MGM Resorts is expecting to issue a largest pay increase in the history of negotiations with the Culinary and Bartenders Unions to bring an end to potential strike action, with negotiations ongoing in Detroit.

This was the update issued by Chief Executive Officer and President Bill Hornbuckle, who also asserted that the company was “off to a strong start” prior to the cybersecurity issue that blighted the company.

This update came as the casino and entertainment operator reported “great momentum across our businesses” following the third quarter, which included optimism on the group’s pipeline of development opportunities. This includes New York and Japan, as well as its international digital business and BetMGM.

Las Vegas strike action to be averted?

Across recent weeks, repeated warnings have been shared by the Culinary and Bartenders Unions that thousands of casino workers could stage a walkout in Las Vegas.

The move, which could have affected 18 establishments of MGM, Caesars and Wynn, has been billed as the “largest hospitality worker strike in US history”, and action that could derail the city’s Formula 1 grand prix.

However, after Caesars came to an agreement to ensure no disruption would be brought to its nine venues, Hornbuckle noted an expectation that MGM would reach its own agreement. 

Furthermore, progress continues in Michigan, where 3,700 workers at MGM Grand Detroit, MotorCity Casino and Hollywood Casino at Greektown staged their own walkout last month.

“We continue to negotiate in good faith with the unions in both Las Vegas and Detroit with the goal of reaching agreement on new record contracts that work for everyone,” commented Hornbuckle 

“In Las Vegas, as you know, Caesars Entertainment came to a new tenant of collective bargain agreement this morning, and we are literally in session as we speak, and I believe we will come to a deal today. 

“We know from listening to our employees that they are looking for a pay increase, the combat inflation, as well as reduced workloads among other concerns. 

“This deal when announced, we’ll do just that and will result in the largest pay increase in the history of our negotiations with the culinary union.”

No more disruptions following cyberattack

MGM reported that it witnessed a “strong start” following the cybersecurity issue that affected the company earlier in the year, with records hit in Las Vegas “despite the disruption across our portfolio”.

This follows MGM confirming that it was also the victim of a data breach, with a regulatory filing by the operator subsequently noting expectations of a negative impact of approximately $100m to adjusted property EBITDA across Las Vegas strip resorts and regional operations.

This primarily arose from a loss in revenue from room cancellations in Las Vegas and service recovery efforts, with impacts through Q4 expected to be “minimal”.

In addition to praising the response of employees “during a challenging few weeks”, Jonathan Halkyard, Chief Financial Officer and Treasurer, issued confidence that “losses will be covered by our cyber insurance”.

Hornbuckle commented: “On September 12, we disclosed that we identified a cybersecurity issue affecting certain of our US systems.

“As a precautionary measure, we proactively shut down certain systems to mitigate risk to customer information, which resulted in disruption at some of our properties. 

“Over the following weeks, we systematically restored to enhance these systems, and we’re fully operational by the end of the month of September.

“Following the issues, we have seen incredible resiliency in our business to start the fourth quarter. Going forward, we do not anticipate any further operational disruptions from the incent as expected that insurance will cover the losses incurred. We expect to receive insurance reimbursements in the upcoming quarters.”

Q3 began with ‘great momentum’

Despite the above, the company said that the third quarter got underway “with great momentum”, with revenue ultimately increasing 16 per cent to $3.97bn (2022: $3.41bn).

Las Vegas witnessed an eight per cent drop to $2.1bn (2022: $2.3bn) due to The Mirage sale and aforementioned cybersecurity issue, while regional properties dropped five per cent to $924.57m (2022: $973.93m). This is also aligned to the above, as well as February’s disposition of Gold Strike Tunica.

MGM China surged to revenue of $813m (2022: $87m), with a ten per cent uptick compared to 2019’s third quarter delivered as a result of the removal of COVID-19 related travel and entry restrictions, as well as an increase in visitation.

Operating income of $370m was contrasted to a loss of $1bn felt one year earlier, with net income attributable to MGM swinging from a loss of $577m one year earlier to close at $161m. Consolidated adjusted EBITDAR came in at $1.1bn.

Hornbuckle added: “Going forward we have much to be optimistic about with Formula 1’s inaugural Las Vegas race next week and early next year the debut of the MGM Collection with Marriott Bonvoy followed by the Super Bowl. 

“Beyond these catalysts, MGM China is performing exceptionally well, and we have a pipeline of development opportunities including New York and Japan alongside the growth and development of our international digital business and BetMGM.”