Indy Gaming: For MGM, F1 windfall helps offset growing labor costs
Math was never my strongest subject. When I worked for Anchor Gaming, the chief financial officer sent me to a one-day seminar on corporate financial reporting. It was one of the best explainer courses I ever attended and I still use some of the tools I learned in my reporting.
I bring this up because this week’s Indy Gaming is full of year-end and quarterly numbers — from MGM Resorts explaining why F1 was good for the company to an American Gaming Association report on where the Nevada markets fit into the nationwide gaming picture and an update on the parent company of Reno’s Atlantis.
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The three-level Bellagio Fountain Club, which was built trackside at the front of the Bellagio Casino Resort for November’s three-day Formula One Las Vegas Grand Prix, combined high-end dining, grandstand seating and a rooftop viewing space the length of three football fields.
MGM Resorts International did not divulge how much it spent to build and operate the temporary building, but CEO Bill Hornbuckle will tell you the expense was worth the effort.
Gaming and nongaming revenue associated with F1 boosted MGM’s financial results on the Strip for the fourth quarter, the company said last week. Total Strip revenue was almost $2.4 billion, a 10 percent increase from 2022.
More than $1.14 billion of the Strip’s total was attributed to gaming, a 14 percent increase. Strip hotel revenue was more than $875 million, 14 percent higher than a year ago, and factored into the overall $1.3 billion in nongaming revenue.
“Simplistically, we believe the fourth quarter included some expenses associated with F1 and the high-end play that wouldn't necessarily be considered recurring,” Deutsche Bank gaming analyst Carlo Santarelli wrote in a research note about MGM’s Strip results. He suggested the wagering hold percentage of what MGM’s Strip casinos kept from losing gamblers “added $140 million” to the company’s table game revenue.
Santarelli also believes the F1 windfall offset the expenses increased from a new five-year labor agreement with Culinary Workers Union Local 226 that will provide a 32 percent wage jump over the life of the contract for more than 25,000 employees. The agreement came a week before the race.
Companywide, MGM’s total revenue in 2023 was $16.2 billion, of which $8.8 billion came from the Strip.
During Formula One, the Fountain Club hosted invited casino customers from MGM’s Strip resorts. Other visitors paid a reported $11,000 for a three-day ticket to watch the races and dine on meals prepared by MGM’s star chefs.
In prepared remarks to analysts on the company’s quarterly conference call, Hornbuckle said MGM gleaned “valuable insights from the event, and specifically on how to better price and program all of our resorts and streamline the preparation work for future years.”
MGM Chief Operating Officer Corey Sanders told analysts Bellagio and The Cosmopolitan of Las Vegas saw the most activity from the race given their location on a straightaway and the turn toward the start-finish line.
He suggested the company would treat this year’s race “as more like a normal November weekend” for its south Strip resorts, “because of the lack of [racing] activity there.”
MGM’s conference call came two days after Super Bowl LVIII, which, coupled with F1, put the company “at the forefront of two of the largest sporting events ever to take place in Las Vegas,” Hormbuckle said.
In the week leading up to the Super Bowl, Mandalay Bay served as a central location for the NFL, including the media center and the four-day Super Bowl Experience. And Allegiant Stadium sits across Interstate 15 within walking distance of several MGM resorts.
While financial figures were not disclosed, Hornbuckle said the Super Bowl led to average daily room rates topping $1,000 per night at several of the company’s properties with “three of the top five room revenue days ever recorded and a near-record event for gaming volume.”
MGM’s properties, he said, typically have a strong performance during Super Bowl weekend, but the game being played in Las Vegas for the first time “amplified those results dramatically.”
AGA: Las Vegas Strip is still the nation’s gaming revenue capital
The Las Vegas Strip remained the largest gaming market in the U.S., producing more casino revenue than the next four regions combined, the American Gaming Association (AGA) said Tuesday.
