Layoffs are hitting Mandalay Bay. MGM Resorts International (NYSE:MGM), the parent company of Mandalay Bay, announced it is laying off hundreds of its workers and reducing the work hours of others in the aftermath of the October 1 Las Vegas shooting. The hospitality company said the Mandalay Bay layoffs are a result of reduced occupancy rates and increased cancellations. While the broader hotel industry is healthy, on a more localized level, the hotel industry faces lower occupancy rates and job cuts when it is faced with the devastating effects of mass shootings and weather-related events like Hurricanes Irma and Harvey.
Mandalay Bay Layoffs: A Cost-Cutting Measure as Occupancy Drops
The hotel where the Las Vegas gunman opened fire on concertgoers, leaving 58 dead and more than 500 injured, is implementing cost-cutting measures to help it deal with shrinking revenue.
MGM Resorts announced that it is laying off hundreds of workers and reducing the hours of others following the October 1 shooting that took place at Mandalay Bay in Las Vegas. In addition to the shooter using Mandalay Bay, MGM Resorts also owns the venue where the country music festival took place.
MGM chief executive officer Jim Murren said the layoffs and reduced hours are likely a result of reduced occupancy rates and increased cancellations.
While it is not uncommon for Las Vegas hotels to make adjustments to its staffing levels in the fourth quarter, the cost-cutting measures and mass layoffs at Mandalay Bay are directly correlated with the economic effects of the October 1 massacre.
Jim Murren of MGM Resorts noted that the increase in cancellations was largely limited to Mandalay Bay and that other MGM properties had not experienced the same kind of increases in cancellations.
The layoffs were announced shortly after Mandalay Bay’s parent company, MGM, announced its third-quarter results—the first since the October 1 attack. The company reported net income of $149.1 million, or $0.26 per share. In the third quarter of 2016, MGM reported net income of $535.6 million, or $0.94 per share.
The third-quarter earnings in 2016 benefited from a $430.0-million gain on the acquisition of the Borgata Hotel Casino & Spa.
The company said that the shooting at the Mandalay Bay did not have any impact on its third quarter results; in fact, third-quarter revenue inched up to $267.7 million and year-to-date revenue increased slightly to $766.1 million. However, cancellations and the suspension of marketing efforts are expected to weigh down results at Mandalay Bay in the fourth quarter.
In a recent conference call to discuss the company’s third-quarter results, MGM executives noted that most of the cancellations took place in October and had subsided by the middle of the month.
“About half of our cancellations were isolated literally to the month of October,” Murren said. “We’ve seen bookings improve, our business improve, here in November.”
In light of this admission, the mass layoffs at Mandalay Bay must have come as a shock to employees.
Las Vegas Shooting Continues to Hurt Hotel Industry
While Murren is optimistic about Mandalay Bay’s recovery, the city of Las Vegas continues to reel from the mass shooting. In the eight weeks before the October 1 shooting, air bookings for Las Vegas were already down seven percent year-over-year for domestic flights and two percent for international flights. In the three weeks following the shooting, domestic booking tumbled 21% and international bookings fell 16%.
The near-term continues to look bleak for Las Vegas, with air bookings from November 1 through April 30 down 14%.
The question now is, how long will it take for Las Vegas tourism industry to recover from the shooting? Major cities around the world respond differently to mass shootings. In Orlando, a gunman killed 49 people at a nightclub in June 2016; that year, the city welcomed a record 68 million visitors; two million more than in 2015.
In Paris, France, though, it was a different story. In November 2015, gunmen and suicide bombers killed 130; the hotel occupancy rate in Paris plunged from 77% to 69% between 2015 and 2016. In the first half of 2017, the hotel occupancy rate recovered slightly, to 72%.
A drop in tourism could devastate the Las Vegas economy, where it accounts for close to 20% of the city’s gross domestic product.
“Mandalay Bay staff reduction result of Oct. 1 shooting attack,” Las Vegas Sun, November 12, 2017.
“MGM Resorts International Reports Third Quarter Financial And Operating Results,” MGM Resorts International, November 8, 2017.
“Las Vegas tourism reeling from mass shooting,” Travel Weekly, November 13, 2017.
“How Will the Las Vegas Shooting Affect Tourism?” NBC Chicago, November 3, 2017.