MGM Resorts International has launched a new program, titled MGM 2020, which aims to reduce costs, improve efficiencies and position the company for growth. The plan involves organizational changes driven mainly by labor savings. It will also involve further investment in its digital capabilities. The objective, according to the company, is to deliver annualized adjusted EBITDA uplift of $300m in aggregate, comprising $200m by the end of 2020 and an additional $100m by the end of 2021.
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 firm’s digital transformation to drive revenue growth.
“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. “MGM 2020 is intended to further transform the way we operate and leverage the most effective operational architecture for our company.”
He added: “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 centralized 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.”
MGM has split its program into two key areas as follows:
- Organizational changes to improve operating efficiencies
“Over the past two years, MGM Resorts has centralized key company-wide functions and invested strategically in resources to create centers of excellence. The company is now in a position to leverage these centers of excellence to create additional efficiencies and realize $200m of annualized adjusted EBITDA uplift by year end 2020, half of which will be driven by labor savings, 25% by sourcing and the remaining 25% by revenue optimization.”
- Investing in the company’s digital transformation to drive revenue growth
“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 optimizing business mix. Through the company’s digital transformation, the company expects to realize $100m of annualized adjusted EBITDA uplift by year end 2021.”
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.”