Bain & Company advising MGM Resorts on restructuring
Management consultancy Bain & Company is advising MGM Resorts International on its restructuring plan (“MGM 2020”) which aims to cut costs and drive margin improvements. The plan will see the global hospitality and entertainment company lay off 1,000 of its 81,000 employees this month.
According to MGM, the vast majority of job losses are in Nevada, where the company employs 53,000 (and is the state’s largest private employer). The firm’s notable Las Vegas properties include the Bellagio, Luxor, MGM Grand, The Mirage, and CityCenter (of which it owns 50%).
A number of management-level employees have also been offered early retirement packages.
The 1,000 layoffs are part of a “business optimization initiative” announced by MGM in January. The so-called “MGM 2020” plan aims to maximize profitability through a more centralized organization, while investing in technology to drive future revenue growth.
The restructuring plan continues the centralization of company-wide functions undertaken over the past two years in order to “improve operating efficiencies.” MGM 2020 also allocates resources to technology improvements that “will increase revenues and grow market share by innovating and elevating the guest experience through data, pricing, digital and loyalty capabilities.” The company expects the digital transformation to uplift annualized adjusted EBITDA by $100 million by the end of 2021.
The overall plan expects to deliver a cash flow increase of $200 million by the end of 2020, and an additional $100 million by the end of 2021.
“We are building on the strong foundation that we have solidified over the past few years, to deepen our efficiencies and achieve sustained growth and margin enhancement," Jim Murren, chairman and CEO of MGM, said in January. "MGM 2020 is intended to further transform the way we operate and leverage the most effective operational architecture for our company."
According to publication Nevada Current, Bain & Company is advising MGM on its restructuring plan. The consultancy is a leading expert in business strategy, operations, and digital transformation across industry verticals.
Though operational streamlining and digital transformation sound invigorating on the page and in the boardroom, and often set up companies for greater future growth, they obviously have very real and immediate human effects. Those 1,000 out-of-work MGM employees are probably not very happy about Bain’s strategy consulting, for instance. And it’s hard them to be consoled by the “big picture” when it doesn’t involve them.
“We need to create a company that is streamlined, nimble and empowers leaders,” Murren wrote to employees in an April release. “If we want to unleash innovation and support dynamic new ideas, we need a new way of operating.
“From the beginning we have been transparent that our strategy would include reskilling, reorganization and – regrettably – a reduction in our workforce. These are difficult decisions, ones no leader wants to make. But they set the stage for future growth and greater job creation in the long run, a responsibility I take seriously as the leader of this Company.”
MGM recently reported a revenue increase of 12.6% in Q1 2019 compared to Q1 2018. The company also reported a 23% increase in revenues at non-Las Vegas properties in Q1, driven by the opening of MGM Springfield (Massachusetts) and the acquisition of Empire City Casino in Yonkers, New York.
