MGM Resorts is raising fees across its properties in 2025, looking for ways to drive additional revenue amid a changing landscape. Deutsche Bank’s recent note to investors sheds light on how the company plans to navigate a challenging first quarter and strengthen its financial performance over the coming year.
As part of its strategy, MGM Resorts is introducing a series of incremental price increases. For starters, in early December, the company increased resort fees by $3 to $8 at all of its Strip properties. Deutsche Bank projects a 13% year-over-year increase in resort fees, estimating this will add roughly $70 million in incremental revenue for 2025. Additionally, MGM has raised parking fees by a low double-digit percentage, further contributing to its revenue growth expectations.
New Revenue-Generation Ideas: Tiered Seating and More
MGM Resorts is also exploring new revenue-generation strategies, which, while not expected to significantly boost top-line growth, are poised to enhance profitability. Analyst Carlo Santarelli suggests that these new avenues could lead to high-margin, low-cost revenue streams that may not yet be on investors’ radar.
One of the more intriguing ideas involves tiered seating in MGM’s restaurants, similar to the upcharge system seen in airlines for premium seating. Customers could pay extra for preferred seating areas or specific tables. While the revenue potential from this idea may not be huge, it could be a quick way to increase margins without substantial investment. Santarelli believes such “creative” concepts will be key to MGM’s success in 2025, adding that these high-margin flows could significantly impact the company’s EBITDA (earnings before interest, taxes, depreciation, and amortisation).
BetMGM: A Future Growth Driver for MGM Resorts
While MGM Resorts is leaning into fee increases and new concepts, Deutsche Bank analysts are focusing on the future of BetMGM, the company’s online gaming platform. Santarelli emphasized that BetMGM will likely drive MGM Resorts’ stock performance in 2025, as the traditional brick-and-mortar business faces slowing growth. In fact, analysts have set a price target of $48 for MGM Resorts’ stock, up from the $30s it was trading at toward the end of 2024.
BetMGM’s role in MGM’s strategy is expected to become clearer in 2025, as the company plans to improve its financial disclosure around the platform. After an investment-heavy year in 2024, MGM is anticipated to shine a brighter spotlight on BetMGM’s performance and growth prospects. Santarelli suggests that the company’s pivot toward BetMGM as a major revenue source will be key to gaining investor confidence.
Moreover, there’s speculation that MGM Resorts may take steps to consolidate BetMGM further, potentially acquiring additional stakes in the business to gain more control and improve its valuation. Similar strategies in the past, such as MGM’s 2011 stake increase in MGM China, have had favorable outcomes for the stock price, leading to expectations that a similar move with BetMGM could unlock significant value.
Operational Costs and Cost-Cutting Initiatives
As MGM Resorts faces challenges in net-revenue growth, particularly on the Las Vegas Strip, cost management will be crucial for maintaining profitability. The company has already taken steps to reduce its costs, with a goal of cutting $200 million in expenses across its Strip and regional markets. This initiative is part of a broader strategy to maintain profit margins, with management noting that net-revenue growth of just 3% is needed to keep property-level EBITDAR stable.
These cost-cutting measures will help offset slower-than-expected revenue growth, ensuring that MGM Resorts can continue to operate efficiently. Despite these challenges, Santarelli remains optimistic about the company’s ability to drive positive EBITDA growth, especially as it transitions away from its investment-heavy approach and toward higher-margin revenue sources like BetMGM.
In summary, while MGM Resorts faces some headwinds, its strategic adjustments, from increased fees to a stronger focus on BetMGM, could position the company for a more profitable 2025. The mix of new ideas, along with improved operational efficiency, may be exactly what MGM needs to navigate the competitive landscape of the resort and gaming industry.
