Hello From Las Vegas! – Oh boy, oh boy, oh boy. The biggest shake-up in a long, long time could be good for our visitors. Some of you have heard that MGM Resorts CEO Jim Murren is stepping down. For those not up to speed: He’s the guy who brought high resort fees, paid parking, and tons of other high prices and nickel-and-diming. Which ended up permeating most of the industry here.
For those new to the classroom, we generally don’t go way into the business side of Las Vegas here. Although, there have been calls for it in our Members Facebook Group. Hence, I am considering a time-to-time section at the bottom of our Members newsletter version for those interested. I’m constantly involved in talking the business side of Las Vegas with colleagues, industry people, and those in the media.
My involvement the past couple of years has aggressively centered on calling out MGM Resorts for these practices. I’ve frequently been speaking out in assorted articles about how fees were negatively affecting visitors, visitation rates, and simply leaving a bad taste in people’s mouths.
So… Ding, Dong… The Witch Is Dead! Let’s backtrack almost exactly two years, trace this amazing and fortunate downfall, talk about how and why it happened, and talk about what is next for Las Vegas!
On February 17, 2018, I wrote the following Op-Ed in the Review-Journal:
Let’s just say that suggesting the emperor has no clothes on isn’t popular. I got one very gruff phone message, and some of you may have noticed that we haven’t carried any MGM advertising nor promotions in a long, long time! (Except perhaps through a third party not associated with them). However, I really felt strongly about what they were doing to our visitors, the bad path they were taking, and was in a position to speak up.
While I can’t begin to take full credit for getting Murren out the door, what followed that op-ed was quarter-after-quarter of (usually) sub-par earnings calls. Jim Murren kept saying “wait until 2020, wait until 2020” and I was thinking “Yes, 2020 when everybody finally sees that your horrible treatment (financially) of your guests isn’t helping the business and you get shown the door.”
Disclaimer: Murren is resigning, but many feel that the company board of directors suggested that he do so.
In fact, many months ago, well back into 2019, I had specifically told anyone who will listen that Murren would be out the second half of 2020. (He’s taking his time stepping aside, and highly likely will within that window). People no longer think I’m nuts on that one!
I followed that “Warning Signs” article with a Letter To The Editor:
Here’s the crux of that letter:
As someone with more than two decades of Las Vegas tourism promotion, I can tell you what they are doing right: Lower limits, more favorable game rules, looser slots, free-flowing liquor comps, and more affordable food and beverage. They know they are going to get your money eventually. Not only isn’t it a sin to let you play longer, but even after you’ve lost that first $100 bill, you are more likely to pull out the next one because you got your entertainment value out of it.
The mantra of Strip casinos has been “people aren’t gambling as much, so we want to focus on other revenue sources.” The reality is that people aren’t gambling on the Strip as much in recent years because those casinos decided to choke the golden goose some time ago. Slots were tightened, limits were raised, house-favorable rules like lower-pay blackjack were instituted, and people simply lost their money more quickly.
Oh, and could downtown’s lower (or non-existent) resort fees, free guest parking and lower-priced dining (both fine and casual) be leaving people more money to gamble with? Food for thought.
I’ve been additionally quoted regarding the negatives of parking fees here, here, here, and here. Plus, articles such as South Point going strong with “old-school” playbook regarding casino operators who are doing it old-school (good odds, good rules, reasonably-priced food and beverage) and seeming to do just great!
The first major tip-off that all was not right in Murren-land was the sale of Circus Circus. This didn’t fit their long-term plan. Many years ago, the company had floated ideas for the empty land up there to be CityCenter North. MGM was also a key proponent of a billion-dollar (give or take, depending on the source) expansion of the Las Vegas Convention Center. Which just so happened to sit in close proximity to both Circus Circus and all of that empty land!
Side Note: Playing connect-the-dots, there is also some thought that MGM Resorts was a proponent of the Convention Authority buying and blowing up The Riviera. Bye-bye competition, especially competition to Circus Circus! Think about it: They blew up The Riv for parking. And, in doing so, demolished two perfectly good hotel parking garages. Only to pave it over and turn it into a parking lot? Seem fishy to you? The Riv also had a nice amount of convention space, which seemed to stay busy with “working class” gatherings (billiards tournaments, etc).
