MGM Resorts International has recently launched a new programme, MGM 2020. Its aim is to reduce overall costs, improve efficiency, and to better the company’s position for growth. It involves a series of organisational changes that are set to be driven predominantly by saving on labour. It will also require additional investment in digital capabilities.
The aim, says the company, is to be able to deliver an annualised, adjusted EBITDA uplift of US$300 million in aggregate, consisting of US$200 million by the end of 2020 and an extra US$100 million by the end of the year following.
MGM 2020 is set to be a business optimisation initiative across all of the organisation’s companies aimed at leveraging a more centralised concern. This will maximise profitability, and, thanks to key investments in the technology sector, lay the groundwork for the institution’s eventual digital transformation to drive profit growth.
Jim Murren, Chairman and Chief Executive Officer, said that this programme marked the company’s next step in organisational evolution. He said that they are building on the strong foundation that has been solidified over the past few years, extending their areas of efficiency, and achieving sustained growth and an enhancement of margins. He stated that the programme was intended to continue transforming the way the company operates and leverage the most effectual operational architecture for the firm.
The programme has been split in to 2 main areas.
Over the past 2 years, MGM Resorts has been able to centralise functions country-wide, and strategic investments in resources have helped them create centres of excellence. These can now be leveraged to create extra efficiencies and realise US$200 million of annualised, adjusted EBITDA uplift by the end of 2020, half of which will be driven by savings on labour, 25% by sourcing, and the remaining 25% by the optimisation of revenue.
The second area consists of investments in to the company’s digital transformation to drive profit growth. Significant levels of free cash flow have been generated, and the next few years will see them reallocating a portion of their annual budget for capital expenditure to specified advancements in technology. This will increase profit market share growth by innovating and subsequently elevating guests’ experience through the data digital, loyalty, and pricing capabilities and an optimisation of the business mix. This digital transformation is expected to realise US$100 million of annualised adjusted EBITDA uplift by the end of 2021.