MGM Taking Airline Approach to Boosting Earnings

• Moves follows increased parking prices and resort fees
• Higher ATM fees, recycling furniture among initiatives

In a bid to boost earnings and cut costs, MGM Resorts International (NYSE: MGM)is taking a page from the airline industry’s playbook, embracing higher fees and cost-cutting moves.

At the J.P. Morgan Gaming, Lodging, Restaurant and Leisure Management Access Forum last week, executives from the largest operator highlighted profit-generating and cost-saving initiatives such as raising ATM fees and moving room furniture from one property to another rather than buying new couches and desks.

If you’ve bellied up to an ATM machine lately, it wouldn’t surprise you to know that those fees have gone up,” said CEO Bill Hornbuckle at the conference. “Some of its fee-based based on general volumes and we were under-market in a couple of instances. We’ve positioned ourselves well and we’re already seeing a return.”

Those moves come after MGM announced last December higher parking and resort fees at all 12 of its Strip properties. It now costs $20 a day to self-park at MGM casino hotels on the Strip Monday through Thursday with that price rising to $24 daily on Fridays, Saturdays, and Sundays.

MGM Fees Could Lift Earnings, But Customers Could Balk

Last year, the Bellagio operator told analyst and investors that its cost-cutting and fee-hiking plans could add $200 million to its earnings before interest, taxes, depreciation, and amortization (EBITDA) tally with $150 million of that benefit potentially being realized this year.

On the Vegas forum on Reddit, some users decried MGM’s embrace of higher fees, speculating that the operator wants to focus on the most affluent patrons while pricing out cost-sensitive consumers. Others added the higher fees are unattractive to locals and tourists alike.

As for the higher ATM fees, MGM long had lower levies than rival Caesars Entertainment — the second-largest operator on the Strip — but the former’s move to raise those costs is a reminder to consumers that at nearly any casino on the Strip, it can cost $10 to $20 to pull money from an ATM and that’s before the customer’s bank assesses its fees.

That Couch Might Look Familiar

Frequent guests of MGM’s Strip casino and hotels, particularly those that frequent multiple properties, might encounter room furniture at one venue that they saw in a room at another. That’s because “furniture recycling” is one of the operator’s cost-cutting moves.

For example, the $300 million refresh of MGM Grand that’s currently underway has result in some fixtures being moved to the Excalibur. Previously, MGM moved some furniture from the high-end Bellagio to the Luxor.

“We’re going to reduce the age of our rooms from nine years a few years ago to four years now and that will allow us to sustain growth and average daily room rates and retention and growth of this high-value group business among other things,” said CFO Jonathan Halkyard at the J.P. Morgan conference.