Published on October 2nd, 2020
MGM is in trouble but it’s certainly not alone. The pandemic changed everything. The once-bustling cities of Las Vegas and Atlantic City went dark for a few months after the shutdown.
Because casinos were regarded as nonessential businesses the state-mandated closure and its effects can still be felt to this day.
While casinos such as MGM have done their best to stay afloat during these challenging times, most have been forced to cut staff as well as furlough employees, and the numbers are confounding.
Casinos recently opened their doors after almost 5 months after they were shut down as a result of the pandemic. However, gambling is far from what it used to be.
These days, punters and customers are subjected to mandatory temperature checks, masks requirements, social distancing guidelines, as well as constant disinfecting protocols.
The crowds are nothing like they used to be before; these days they are much smaller. Casinos such as MGM are only allowed to operate at a 15 percent capacity for good reason.
This long shut down, as well as the reduced capacity, has lowered revenue, which has caused casinos to let go of hundreds if not thousands of workers.
According to NJGamblingFun.com, MGM Resorts International is one of the biggest casino operators in not just America but the world. But now, it’s found itself in a pickle thanks to a struggling economy.
It’s been handing out pink slips to its employees. Just 2 months ago, it had to let go of more than 17,000 staff members, more than one-quarter of its workforce before the pandemic swept across the world.
The layoffs have been happening countrywide. With the reduced capacity, it’s been a challenge for MGM to fill rooms and casinos since it opened its doors again in early June.
2 of MGM’s casinos, the Park MGM in Las Vegas and Empire City in New York, still haven’t been able to resume operations.
MGM’s struggles have become even more pronounced due to the lack of convention guests. Hotel occupancy is still super low at 43%, which is more than half what it was last year.
Rooms in various properties like MGM Resorts’ MGM Grand and Caesars Entertainment Inc.’s Paris used to go for premium prices but now they are available for less than $50 a night.
These numbers underscore the challenges that continue to be faced by industries and economies that are reliant on air travel, as individuals are still very unwilling to venture beyond their safe homes for entertainment or fun.
“While we have safely resumed operations at many of our properties and have returned tens of thousands of our colleagues to work, our industry — and country — continues to be impacted by the pandemic, and we have not returned to full operating capacity,” Chief Executive Officer Bill Hornbuckle stated in a staff memo.
According to reports, MGM will continue to sort out its employees’ healthcare benefits through September. If things should start looking up soon, any employees that will be recalled by December 2021 will maintain their previous titles and seniority.
As of now, MGM’s properties are not effectively generation revenue, which means that the best way to reduce expenses is by diminishing employee costs.
Unfortunately, this will result in hiring freezes, furloughs, headcount reductions, as well as canceling merit pay increases.
Casinos have also been forced to implement programs that have seen senior management, directors and executives receive some or part of this year’s salaries as restricted stock in lieu of cash.
What Does The Future Of MGM look Like?
The future of MGM Resorts International looks bleak right now. Online gambling has been instrumental in helping to keep the casino afloat but even this may not be sufficient enough for MGM to lift itself from the current hole it finds itself in.
Casinos may have resumed operations, but it’s core business, which is derived from brick and mortar casinos as well as visiting patrons and guest, has now been deferred for the foreseeable future.
While MGM still has properties all over the world in places such as China and other regional markets, its biggest operations lie in Vegas, where it used to enjoy the largest share of the MICE business, that is, meetings, incentive travel, conventions, and events.
This business has all but evaporated with the pandemic and there are no signs that things will normalize soon or until at least the cure for the virus is found.
MGM stocks are also struggling with experts predicting a loss of approximately $1.10 per share, which does little to inspire optimism.
Even worse, analysts believe that these losses will continue to be experienced through 2021 or longer. So just how prepared is the conglomerate prepared to ride out the storm?
MGM’s cash reserve of $4.84 billion may be sufficient to carry the company for several quarters but it needs to come up with a solution fast such as asset sales in a bid to boost its liquidity status.
Otherwise, the company risks extinction. The company may also be forced to add to its already heavy debt burden in order to keep its head above water.
Although most of MGM’s properties have since reopened, it could take years before revenue returns to the levels that were experienced before the pandemic.
So all that it can do now is wait to see if conditions will continue to improve once the virus has been eliminated.
It’s no secret that COVID-19 has hit some businesses harder than it has others and the casino industry is one of the worst affected.
In particular, MGM Resorts International among other casinos, has recorded the lowest net revenue numbers that they’ve recorded in years.
As a result, these establishments have been forced to close down operations as well as fire thousands of employees.
Sadly, we cannot yet predict the degree or the duration to which casino operations will continue to be impacted by the pandemic. What we know for sure is that the effects will be material and long-lasting.