Nationwide, casino revenue was $66.25 billion in 2023, a 10 percent increase from 2022 and the third consecutive year that revenue from traditional casinos, sports betting and online casinos set a new record. The figure doesn’t include tribal casinos.
The Strip remained the nation’s No. 1 gaming market with more than $8.8 billion in revenue. Atlantic City was next highest with more than $2.8 billion. Click here for the full list.
Three other Nevada gaming regions were part of the AGA’s top 20 markets: the Boulder Strip (which includes Henderson) was No. 10; Reno-Sparks was at No. 13; and downtown Las Vegas was No. 17 with $811.3 million.
Nevada casino net income is up, but higher costs are reducing profits
Nevada’s casino industry recorded its second-highest fiscal year profit in 2023, according to new figures recently released by the Gaming Control Board. However, increases in operating expenses and costs drove down the net income covering 300 casinos statewide.
“There were 10,000 more employees in 2023 than in 2022,” said Michael Lawton, the board’s senior economic analyst.
The figures were disclosed in a statement that covered the annual Gaming Abstract, which the board released Friday. The abstract includes results from the last six months of 2022 and the first six months of 2023.
The 179-page report covered what casinos statewide and by county collected in total revenue — money spent by customers on gaming, hotel rooms, food, beverage and other attractions. The report also breaks out expenses by property.
For the 12 months, statewide net income for casinos was more than $3.4 billion, a 21.4 percent decline compared to just under $4.4 billion a year ago. Total gaming and nongaming revenue was almost $29.9 billion, an 8.9 percent increase. However, the net income decline was due to a 13.5 percent increase in expenses associated with casino operations and a 16 percent jump in general and administrative costs.
The higher expenses were part of the gaming industry's multiyear recovery from shutdowns during the pandemic. As additional business operations reopened, staffing costs and other expenses increased.
The control board said casinos statewide paid almost $1.1 billion in gaming taxes.
On the Strip, resorts had a total revenue of $20.5 billion, an increase of 11.6 percent. Gaming revenue was $5.5 billion with nongaming revenue accounting for $15 billion. Net income of just under $1.4 billion was the third-highest total of all time, but the figure was a decline of 33.6 percent from the previous fiscal year given the market’s increased expenses.
New Northern California casinos keeping business away from Reno’s Atlantis
Reno-based Monarch Resorts said its hometown Atlantis is now facing competitive challenges from new tribal gaming properties in Northern California. However, the company’s financial prospects are supported by its flagship resort in Black Hawk, Colorado.
Monarch released its fourth-quarter and year-end results on Valentine’s Day through a filing with the Securities and Exchange Commission, reporting net revenue of almost $501.5 million in 2023, up 4.9 percent from a year ago. Profits of $824 million were down almost 6 percent.
Monarch doesn’t break out the results separately for its two properties.
In a statement, CEO John Farahi said Atlantis operates in an “extremely competitive promotional environment” with tribal resorts offering various discounts and incentives to keep customers from making the drive to Reno. In the past two years, the Sacramento area has seen three new casinos open, including properties operated by Caesars Entertainment and Boyd Gaming.
To help entice customers to make the drive, Atlantis has been renovating the hotel and making other upgrades. The improvements, which have taken place during the past year, will continue through June.
After talking with Monarch officials about the results, Truist Securities gaming analyst Barry Jonas told investors in a research note that Atlantis appeared to increase its share of the Reno market despite the challenges.
“We continue to see Reno as among the most competitive markets in the U.S., with Northern California tribal gaming and irrational promotional intensity in Reno making sustained growth difficult for Atlantis,” Jonas wrote.
The analyst noted that Atlantis saw a jump in business from Bay Area residents making the trek to Northern Nevada to wager on Super Bowl LVIII, particularly the San Francisco 49ers. California does not have legal sports betting. Jonas said the overtime 25-22 loss by the favored 49ers to the Kansas City Chiefs “was a benefit” to the sportsbook’s hold percentage on wagers.