MGM and Wynn Stand Out as Top Gainers in Travel and Leisure Sector.
In a day filled with growth for gaming stocks, MGM Resorts International (NYSE: MGM) and Wynn Resorts (NASDAQ: WYNN) shone brightly after a research analyst voiced optimism about travel and leisure shares.
In a memo to clients on Monday, HSBC analyst Meredith Jansen began analyzing nine travel and leisure stocks, giving each a "buy" recommendation. MGM and Wynn were two of these stocks. The analyst prefers businesses that capitalize on scale and unique branding to create long-lasting cash generation.
She wrote, "We're bullish on emerging demand categories and the groundbreaking technologies that can further improve travel and leisure experiences."
For Wynn Resorts, Jansen predicted a $111 share price, meaning an increase of approximately 23.3%. The price target for MGM Resorts was set at $49, indicating a potential gain of 34.4%.
The Attraction of an Asset-Light Operation
Jansen emphasized the significance of the asset-light business model, a tactic employed by several travel and leisure companies. According to her, this strategy separates "the properties, or 'bricks,' from the operators' capabilities and the brands' creative thinking."
MGM has commanded this operation with ease, boasting a small stake in the Cosmopolitan's Las Vegas property assets and a minor share in VICI Properties (NYSE: VICI) gaming real estate investment trust. This real estate exposure is minimal as most of its Strip and regional casino hotels are completely owned by them. In recent years, MGM has utilized the sale of properties to obtain funds for reducing debt, buying other companies, and purchasing its own shares.
Wynn copied its approach, announcing in early 2022 the sale of Encore Boston Harbor's real estate assets to Realty Income (NYSE:O) for $1.7 billion.
While Realty Income now possesses Wynn's property for its namesake casino, Encore, and unused land on the Strip, Wynn hasn't mentioned plans to sell its Las Vegas real estate.
The Future: Travel and Leisure "Convergence"
According to Jansen, the lines between hotels, real estate investment trusts (REITs), casinos, cruise lines, and online travel agencies will continue to merge as more travel and leisure businesses adjust to an environment that demands efficient growth.
She identified three key factors in this new landscape: "The first emphasizes experience and digital transformation, the second concerns the business model strategy – what we call asset-light 2.0, and the third focuses on the significance of loyalty and rewards programs."
This last point is significant for any casino operator but holds extra weight for MGM. In July, the casino giant teamed up with Marriott International, launching the MGM Collection with Marriott Bonvoy. This long-term licensing deal, which becomes valid this month, includes MGM's 17 domestic properties.
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Source: www.casino.org
