MGM Resorts International reported its third-quarter 2023 earnings Wednesday, posting 16% net revenues growth year over year, mainly due to increased revenues at MGM China. Domestically, however, the company’s earnings took a hit in part due to a cybersecurity issue it faced in September, the earnings report detailed.
In Las Vegas, MGM saw an 8%, or $200 million, decrease in revenues year over year, going from $2.3 billion in Q3 2022 to $2.1 billion in the same quarter of 2023. Also in Vegas, MGM saw adjusted property EBITDAR decline 16% year over year.
MGM’s disappointing third-quarter Vegas results follow an alleged social engineering attack that impacted the company’s portfolio in September, leaving property systems down for some time. Despite this and other challenges — including negotiations with the Culinary Union to avoid a strike — MGM President and CEO Bill Hornbuckle said he’s optimistic about future-quarter growth in Vegas due to upcoming events in the city.
Cybersecurity attack
The cybersecurity attack that MGM faced in September has seemingly impacted the company slightly more than originally anticipated.
In an Oct. 5 SEC filing, the company announced that adjusted EBITDAR for its Las Vegas Strip resorts would take a hit of $100 million. But, according to the company’s third-quarter earnings report, that impact was closer to $132 million, with adjusted property EBITDAR declining from $846 million at the end of last year’s third quarter to $714 million at the same time this year.
In a Wednesday earnings call with analysts, MGM COO Jonathan Halkyard said most of the impact of the attack was from loss in revenues, room cancellations in Vegas and the company’s service recovery efforts. Halkyard said he is confident these losses, though, will be covered by the company’s cyber insurance. Hornbuckle said MGM should receive insurance reimbursements in the coming quarters.
Beyond the third quarter’s revenue drop, the company faces additional challenges brought on by the attack, including class action lawsuits. Two separate suits were filed in the U.S. District Court in Nevada in late September by plaintiffs claiming MGM failed to protect the personal data of its customers from social engineering attacks.
Following the attack, MGM’s peer Caesars Entertainment subsequently announced it faced a cybersecurity attack by the same group.
In the earnings call, Hornbuckle expressed his “deep appreciation” for MGM’s Vegas employees for their response to the cybersecurity issue, which showed “resilience and professionalism.”
Worker woes
But MGM employees along the Strip have faced issues beyond cybersecurity in the third quarter. Thousands of workers in Vegas’ Culinary Union, including MGM employees, voted to authorize a strike at the end of September, seeking wage increases and workplace protections.
Just hours before MGM released its earnings report, Caesars reached an agreement with its workers. While the terms of the agreement were not disclosed, Caesars’ CEO Tom Reeg touted in the company’s Oct. 31 earnings call that the tentative contract would be the “largest increase that our employees have seen in the four decades since we started interacting with the Culinary Union.”
In the Wednesday call, Hornbuckle said MGM was in ongoing negotiations with its Vegas union workers and an agreement was imminent. He was right — hours later the company made a tentative deal with the Culinary Union, avoiding strikes at eight properties.
Though it skirted walkouts in Vegas, MGM union workers in Detroit are striking currently. “We continue to negotiate in good faith with the unions in both Las Vegas and Detroit with the goal of reaching agreements on new record contracts that work for everyone,” Hornbuckle said on the call.
Looking forward
Despite the challenges MGM is facing, Hornbuckle is “optimistic” about Vegas’ growth in the fourth quarter and beyond. He pointed to Formula 1's inaugural Las Vegas race, scheduled for next week, as one growth driver. Hornbuckle predicts MGM will do $16 million in incremental hotel revenue for the weekend of the Formula 1 race, 50% more than any other event.
Going into 2024, MGM expects to see growth from Super Bowl LVIII, as well as the official launch of its strategic partnership with Marriott International, which will enable Marriott Bonvoy members to earn and redeem points for stays at 17 MGM properties, a majority of which are located along the Strip.
