MGM Resorts’ US strength bucks up Macau weakness

mgm-resorts-vegas-revenueCasino operator MGM Resorts says a strong performance by its recently enhanced US operations overcame continued weakness at its Macau joint venture in the third quarter of 2016.

Figures released Monday show MGM Resorts reporting revenue of $2.73b in the three months ending September 30, 10.6% higher than the same period last year. Net income soared over 700% to $535.6m thanks to a $430m gain on the company’s recent acquisition of the remaining 50% stake of Atlantic City’s Borgata casino from former partner Boyd Gaming.

MGM CEO Jim Murren celebrated the “tremendously strong quarter,” which generated the best net revenue and earnings at MGM’s domestic properties since the pre-recession year of 2007.

Gaming revenue at MGM’s wholly owned domestic resorts was up 23% to $1.9b thanks to a full share from the Borgata, which generated $151m during the quarter. Had the Borgata deal not gone through, domestic revenue would have been up a more modest 7%.

Domestic table game hold percentage gained 3.4 points to 23.7% and slots revenue jumped 19%, although that latter number falls to just 3% absent the Borgata deal. Room revenue was up 14%, as Vegas occupancy nudged up one point to 97% despite average daily rates rising 9% to $154.

Things were less rosy at the MGM Resorts China joint venture, as overall revenue fell 6% to $500m. Mass market table revenue fell 21% while VIP table revenue was down 26% thanks to declines in both turnover (-14%) and win rate (-0.7 points).

Despite the declines, Macau earnings rose 17% to $150m and operating income was up one-third to $84m thanks to ongoing cost-cutting efforts and a greater focus on mass market customers. On September 1, MGM increased its stake in MGM China by a further 4.95%, giving it a 56% stake in the Macau JV.

Looking ahead, MGM’s National Harbor casino will open in Maryland next month and Murren called the $1.4b resort “crushingly beautiful” and the company is “so pumped about it.” Noting the rancorous political climate in nearby Washington, D.C., Murren joked that National Harbor was “the only thing that everyone can agree on.”

Vegas revenue will likely continue to rise thanks to MGM’s recent announcement that it’s boosting its loathed resort fees yet again. Starting Wednesday, resort fees are going up $3, or about 10%, at Aria, Bellagio, Vdara, Luxor, Excalibur and Circus Circus. The new hike comes just three months after MGM last boosted this ‘money for nothing’ charge by $2.

In Macau, MGM China CEO Grant Bowie said the in-development MGM Cotai property wouldn’t feature any junket-driven VIP rooms when it opens in spring 2017. Bowie said MGM was talking with some junket operators but felt it was prudent for MGM to build mass and premium mass momentum before enlisting junket assistance.

Bowie said the company needed to be pragmatic about the fact that the junket business was stagnant. Bowie insisted that MGM Resorts would continue to collaborate with junkets at its peninsula property but didn’t see the wisdom in opening new junket VIP rooms that would only serve to further dilute the overall VIP market.

Finally, Murren threw some shade at Las Vegas Sands’ boss Sheldon Adelson for his recent claim that Sands had a leg up on its rivals in Japan because Osaka officials “think we’re the best company.” Without mentioning Adelson by name, Murren said that any operator who claimed to have an inside track “in Osaka, for example” was “wrong.”

November 8, 2016: posted in News And Reviews No Comments

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