MGM Resorts International’s 2025 growth prospects may hinge on its digital pivot, with a significant focus on BetMGM, the company’s joint venture in online gambling. A Deutsche Bank report by analyst Carlo Santarelli outlines MGM’s strategic shift toward digital operations as the gaming giant navigates challenges in its traditional casino business.
Digital Expansion: MGM’s Key to Future Growth
MGM’s move to embrace digital platforms is a calculated response to stagnating growth in its brick-and-mortar casino operations. With rising costs and intensifying competition, particularly in the Las Vegas market, the company is exploring new revenue streams. BetMGM, a joint venture with Entain, offers a suite of online casino games and sports betting options, representing a cornerstone of MGM’s digital growth ambitions.
Santarelli’s report underscores MGM’s commitment to making BetMGM a transparent and investor-friendly operation by 2025. Enhanced reporting metrics and possible consolidation moves, such as acquiring a greater stake in BetMGM, could strengthen MGM’s control over the platform and improve investor confidence. This strategy mirrors MGM’s 2011 decision to increase its ownership stake in MGM China, which received positive market feedback.
Revenue Boosts from Incremental Fee Adjustments
Traditional casino operations aren’t being left behind entirely. MGM recently implemented resort fee hikes across its Las Vegas properties, increasing fees by $3 to $8 per night. According to Deutsche Bank, this adjustment could generate an additional $70 million in incremental net revenue for 2025.
Beyond resort fees, MGM is considering tiered seating arrangements in its restaurants to enhance profitability. While these measures might not drastically impact revenue figures, they present opportunities to improve margins—a crucial factor as the company faces rising operating costs.
Summary of Key Measures:
- Resort Fee Adjustments: Estimated $70 million in incremental revenue.
- Tiered Seating Strategies: Potential for high-margin profitability enhancements.
- Focus on BetMGM: Emphasis on digital growth and transparency.
Challenges in Brick-and-Mortar Operations
Despite these forward-looking strategies, MGM faces significant challenges in maintaining its traditional gaming operations. Santarelli highlighted that MGM’s Las Vegas properties require a 3% annual net revenue growth to sustain flat EBITDAR margins. This sets a high bar for the company amid cost pressures and a competitive landscape.
Meanwhile, MGM China, a significant contributor to the company’s overall performance, experienced a slowdown in revenue growth during the latter half of 2024. Deutsche Bank predicts further margin compression in 2025, driven by higher operating costs tied to new amenities and infrastructure investments.
BetMGM: The Centrepiece of MGM’s Digital Vision
BetMGM stands out as a pivotal part of MGM’s future. The joint venture has already gained traction in the competitive online gambling sector, where companies are vying for market share through innovative offerings and user-friendly platforms. Santarelli suggests that MGM could look to strengthen its position within BetMGM by increasing its stake or buying out a portion of Entain’s share.
This approach would provide MGM greater control over BetMGM’s operations, ensuring alignment with its broader corporate strategy. Santarelli likened this potential move to MGM’s 2011 acquisition strategy in MGM China, which successfully bolstered the company’s growth and investor trust.
Margin Focus and Investor Sentiment
As 2025 approaches, Deutsche Bank expects investors to focus on MGM’s margin performance, particularly after its fourth-quarter earnings results. Santarelli anticipates that property-level margins will remain under scrutiny as operating costs rise across the board.
While the digital pivot represents a promising avenue for growth, the balance between traditional and online operations will remain crucial. Santarelli’s note indicates that investors are likely to weigh the risks and rewards of MGM’s dual focus, with a strong emphasis on the execution of its BetMGM strategy.
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