MGM shifts capacity to catch up with Macau gaming rivals
US operator opens $3.4bn casino resort on Cotai strip
NIKKI SUN, Nikkei staff writer
MACAU -- Casino operator MGM China Holdings has transferred dozens of its gaming tables from MGM Macau to its newly opened casino in Cotai to fend off rivals who have a larger presence nearby.
MGM Cotai, which opened on Tuesday at a price tag of $3.4 billion, only secured 125 new gaming tables from Macau regulators. The number is lower than the 150 granted to Sands China and Wynn Macau for their new casinos in a nearby reclaimed area. MGM China is a joint venture between billionaire businesswoman Pansy Ho, daughter of gaming tycoon Stanley Ho, and New York-listed U.S. casino operator MGM Resorts International.
The Macau authority has deployed a gaming table cap policy to limit the growth of new tables to 3% annually until the end of 2022.
The launch came amid strong recovery of the gaming sector in the former Portuguese colony, which was hit hard by President Xi Jinping's anti-corruption campaign. Macau gaming revenue jumped 36.4% to 26.26 billion patacas ($3.26 billion) in January, marking an 18th straight month of increase, according to the government.
After receiving 77 gaming tables from MGM Macau, the new resort opened with 177 gaming tables on Tuesday, with 25 more available in January 2019.
While the opening of the Cotai property boosts the total number of MGM's gaming tables by 29% to 552, analysts worry that lower-than-expected table allocation would affect the new resort's future profitability.
"The lower-than-expected number is unlikely to impact the initial ramp, it could impact the ceiling level when MGM Cotai matures over time," an UBS report said.
MGM has been a relatively smaller player among top Macau casino operators. The U.S. operator had a market share of 8% in 2016 through the joint venture, lagging behind Galaxy Macau (23%), Sands China (22%), SJM Holdings (20%), Melco Crown (15%) and Wynn (12%), according to data compiled by Daiwa Securities.
While it is common for operators to move available tables between casino properties owned by them, analysts expect the shift would have some impact on its peninsula casino given its low base of gaming tables. The new split will see the number of gaming tables at MGM Macau reduced from 427 to 350.
But Grant Bowie, chief executive officer at MGM China Holdings shrugged off the potential impact and said the move was aimed at redistributing resources and maximizing the group's profits.
The $3.4 billion casino features more than 1,390 hotel rooms and suites, a luxury spa, and Asia's first dynamic theatre that can accommodate 2,000 people. It plans to tap into the premium mass market amid the local government's drive to diversify tourism offerings from gaming. About 70% of the retail shops and half of the restaurants were launched on Tuesday.
On the same day, Fitch Ratings upgraded Macau's credit rating to "AA" from "AA-," encouraged by the government's commitment to "fiscal prudence." "The territory's fiscal and external balance sheets have strengthened to levels that more than offset the significant risks associated with its narrow economic base and concentration on mainland Chinese gaming tourism," the report read.