MGM China, the Asian arm of the mega-conglomerate that dominates the global gaming industry, saw a strong Q4 wrap-up to 2017, and the year ahead looks even better, with the opening of the new MGM Cotai just in time for the recent Chinese New Year festivities.
GGR for MGM China surged to HKD$4.28 billion (US$547.4 million) for the fourth quarter, the company announced this week, a year-over-year increase of 10.5 percent. Earnings for the full 2017 calendar year were also up about 3 percent to HDK$15.36 billion (US $1.96 billion). That was enough for MGM China to offer shareholders a dividend of HKD$0.097 per share.
None of those numbers include the company’s highly anticipated second holding, the MGM Cotai, which opened its doors in a limited capacity this month.
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Despite the bright Q4, net profits for MGM were down in 2017 overall compared to 2016 by 23 percent, narrowly missing analysts’ expectations of 24 percent. However, it’s all in the name of future income, as the company attributes the loss in profit to the “acceleration of pre-opening costs” for their newest Cotai Strip casino.
Sands China, Wynn Macau, and the Galaxy Macau are already open on the crowded Cotai strip, but it’s the first foray into the space for MGM. Large crowds swarmed the new property for the start of the Year of the Dog, placing the first bets and breaking in hotel rooms, when the doors finally opened after several delays on February 13th.
MGM Cotai is currently only operating on a limited basis, and while the hope is that a full room inventory will be available by spring 2018, MGM China CEO Grant Bowie has not been specific on when exactly expansion plans might ramp up.
“Every time a new property opens, it normally – you hope – would create an upward inflection in the visitation. But the reality we’ve also seen is that these properties took a little bit longer to ramp up than the previous,“ Bowie told GGRAsia recently.
The new casino’s expansion plans could be hampered by China’s ongoing table cap policy, a protocol which wasn’t in place for competing casinos when they opened their doors on the Cotai strip earlier in the decade.
With Macau’s casino industry booming, the cost of living continues to grow. The MGM China currently employs about 6,000 people, a figure that is likely to double with the opening of their new casino. Demand for rental leases will increase to accommodate all the new staff, 75 percent of whom are expected to be expatriates from places like Las Vegas and Hong Kong.
“In the short term, probably the rent will rise by about five percent next year, because of the new hotel opening,” Thomas Lam of global real estate consultancy firm Knight Frank in Hong Kong told the South China Morning Post.
Lam points out that 1,500 new leasing units expected to open in the area in 2019 could offset that pricing pressure down the line.