No More Free Parking In Las Vegas -- Why MGM Resorts Is Taking This Gamble

By Markets Fool.com


LasVegas from behind MGM's Bellagio Resort fountains. Photo by the author, January 2016.

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Free parking on the Las Vegas strip has a been a highlight for Vegas tourists in years past. But that's about to change as MGM Resorts International announces plans to start charging for parking at its resorts in April. The gamble is that MGM's paid parking plans will drive visitors to rival casinos. There has already been an outcry from disappointed guests, even a petition to stop the move. Here's why MGM is nevertheless going forward with its plan, and why it's likely to work in the company's favor.

The end of an era

Vegas has the biggest and the most parking garages in the world. Actually, we don't know if that statement is true. Neither of these categories appears in the Guinness World Records. But it sure feels like it could be true. -- fromVegas.com

The official tourism site of the city, Vegas.com, plays up the ample free parking in Vegas as one of the highlights for why you should visit. The site was recently updated though to announce that beginning in April, MGM Resorts will charge at all of its strip resorts.

This will leave three operators on the strip that continue to offer free parking --Wynn Resorts,Caesars Entertainment, andLas Vegas Sands. It isn't unreasonable to think, in other words, that MGM's movecould benefit these companies by attracting value-conscious visitors. So why would the company take this risk?

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Because it can
MGM has grown in Vegas and now owns the majority of the properties on the strip, includingMandalay Bay, Delano, Luxor, Excalibur, Monte Carlo, New York-New York, Vdara, Aria, Bellagio, The Mirage, and MGM Grand. Among these locations, MGM has 37,000parking spaces. Of course, those are not 100% occupied, but when I attempted to park at the Bellagio during the Consumer Electronic Show in January of this year, many of the garages were full. With a record 42.3 million visitors in 2015 and expected continued growth, those parking areas are likely to get even more crowded.

MGM is gambling that most visitors are unlikely to change vacation plans for a few dollars of parking cost savings, which I believe to be true. Furthermore, there are likely to be comp parking vouchers provided for visitors that are staying or playing at the MGM casino resorts, or players that get rewards for being MGM "M Life" special rewards members.

Viewed in this light, the move could be worth hundreds of thousands, if not millions of dollars, in additional revenue every year for MGM. Even more importantly, it may encourage more visitors to opt into an MGM loyalty program or to stay at one of its hotels in order to earn free parking. The added revenue will also help fund a new 3,000-spot parking structure that MGM will build near its Excalibur resort to serve a new mega-arena opening later this year.

MGM's Bellagio Resort. Photo by the author, January 2016.

MGM understands better than any company that times are changing in Vegas, and that gambling is less important than ever. Visitors to the city have increased steadily year over year, yet gambling revenue has been relatively stagnant and now accounts for less than 1/3 of total tourist revenue.

MGM still looks like the best bet in Vegas
Instead, hotel, food and beverage, live entertainment, convention space usage -- and soon parking -- are driving revenue growth in Vegas. "When gambling was the be-all and end-all to our business models," says MGM CEOJim Murren, "we gave away anything we could to increase the gambling revenue, including cheap rooms and cheap food." Now guests expect a full entertainment experience that may or may not include gambling, and they are willing to pay up for it.

With more properties, hotel rooms, live entertainment, convention space -- and parking spaces -- in Las Vegas than any other gaming company,MGM continues to look like the best bet on Vegas' transition to a more holistic entertainment economy.

The article No More Free Parking In Las Vegas -- Why MGM Resorts Is Taking This Gamble originally appeared on Fool.com.

Bradley Seth McNew owns shares of Las Vegas Sands. 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.