MGM Resorts have announced the sale of two of its Las Vegas properties namely Bellagio and Circus Circus. This step is a part of its asset-light strategy. The Vegas Strip properties contribute nearly 50% to MGM’s total revenues. But since 3 years they have been reporting a lukewarm performance. MGM’s food & beverage revenues despite tepid growth in Vegas are likely to surpass its casino revenues this year.
After they entered into a long-term operational lease with MGP for most of its properties, MGM kept Bellagio and Circus Circus separately under its ownership. Considering the slow growth in Vegas’ casino business, it is a valid decision to sell these properties and is a no big surprise. The management’s plan to lower debt burden (which stood at $15.1 billion according to the latest 10-Q filing) will be achieved primarily by the monetization of Las Vegas properties.
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In 2018, the Las Vegas Strip, the Regional Properties, Macau properties contributed 49%, 25%, and 21% of total revenues for MGM, respectively. In Q3’19, primarily due to the acquisition of new Regional Properties and strong growth in Macau, the share of Las Vegas Strip declined to 45%. Thus, now, the company plans to achieve consistent single-digit growth in EBITDA by focusing on new properties as a part of the MGM 2020 initiative.
$11.7 billion in Total Revenues for full-year 2018 were reported by MGM that included revenues from Casino ($5.7 billion in FY2018 – 49% of Total Revenues), Rooms ($2.2 billion in FY2018- 19% of Total Revenues), Food and Beverage ($1.9 billion in FY2018- 17% of Total Revenues) and from Entertainment and retail ($1.4 billion in FY2018- 12% of Total Revenues)