With its $1 billion purchase of The Mirage on Monday, Hard Rock International will become the first tribal gaming operator on the Las Vegas Strip and will stamp its presence with plans to build an iconic guitar-shaped hotel on the north end of the popular thoroughfare.
But the transformative deal also has implications for the rapidly evolving Nevada sports betting landscape, with another newcomer potentially ready to enter a crowded marketplace. Under the $1.08 billion deal, Hard Rock will acquire the operating assets of The Mirage Hotel and Casino from MGM Resorts International, subject to regulatory approvals and customary working capital adjustments, the company said in a statement. Hard Rock plans to enter into a long-term lease agreement with VICI Properties Inc. for the Mirage property, the company added.
“We are honored to welcome The Mirage’s 3,500 team members to the Hard Rock family,” Hard Rock International Chairman Jim Allen said in the statement. “When complete, Hard Rock Las Vegas will be a fully integrated resort welcoming meetings, groups, tourists, and casino guests from around the world to its nearly 80-acre center-Strip location.”
Before 2020, Hard Rock International had no prior involvement in the Hard Rock Hotel & Casino Las Vegas, an off-strip property that closed for renovations in February of that year. After being rebranded as Virgin Hotels Las Vegas, the new hotel property opened in March.
A crowded marketplace
Prior to the rebrand, CG Technology powered the retail sportsbook at the Hard Rock. CG Technology, which ceased operations after the Nevada Gaming Commission approved its sale to William Hill in August 2020, previously operated retail sportsbooks at a handful of top casinos throughout Las Vegas. As a result, the Hard Rock will still need to obtain a Nevada license to accept sports wagers statewide.
At the moment, both DraftKings and Fanduel have sports betting license applications pending in Nevada, where gaming regulations require a sportsbook to be tethered to a casino property in order to receive a non-restricted gaming license. And Betfred is still waiting for the state to approve its license to open an already built-out sportsbook at the Virgin property.
From a market access standpoint, Hard Rock should not face too many obstacles in entering the market, a Wall Street analyst told US Bets on Monday night. The bigger issue, according to the analyst, will be whether Hard Rock can hang on to longtime Mirage customers.
In 2019, pre-COVID, The Mirage reported earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) of $154 million, or $64 million after rental costs. With about $500 million in annual revenue at the property, an assumption can be made that more than a million people enter the doors of The Mirage each year, the analyst explained. Sports bettors and other MGM Resorts customers can receive a variety of perks, such as points toward free hotel stays through the company’s M life Rewards program.
“The opportunity for Hard Rock would be: Can they monetize those 1 to 2 million people and will those people stay in the MGM database?” the analyst told US Bets.
Wow … MGM Resorts has sold the Mirage hotel and casino to Hard Rock International. The hotel's name will stay the same for about three years, and then Hard Rock plans to rebrand it. https://t.co/agGDIUiSZH Wow! pic.twitter.com/y6ODguowkD
— Martin Lieberman (@martinlieberman) December 14, 2021
There is a strong possibility that MGM can retain some of the lost Mirage EBITDAR through the M life database, Truist Securities analyst Barry Jonas wrote in a research note. By the time the Hard Rock completes a multi-year renovation in rebranding The Mirage, the company could secure sports betting licensure in Nevada.
The Hard Rock database and brand may also become a formidable player in the Vegas market once fully open, Jonas wrote in the note.
On Tuesday, MGM Resorts gained 0.90, or 2.23%, to close the session at $41.24 a share. MGM shares are up fractionally since falling to three-month lows in late November.
In September, MGM acquired The Cosmopolitan of Las Vegas in a deal for about $1.63 billion. Upon completion of the transaction, MGM Resorts will enter a 30-year lease agreement with a group of partners consisting of Stonepeak Partners, Cherng Family Trust, and Blackstone Real Estate Income Trust.
$MGM — MGM Resorts will sell The Mirage to Hard Rock for $1.075B
In 2019, The Mirage reported Adj. Property EBITDAR of $154M.
MGM expects net proceeds of $815M. The deal will close in 2H 2022.
This deal comes after MGM acquired the operations of The Cosmopolitan for $1.625B
— Chris De Sousa 🇨🇦 (@ChrisRJL) December 14, 2021
“As it relates to use of proceeds, we will remain disciplined allocators of our capital to maximize shareholder value,” MGM Resorts Chief Financial Officer Jonathan Halkyard said in a statement. “This consists of maintaining a strong balance sheet, returning cash to shareholders, and pursuing targeted growth opportunities that advance our vision to be the world’s premier gaming entertainment company.”
Photo: Courtesy of Hard Rock International