MGM Resorts Eyes Sale of the Mirage Amid Growth in New Sectors

Even MGM Resorts hits a limit on how much of Sin City it can take. 

The company, which operates about 40,000 hotel rooms across 13 resorts in Las Vegas, plans to sell operations of The Mirage, MGM Resorts CEO William Hornbuckle announced Wednesday on a third quarter earnings call. The sale exploration talks come after the company announced plans in September to acquire the operations at the Cosmopolitan of Las Vegas for $1.6 billion and won a bid to become a resort partner to bring a casino to Osaka, Japan. 

The Mirage fell down MGM’s list of financial priorities amid a changing business model increasingly focused on digital gaming and away from the headache of owning real estate. 

“As we looked at capital allocation, we have enough of Las Vegas,” Hornbuckle said on Wednesday’s call. “We think there is an opportune time and that this may be it to sell an asset in Las Vegas.”

A potential sale comes after Las Vegas Sands moved earlier this year to sell its Venetian Resort Las Vegas and the Sands Expo and Convention Center to investment firm Apollo Global Management for $6.25 billion. 

Investor Dreamscape announced earlier this year plans to overhaul its Rio All-Suite Hotel & Casino into a variety of Hyatt brands without disclosing a price tag. 

The Cosmopolitan deal was part of a $5.65 billion Blackstone sale, poised to become the investment firm’s most profitable single-asset sale. MGM Resorts executed a string of sale-leaseback deals in recent years with Blackstone where the investment firm takes over ownership of the real estate while the gaming company maintains management rights.

The Mirage first opened in 1989.

“I’m excited for someone to come in and make it their marquis property,” Hornbuckle said of the Mirage. “It fell pretty far down the spectrum in terms of how much capital we’d allocate to it.”

New Frontiers

MGM Resorts continues to move away from real estate ownership and into more of an asset-light management role akin to traditional hotel companies. Many of those real estate proceeds are getting pumped into newer areas, whether it’s the potential for a $10 billion resort in Japan or its BetMGM platform. 

Hornbuckle even touted potential in boosted development at the company’s Empire City Casino outside New York City. 

But casino developments take time. The property in Japan isn’t likely to get underway until 2024 while the 97-acre New York casino may not see an infusion of capital until 2023. Online gaming investment can happen much earlier. 

“We are just getting started in the digital world,” Hornbuckle said. “It’s a space we’ve indicated many times we want to be progressive in and be dominant in, in a both domestic and potentially a global basis.”

The company increasingly sees online gaming and sports betting as an extension to its physical casino floors attached to resorts around the world. An investor presentation included in Wednesday’s call indicated the company expects to win as much as a quarter of the U.S. online gaming market share. 

Appealing to customers traveling to a physical casino as well as from the comfort of their own home or while they are on the go offers significant revenue growth for the company. MGM Resorts expects to make more than $800 million in net revenue associated from BetMGM this year compared to $178 million last year.

“We know that an omnichannel customer is worth more than a single-channel customer,” Hornbuckle said. “We’re particularly excited about the mutually beneficial advantages of our omnichannel strategy with BetMGM.”

Macau Outlook

Hornbuckle kept up with competitor Las Vegas Sands in terms of optimism surrounding heightened regulation review in the Chinese gaming destination of Macau as well as the license renewal process for next year.

Shares of U.S.-based gaming operators doing business there tanked earlier this year when the potential regulation overhaul was first announced. But Hornbuckle appeared upbeat about conversations with the government. 

“I feel good about what was said. I feel good that we had an opportunity to air some of our concerns and that they were heard and listened to,” he said. “We’ve been there like everyone else for 20 years. They’ve been fair to us to date as we have to them.”

Though, he added a caveat there were “some complications” around several issues he never elaborated on. That leaves some uncertainty on solving all the regulatory framework by the time licenses are set to expire next June. 

“Whether this gets done by June, I just don’t know,” Hornbuckle said.