MGM Resorts International said it plans to boost operating cash flow with an additional $300 million over the next three years by trimming the number of managers, centralizing operations and investing in technology.
The Las Vegas-based casino operator plans to trim about 3 percent of its U.S. staff by 2020, the company said Thursday morning in a statement. MGM Resorts employs about 71,000 people in the U.S., implying about 2,100 layoffs.
Though most of the cuts will be managers and above, the company said some union jobs could also be eliminated. MGM Resorts has an annual employee turnover of about 14 percent, meaning it could choose not to fill some positions.
The cuts along with improvements in sourcing goods and services as well as “revenue optimization”’ will enable to company to increase its cash flow an additional $200 million over the next two years, MGM Resorts said. Investments in technology will boost cash flow an additional $100 million by the end of 2021, the company said.
Prior to Thursday’s announcement, Union Gaming forecast MGM Resorts’ operating cash flow to rise by 26 percent over the next two years to $3.5 billion, driven by new casino openings in Springfield, Massachusetts, and Macau and the completion of Park MGM’s renovation. The additional $200 million would thus represent a 5.7 percent boost to 2020 cash flow.
MGM Resorts will operate 18 casinos in the U.S. when it completes the acquisition of properties in New York and Ohio this month. Most of the company’s U.S. operations, though, are on the Strip, making further centralization a logical move.
‘’There has always been a debate about the degree to which MGM is centralized and whether or not there is an opportunity for the company to benefit from more centralized operations,’’ said Jefferies gaming analyst David Katz.
Caesars Entertainment Corp., the largest U.S. casino operator by properties, has always been more centralized than its peers, Katz said.
MGM Resorts’ new cost-cutting strategy comes as the company finishes an aggressive investment cycle that saw it spend more than $6 billion to build three casinos and an arena. MGM said it now expects to reallocate some of its annual capital expenditures to technology.
Casino operators have historically spent a significant portion of their budget on promotions to attract players. New technology now enables operators to better target those promotions, including through mobile apps, potentially cutting costs and improving revenue.
‘’The ability to analyze behavior better and make the right inducements to get people to play is one of the most important themes in the industry,’’ Katz said.
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