The convention space and garages couldn’t have been salvaged and incorporated into the new plans? Kind of the way the front tower of the MGM Grand is actually the old Marina hotel? Oh, and you can’t make this stuff up. The Convention Authority decided they don’t need the land The Riv sat on. They are thinking of selling it. So yes, you Riv fans, it was completely imploded for absolutely nothing.
But I digress…
So, when he sold off Circus and all of that land, I believe that was the beginning of the white flag. His plans were not going well, earnings didn’t seem to be going well, the company wanted the cash in hopes that it would boost investor confidence, and he was kissing the long-term plans goodbye. Especially when you consider the hub of activity which is now the North Strip, and how that land will likely only grow in value starting in 2022 or 2023, it was NOT a long-term move.
This combined with the selling of the dirt and buildings of numerous properties they won wasn’t exactly a great, long-term sign either. Think about it? Do you mortgage your house when you are doing well? Or when something financially horrible has happened and you need the money?
For the most part, you can’t be kicked out of a house you own outright. Missing payments? That can do it. MGM Resorts is now a tenant in many of their buildings. If and when this “Trump Recession” that has been predicted for a number of years now actually happens (I’m not rooting for bad economic times, so don’t shoot the messenger), and money gets tight, what happens if they miss rent on buildings they own less than 50% of?
More and more, it was evident that these short-term moves could be interpreted as Murren temporarily looking to make the company’s financial footing look good on his way out.
When did I know the jig was up? When this story hit: MGM Resorts sets goal to get 100% of eggs from cage-free sources for all properties
What’s the big deal? The target date for accomplishing this was (drum roll please): 2030. 10 years from now. Huh?
I happened to be messaging TravelZork‘s Michael Trager that evening. He was scratching his head at this one (as was nearly everybody). I told him that this was simple:
Murren has been on a huge sustainability kick. The kind you’d expect to more see out of an Eastern (US) corporation. Not a Nevada gaming company. We don’t even have mandatory recycling in Las Vegas. Murren is from the east. Connecticut. That was his life before moving out here to work for MGM Resorts. I’ve heard that he and his wife have stayed active in various activities back in their home area, flying back to participate.
My personal opinion is that Murren never really liked nor adapted to Las Vegas. To add insult to injury, MGM Resorts may be Nevada’s biggest employer, but people of his ilk and from his region still may see the state as a backwater. And, I’m not sure he ever got over that.
I also believe much of the partnership with various sports teams, plus his drive to bring an NBA team to town, was him keeping doors open for his future. Here he is throwing out the first pitch in a Major League Baseball game in Japan.
I believe he’d do just about anything to get a comparable job in sports. Why? Not much gets by me:
By the way, he just sold a ton of stock as he’s on his way out. Which means that the attempts to shore up the company’s balance sheet with short-term efforts may have gone beyond him simply looking out for the best interests of the stockholders. Wait, on the other hand, he is one!
Let that all sink in a little.
Are resort fees, parking fees, and such going away overnight? Unfortunately not. In fact, Caesars just upped theirs at four resorts. After stating a number of months ago that resort fees might be hitting the ceiling on what they can charge.
Side Note: Nobody has brought this up yet, but I think this is in prep of them becoming more gambler-friendly, and thus possibly leading to more comps. Or, what I call “fake comps”, where the room is free but you pay the fee.
We’ll keep you posted. In the meantime, we’re working harder than ever to point out ways to stretch your dollar. On The Strip, Fremont Street and Downtown, and Near-Strip. There aren’t armed guards keeping you from slightly changing your latitude or longitude to grab a $2 beer or $8 complete steak dinner! Or, a fine steakhouse dinner with a cocktail for two while keeping the check in the $100 range. (Redwood Steakhouse at Cal downtown!)
PS Members Mania is back next week. This special event deserved an exhaustive and specific focus this issue.
Hope you are enjoying this issue!
The hard-charging and endlessly fun “Raiding the Rock Vault” opened at its fourth home in nearly seven years in Las Vegas this month, exploding onto the stage at the 172 music club and restaurant near the Chippendales Theater at the Rio.
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(Producers Notes)Eating at the worst buffet in Las Vegas? The buffet at MGM GRAND LAS VEGAS.
(Producers Notes) We took a trip to the Arizona Hot Springs. Its a 6 mile round trip hike with an elevation change of 800 feet. The trail offers 3 routes and we tried 2 of the 3. The hot springs were too hot to enjoy, but we still enjoyed the hike. Pack tons of water and a sack lunch.
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