MGM Sings Same Song on Earnings Call

MGM Resorts International released its third quarterly results today, and the relatively soft numbers from Las Vegas show that, despite brave talk otherwise, the Strip is still far from growth mode.

In an earnings conference call, MGM Chairman, CEO, and President Jim Murren spoke of a tough July and August, followed by a better September that “has carried into October.” So we’re just about at the top of the hill, with the hard times behind us, and a nice downhill stretch (with plenty of convention bookings and nothing but positive prospects for increased consumer spending) ahead of us.

I can’t speak directly to earnings in September, but I’ve got to say that we’ve heard that song before. Since the start of the recession, it seems like a once-a-quarter ritual: casinos release their quarterly results, which usually disappoint, are flat, or show moderate growth, and their executives proclaim that the worst is behind us.

By way of comparison, here are a few extracts from Murren’s opening statement from the Nov. 3, 2011 conference call that discussed that year’s third quarter:

“We continue to see consistency in this recovery. You can see that in the improving citywide trends, when you look at Las Vegas, but also, importantly for us, our operating results … looking at the current trends, they remain very positive. Bookings and current asking rates are up. In fact, the convention business is particularly strong … .

“And so our fundamentals of our business are solid, rising revenue is leading to higher profits. Core consumer and business demand is expanding and is broad-based. And for those reasons, we’re quite optimistic for the prospects of our company in the current quarter, as well as the coming years.”

From that, you would have felt certain that the fall of 2011 was going to be the springboard to a glorious 2012. And yet, one year later, we’re in virtually the same place. In fact, Murren said that the third quarter 2012 presented “tough comparisons,” meaning that the previous year’s third quarter—which previously he’d said was a sign of strong future growth—was something of an anomaly.

That’s not to say that some things aren’t looking up at the company: CityCenter continues to improve, and the company is well-positioned for expansion in Macau. But seven of its 10 Las Vegas properties pulled in less money in the third quarter of 2012 than they did in the same period in 2011. Bellagio’s miss was put down to that usual boardroom stand-by, “poor hold,” meaning a variance from the traditional hold percentage at the tables. But is it possible for six other resorts in the company’s Strip portfolio to suffer three months of poor hold, or is it more likely that visitors to Las Vegas just aren’t spending like they used to?

None of this is meant to single out MGM. A host of other casino companies have reported losses and missed estimates this quarter. And obviously, no CEO worth his salt is going to get on an investor call and frankly admit that business isn’t what it used to be, and that the future’s not looking so bright, either. But it’s the job of those outside the company to try to find bigger trends and understand what four years of “happy days are (almost) here again” really means for Las Vegas. For my money, it means that diversification is more important than ever, and that, while the city has rebounded better from the recession than others (my storm-battered hometown of Atlantic City comes to mind), its leaders need to seriously think about how they can run successful resorts in a changed world.