MGM Resorts International has canceled room reservations at its Las Vegas properties through May 21, a company spokesman said on Friday.
All nonessential businesses in Nevada were temporarily shuttered March 17 by Gov. Steve Sisolak over the global COVID-19 pandemic, which has claimed more 200 lives statewide. Sisolak’s order was extended through April 30 and is likely to be extended further.
Whenever the Las Vegas Strip reopens, MGM officials expect to open their properties incrementally, according to a Securities and Exchange Commission filing made by the company this week.
MGM filing indicated the company’s 10 Strip casinos will be opened in phases, something that gaming industry insiders have speculated to be the path forward to reopen the popular resort corridor.
The phased approach would make sense because of “demand needs and continued compliance with any government imposed restrictions on our operations or policies we choose to implement as necessary to mitigate the impact of COVID-19,” according to MGM officials.
Because of the economic fallout from the pandemic, MGM has reduced its planned 2020 capital expenditures by 50%.
While the company isn’t scheduled to release its first quarter financial performance until Thursday, company officials in the filing predicted dire results for the first three months of 2020. MGM is predicting its consolidated net revenues total for the quarter to be about $2.3 billion, which would be about a 29% decrease from the first quarter of 2019.
Net revenue from MGM’s Strip properties is expected to come in at about $1.1 billion for the first quarter, which would be a drop of about 21% from the same quarter in 2019.
The pandemic, MGM said, will “continue to impact, possibly materially, our business financial condition and results of operations. We cannot predict the degree, or duration, to which our operations will be affected by the COVID-19 outbreak.”
Despite the ominous state of affairs — all MGM resort and casino properties in the U.S. remain closed as the country battles with the virus — officials did point, in the filing, to MGM’s solid footing when it comes to liquidity.
The company reported it has about $6 billion in cash, though its “cash outflow” for its domestic properties has been coming in at around $270 million per month while the properties remain closed.
“Our properties are effectively generating no revenue,” MGM officials said in the filing. “While we believe our strong liquidity position, valuable unencumbered assets and aggressive cost reduction initiatives will enable us to fund our current obligations for the foreseeable future, COVID-19 has resulted in significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future.”
In response to the MGM filing, Barry Jonas, a gaming industry analyst for investment firm SunTrust Robinson Humphrey, said there are worries about how long a Strip recovery could take.
“We continue to have concerns over the long-term demand profile once casinos reopen on the Strip,” Jonas said in a brief. “We think a return to normalized levels could take some time (versus) regional markets given the Strip’s exposure to fly-to and corporate visitation.”
Because of the expected continuance of sparse air travel in the U.S. into the summer, it’s widely expected that Las Vegas resorts will lean on drive-in customers from regional population centers like Los Angeles and Phoenix.
In a video message released this week, MGM acting CEO Bill Hornbuckle said sweeping changes are likely to be seen once casino resorts start to reopen in the U.S.
“Our industry will likely change for the foreseeable future,” Hornbuckle said in the five-minute video. “What it means to provide good customer service will change — everything from how often we clean to how we greet our guests could and will change.”
About 52,000 of MGM’s 80,000 employees worldwide are based in Las Vegas.