7,982,550 Reasons MGM Resorts Could Still Win in Las Vegas

Source: Las Vegas Convention and Visitor Authority.

Even though its recent Q4 and full-year results were largely disappointing -- $0.31loss per share for the 2014 fiscal year -- MGM Resorts International shares have actually gone up slightly since the earnings release on February 17th.

That's probably because even though the company had some definite downfalls during the year, there were also some bright spots. While Chinese operations were the cause of much of the 2014 pains, non-gaming operations in Las Vegas show that MGM could have a promising future.

Macau was the cause of much of MGM's pains in the recent quarter. Total revenue for MGM China declined 22% year-over-year in the fourth quarter due to the sudden massive decline in VIP revenue in Macau, an issue that started after Q1 2014 due to increased government regulation on this segment of visitors. However, MGM China made strong gains in its mass-market revenue and profit, and is increasing focus on this segment of gamers by putting most tables on the main floor instead of using VIP rooms.

That led to a shift in the division of income for MGM China in the recent quarter of 75% mass-market / 25% VIP, compared to 60% mass-market / 40% VIP in the same period last year. So even though the VIP segment may continue declining (though the comparisons will get easier in Q2), MGM will continue to bet on the growing mass market in Macau to drive profit growth there going forward.

MGM's Las Vegas earnings also didn't seem very inspiring, but the main issue there was actually a $39 million one-time property tax settlement for one of its CityCenter properties. A drop in gaming revenue at the company's CityCenter group of properties also depressed the company's domestic revenue slightly -- but investors shouldn't worry too much. (Read on to learn why!)

Las Vegas is a good bet againEven though the recovery in Las Vegas has been slow since the 2008 U.S. recession, revenue there is starting to pick up to near the peak it reached before the recession. While Macau is experiencing major declines, companies like MGM and Wynn Resorts are finding themselves highlighting their domestic growth recently thanks to Las Vegas. That's mainly because of more visitors to Sin City than ever before. Las Vegas reached a record number of visitors in 2014, at over 41 million.

Gaming revenue in Las Vegas is actually decreasing, but it's not gambling that is driving the Las Vegas economy into new phases of growth now -- it's non-gaming revenue such as convention use, dining, and entertainment. In 2014, gaming accounted for just more than one-third of the total revenue for the major casinos on the Vegas Strip. That is the lowest percentage of total revenue that gambling has accounted for in Vegas' history.

But among these non-gaming revenue growth drivers, the one that is performing best is hotel revenue. And when it comes to hotel revenue, MGM is by far the industry leader in Las Vegas.

7,982,550 reasons why MGM Resorts is the best bet in Las Vegas7,982,550 -- that's the number of pillows that were fluffed at MGM's many hotel properties in Las Vegas in 2014. That may sound like a silly reason to bet on MGM as one of the winning companies there, but here's what so many fluffed pillows look like in terms of hotel revenue.

In 2014, MGM's domestic hotel revenue increased 6% year-over-year, led by a 7% increase in revenue per available room at MGM's Las Vegas strip properties.

Both rising occupancy and higher room rates have led to an increase in MGM's overall revenue per available room for its huge number of Las Vegas hotel rooms. In total, MGM-owned and -operated hotels account for about 25% of the total hotel room market in Las Vegas.

Source: Total hotel room numbers from LVCVA; other figures from each company's reported hotel operations.

Is MGM worth a bet now?As non-gaming revenue continues to drive fresh growth in Las Vegas, MGM is the obvious winner there in size and hotel room growth. However, as the recent poor Q4 and full-year earnings numbers showed, having this winning factor in Vegas may not be enough to push total earnings into the black, with so many issues on the gaming side both in Macau and the U.S.

Long term, the transition from gambling revenue to more non-gaming revenue is a good thing. Keep watching to see if MGM can start to turn this non-gaming growth into something large enough to win not only in Vegas, but companywide in terms of posting profits instead of losses. Until MGM can do that, you may want to sleep on it before making a bet.

The article 7,982,550 Reasons MGM Resorts Could Still Win in Las Vegas originally appeared on Fool.com.

Bradley Seth McNew has no position in any stocks mentioned, and is sorryfor the bad "sleep on it" pun at the end of the article. The Motley Fool is short Caesars Entertainment. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.