Operator News
US – MGM Resorts announces MGM 2020 plan to reduce costs
By Phil - 4 January 2019
MGM Resorts International has announced a plan to further reduce costs, improve efficiencies and position the company for growth. The company expects to deliver annualised Adjusted EBITDA uplift of $300m in aggregate, consisting of $200m by the end of 2020 and an additional $100m by the end of 2021.
The program, known as ‘MGM 2020’, will be a company-wide, business-optimisation initiative aimed to leverage a more centralised organisation to maximise profitability and, through key investments in technology, lay the groundwork for the Company’s digital transformation to drive revenue growth. The plan expands upon themes that were outlined at the company’s 2018 Investor Day and also builds on MGM’s highly successful Profit Growth Plan that was implemented in 2015.
“We are taking the next step in our evolution as an organisation. We are building on the strong foundation that we have solidified over the past few years, to deepen our efficiencies and achieve sustained growth and margin enhancement,” said Jim Murren, Chairman and CEO of MGM Resorts International. “MGM 2020 is intended to further transform the way we operate and leverage the most effective operational architecture for our company.”
Mr. Murren continued: “When we launched our Profit Growth Plan a few years ago, we transformed our culture to embrace a ‘One Company’ approach to operations, create best practices and efficiencies, and drive significant Adjusted EBITDA growth and margin expansion. Importantly, during this time, we established key centralised strategic functions and developed crucial operational expertise to enable best practices and efficiencies. These cornerstone strengths allowed us to exceed our initial expectations on our Profit Growth Plan, as we currently operate many of the most profitable destinations in Las Vegas and across our regional markets.”
This new program will be driven by organisational changes to improve operating efficiencies. Over the past two years, MGM Resorts has centralised key company-wide functions and invested strategically in resources to create centres of excellence. The Company is now in a position to leverage these centres of excellence to create additional efficiencies and realise $200m of annualised Adjusted EBITDA uplift by year end 2020, half of which will be driven by labour savings, 25 per cent by sourcing and the remaining 25 per cent by revenue optimisation.
With the conclusion of its development cycle, MGM Resorts is generating significant free cash flow. Over the next few years, the company expects to reallocate a portion of its annual capital expenditure budget to specific technology advancements that will increase revenues and grow market share by innovating and elevating the guest experience through data, pricing, digital and loyalty capabilities and optimising business mix. Through the company’s digital transformation, the company expects to realise $100m of annualised Adjusted EBITDA uplift by year end 2021.
Mr. Murren concluded: “We had a solid finish to the year in 2018, and as we look to 2019 and beyond, we remain confident in the ramp of our newly opened properties MGM COTAI, MGM Springfield, Park MGM and NoMad Las Vegas. We will enter two attractive markets in New York and Ohio. We will continue to work toward cementing MGM Resorts as the leader in sports, following the milestones achieved in 2018 with GVC and the professional sports leagues. We remain focused on pursuing an integrated resort opportunity in Japan. MGM 2020 reinforces our commitment to increasing margins and maximising profitability.”
