MGM CEO Sorry For High Resort Prices

Las Vegas is seeing a tourism slump. Between stricter immigration policies and skyrocketing hotel and strip prices, Las Vegas has seen an 8.8% visitor decline year over year, with one CEO admitting they’ve “lost the narrative”.

In MGM Resorts International’s latest earnings call, CEO Bill Hornbuckle has admitted that the hospitality group in charge of resort names like Aria, MGM Grand, Bellagio, Mandalay Bay, has let rates and charges get out of hand this past summer.

“When we think about pricing and things that got everyone’s attention, whether it was the infamous bottle of water or a Starbucks coffee at Excalibur that cost $12, shame on us.

“We should have been more sensitive to the overall experience at a place like Excalibur to those customers. You can’t have a $29 room and a $12 coffee. And so, we’ve gone through the organization. We think, we hope, we believe, and we’ve price corrected.”

MGM Resorts recorded a quarterly net loss of $285 million, and even though their earnings per share was $0.24, it fell short of the Zacks Consensus Estimate of $0.37 EPS. Is Hornbuckle truly sorry that his guests had to deal with higher prices? Or is he really sorry that he did not meet investor expectations?

According to him, the hotel group has made the necessary pricing adjustments at its strip hotels. It’s not clear though what areas have been adjusted though. Hotel prices only paint one part of the picture, but it’s the ancillary costs, fees at the casino, and prices at the respective restaurants and bars that really add up.

Then we have to factor the 2022 rewards program rebrand. When they changed the program name from M Life Rewards to MGM Rewards, they also massively cut the amount of tier credits a member was able to earn per dollar spent on non-gaming purchases (e.g. hotel room stays). Unless you are a very big spender, this change made it incredibly harder for existing guests and casual visitors to redeem anything worthwhile.

From a hotelier and real estate standpoint, only the MGM Resorts group has really come out saying the pricing has gotten out of hand, with other execs claiming that this is just a one of the many cycles that Las Vegas usually goes through. They are also downplaying the pricing of food and drinks, claiming that visitors are just making noise, and not looking at the overall value being offered by the various hotel groups.

However, it is hard to argue with the numbers as both visitor and hotel booking numbers are on the decline. It will be interesting to see if MGM’s price corrections translate into anything meaningful. I myself have not been to Las Vegas in ages, but I’m curious if anyone reading this recently visited and noticed improved pricing. I’d love to hear in the comments below.

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