as well as newer markets like Japan.
“We have long discussed our goals of simplifying our corporate structure and monetizing our real estate at premium valuations to become asset-light,” Hornbuckle said before noting of the recent string of deals in the last three months, including a $400 million sale of its MGM Springfield in western Massachusetts in May: “We’ve been busy on this front, and over the past 90 days, we’ve meaningfully advanced the strategy.”
All Eyes on iGaming
The omnichannel experience Hornbuckle described for the casino resort business means being able to meet customers in a variety of means, from the sprawling acreage of a Las Vegas resort to the screen of one’s iPhone while they sit in their own living room.
Online gaming, or iGaming, is an increasingly important part of the revenue stream at MGM Resorts. Thirty-one percent of new players in MGM’s M life Rewards program in the second quarter came from the BetMGM platform.
MGM’s projected more than $1 billion in revenue for the online gaming platform next year is a rapid ascent from last year’s $178 million.
Online gaming has been a major focus for MGM in recent years, but it hasn’t always worked in the company’s favor. Entain turned down MGM’s $11 billion offer earlier this year. But Barry Diller’s IAC/InterActive took a $1 billion, or 12 percent, stake of the company last year with the intention of beefing up its online gaming presence.
With billions in real estate capital on track to return to the company, MGM Resorts considering another attempt at a merger or acquisition would seem natural. But Hornbuckle isn’t tied to that idea — for now.
“Our strategy doesn’t refer and hinge simply on one other company,” he said of potential capital reallocation following the real estate deals closing. “We’ll continue to look. The good news is we’ve got six to nine months before these transactions close, and time is our friend. We’ll be disciplined about the approach.”
A Roaring Rebound
MGM Resorts posted a $105 million profit for the second quarter, a strong rebound from the $857 million seen in the second quarter of last year and a $332 million loss the first three months of this year.
Leisure travel into Las Vegas was largely responsible for the recovery momentum, with average occupancy for the quarter at 77 percent — up from 43 percent during the same time last year. Occupancy for the company’s Las Vegas resorts averaged 86 percent for the month of July.
“The question has been asked a lot in the last few quarters on when we get to 90 percent [of pre-pandemic levels], and I think we’re there,” said Corey Sanders, chief operating officer at MGM Resorts. “When we get back to exactly on 2019 levels will be when the convention business comes back.”
While the company’s leaders where overwhelmingly bullish on group booking activity heading into the remainder of this year, and especially next year and beyond, they were less chatty about what rising cases of the Delta variant might do for the company’s recovery path.
“At this time it’s too early to speak to any meaningful impact to our business,” Hornbuckle said. “We are monitoring the situation closely.”