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MGM resorts bets on wealthier masses to catch up in Macau
[HONG KONG] MGM Resorts International is counting on a growing number of affluent Chinese customers to drive revenue at its new Macau property, as it strives to catch up with an industry rebound in the enclave.
The Las Vegas-based company's US$3.3 billion resort on the Cotai strip, its second property in Macau that is scheduled to open in the fourth quarter, aims to cater more to the recreational gambler than the exclusive high-rollers crowd, according to Chief Executive Officer James Murren.
"Our business model is not predicated on the VIP business," Mr Murren said in an interview on Bloomberg TV with Rishaad Salamat on Monday. "Our strategic plan is built on catering to this tremendously emerging more-affluent Chinese customer, a customer that's looking for more experimental experiences, not just a selfie moment or a gaming table."
MGM is playing catch-up in Macau, the world's largest gambling market, after the former Portuguese colony began a rebound a year ago following China's corruption crackdown in 2014. MGM's rivals Las Vegas Sands Corp and Wynn Resorts Ltd have benefited more from the return of tourists and high-stakes gamblers, attracting customers with newer facilities in the last two years.
MGM hasn't done as well from Macau's VIP rebound as it didn't have an early entry in Cotai, Mr Murren said in the interview. The new project was originally scheduled to open in 2016, but technology issues caused delays that required more time and money, he said.
MGM last month posted weaker-than-expected profit for the second quarter, with revenue in China sliding to US$449 million. It lost market share in both the high-roller business and the mass market, according to a note from Sanford C Bernstein & Co.
"The new project will finally put MGM China on the map to compete with its peers on the Cotai strip," said Bloomberg Intelligence analyst Margaret Huang on Monday. "Its focus on the mass market should help to boost margins, but there are still challenges in doing so because it is a late joiner."
Ms Huang noted the casino operator is less experienced in capturing this volume-driven business, as it has been predominantly focused on high-end at the Peninsula, its other Macau property.
Shares of Macau unit MGM China Holdings Ltd rose as much as 1.7 per cent Monday in Hong Kong trading, outperforming the 0.6 per cent gain in the benchmark Bloomberg Intelligence Macau casino index.
The Cotai resort plans to offer approximately 1,400 hotel rooms and suites, and will have a theatre with a 900-square-metre LED screen, the largest in the world.
"We're very adamant particularly because we're not an early entrant to Cotai," Mr Murren said. "We have to wow people, and that takes time." Mr Murren said the market potential in Japan, where the country is hashing out casino regulations, is "tremendous," but the opportunity is unclear at the moment as the government hasn't nailed down specifics. Japan recently released a proposal outlining possible restrictions on the industry, including limits on the amount of gaming floor space and the number of times an individual may enter a casino.
Lawmakers in the country are working on legislation to implement casinos after legalising them in December. Mr Murren said last year that he had high hopes for a US$10 billion casino resort project there.
Ultimately, it will "boil down to the one guidance they have not given, which is the tax rate," Mr Murren said Monday. If they adopt a Singapore-like model, "you're going to see a very competitive bidding for Japan."