US casino operator MGM Resorts International last week announced it will be implementing a new strategy aimed at reducing costs, improve efficiencies and growth.
“The program, known as ‘MGM 2020’, will be a company-wide, business-optimization initiative aimed to leverage a more centralized organization to maximize profitability and, through key investments in technology, lay the groundwork for the Company’s digital transformation to drive revenue growth,” said the company in a press release on Thursday.
The company said it expects to deliver annualized Adjusted EBITDA uplift of $300 million in aggregate, consisting of $200 million by the end of 2020 and an additional $100 million by the end of 2021.
“Today, we are taking the next step in our evolution as an organization. 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.”
The new program will be driven by organizational changes – driven by labor savings, sourcing and revenue optimization.
The company is also aiming to invest in the company’s digital transformation to drive revenue growth, namely – “innovating and elevating the guest experience through data, pricing, digital and loyalty capabilities and optimizing business mix,” said the company in a statement.
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 maximizing profitability.”
Union Gaming analysts said they were confident in the management’s ability to execute the plan.
“MGM has the opportunity to take a more defensive approach to the cost structure and streamline operations, which is particularly important today given some of the economic uncertainty ahead,” said the analysts.
The brokerage has raised its estimates and price target – raising its 2020 Consolidated Adjusted EBITDA estimate to $3.6 billion from a previous $3.5 billion.