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COVID Continues to Hit MGM’s Bottom Line

COVID Continues to Hit MGM’s Bottom Line
The MGM Grand Hotel and Casino in Las Vegas, Nevada. Win McNamee/Getty Images/AFP

The coronavirus pandemic continues to deal a body-blow to life as we know it in the United States. MGM Resorts International is out with its Q2 earnings report and they reflect what we already know COVID-19’s effects on what is an increasingly fragile US economy. The losses are unimaginable, but the optimism remains high as the betting company navigates this uncertain time.

“As we look ahead, we believe the long-term fundamentals of our business and the broader industry remain intact,” said Bill Hornbuckle, who was named MGM Resorts CEO last week. “However, the near-term operating environment will remain challenging and unpredictable as COVID-19 case trends, health and safety protocols, and travel restrictions continue to heavily impact our business.”

Diving Into the Numbers

To nobody’s surprise, MGM Resorts International reported huge losses during Q2 of 2020 when the company was in the throes of lockdowns, travel bans, widespread closures and a lack of sports for people to bet on. The scope of the losses however is a bit of a shock.

The company is reporting that consolidated net revenues dipped 91% to less than $290 million during Q2 for the three months ended June 30. For comparison sake, MGM’s 2019 Q2 revenues came in at $3.2 billion. An MGM news release pointed to a “net loss attributable to MGM Resorts of $857 million compared to net income attributable to MGM Resorts of $43 million in the prior year quarter.”

Year-over-year, MGM is also reporting a huge decline in operating income which came in at an astounding $1 billion loss during Q2 of this year. During the same period last year, MGM Resorts International posted an operating income of $371 million, after operating expenses such as payroll and equipment were deducted.

Vegas Decimated

Obviously, with the lack of global travel and even travel within the US, MGM’s Las Vegas properties were hurt badly by the pandemic. And restrictions for a post-lockdown Vegas haven’t helped matters all that much since the opening of some hotels and casinos June 4.

On The Strip which opened on June 4, MGM is again welcoming guests at Bellagio, MGM Grand, New York, Excalibur, Luxor, Mandalay Bay, ARIA, and Vdara while Mirage and Park MGM remain closed. Those open properties have reported a 90% drop in revenues over last year at this time, bringing in $151 in net revenues during Q2. The second quarter occupancy rate at MGM owned hotels in Vegas was just 43%, down from 95% over the same time in 2019.

Sports betting took a hit, table games revenue dropped 90% year over year to $142 million and hotel business fell off a cliff during Q2 when the coronavirus became a major concern. Simply put, a lack of business across the board has Vegas decimated.

Las Vegas Sands President and COO Rob Goldstein went on record last week saying, “We’re in a world of hurt here in terms of Las Vegas. I’ve never felt more gloomy than I do today about what’s happening in Las Vegas.”

Peeking Into the Future

Despite grim numbers, MGM is already seeing signs that recovery may be just on the horizon. “During Q2, we began re-opening our properties across the U.S. and have been heartened by the better than expected demand in the marketplace,” CEO and President of MGM Resorts Bill Hornbuckle commented.

June saw airport traffic in Vegas climb to over 1 million once again, which was up from 391,712 in May. Although that is an eye-opening 76.6% drop from June 2019, it is still a sign that things may be turning around for MGM, especially in Las Vegas.

In the End…

Things will turn around in the US, but getting a handle on the pandemic comes first. As we have already seen with baseball, until the virus is dealt with fully, sectors of the economy will continue to have potential business-altering hiccups.

MGM has proven that it can adapt quickly and the company does boast a team of highly qualified experts. The Bet MGM mobile brand is strong and the appetite for sports betting has shown promise since North America’s pro sports teams have returned to action.

Restrictions at casinos will continue to hinder MGM’s bottom line but the company is expected to weather the COVID storm.