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MGM Grand will be the home of the big fight on May 2nd. Image source: Wikimedia Commons
It might be too early to call the Floyd Mayweather Jr. vs. Manny Pacquiao fight on May 2nd the boxing match of the century, but it is shaping up to be the biggest fight in Las Vegas since Mike Tyson fought Evander Holyfield II.
The purse could be in the neighborhood of $300 million, and it will not only benefit the fighters, who are splitting the prize 60/40 in favor of Mayweather, but also Las Vegas as a whole. The potential economic impact is staggering.
MGM Resorts owns most of the south end of the Las Vegas Strip. Image is in public domain.
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Staying in Las Vegas that weekend will cost a fortune
Soon after announcing the fight, MGM Resortsbumped room prices at the MGM Grand for Friday, May 1st to $1,601 for a standard king room. By comparison, just one week earlier, the standard rate is $198 with prices regularly dipping below $100. Unless you are an MGM VIP or high roller, you cannot make any kind of reservation at MGM Grand on Saturday.
The neighboring Signature at MGM Grand will set you back $1,500 on Friday, while the Bellagio will cost $1,439 and ARIA $1,199 -- all for standard king rooms the night before the fight.
MGM Resorts has a whopping 40,714 rooms in Las Vegas. Based on rate comparisons for weekends before and after the big fight, we estimate the company will be able to command an average $500 premium per room duringthe fight weekend. For MGM Resorts alone, the potential windfall would be $40.7 million, and that is before anyone sits down at a gaming table or places a bet.
How Las Vegas could make hundreds of millions from Mayweather vs. Pacquiao
The Mayweather vs. Pacquiao fight will put previous Las Vegas fights to shame when it comes to economic impact. The figures below should provide some interesting context for just how large that impact might be:
- Mayweather and his camp believe that any of his fights would have a $100 million impact on the economy.
- According to the Las Vegas Convention and Visitors Authority, the Mayweather vs. Robert Guerrero bout had an $11 million local non-gaming impact on Las Vegas in 2013
- Ticket prices for Mayweather vs. Maidana II last September reached $1,655 in face value, and rooms at the MGM Grand were $405 per night.Hotel rooms for Mayweather vs. Pacquiao are going for four times that much, and the face value of tickets has reached as high as $7,500
In other words, a normal Mayweather fight might have a $100 million impact on the Las Vegas economy, but this event is expected to shatter all records.
Where investors can make money without taking a punch
It is not uncommon for Las Vegas casinos to point to a big event as a driver of earnings. For MGM Resorts, Mayweather vs. Pacquiao will be a highlight in the second quarter.
The company has the advantage of owning a near-monopoly on the south end of the Las Vegas Strip, where the MGM Grand is located. Mandalay Bay, Luxor, Excalibur, New York-New York, Monte Carlo, CityCenter, and Bellagio surround MGM Grand and are all part of the MGM portfolio. It is not unreasonable to assume the direct financial impact of the fight will be north of $100 million. Most of that should flow straight to the bottom line due to minimal marginal costs.
Resorts operators such asCaesars Entertainment, Wynn Resorts, and Las Vegas Sandswill also see a positive impact, but with less proximity to MGM Grand, the impact will be muted.
No matter who wins the fight, MGM Resorts is the clear winner in Las Vegas. The biggest fight of the century could make a significant impact on earnings in 2015. In a city that is still struggling to recover from the financial crisis, that is good news no matter who you root for on May 2nd.
The article Mayweather vs. Pacquiao Could Bring $400 Million to Las Vegas originally appeared on Fool.com.
Travis Hoium owns shares of Wynn Resorts, Limited. 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.
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