How Important Is Macau For MGM Resorts?

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MGM Resorts International
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The opening of MGM Cotai in February 2018 marked an increased dependence of MGM Resorts (NYSE: MGM) on the gambling capital of the world. Notably, MGM Macau and MGM Cotai are the largest MGM venues by casino square footage and gaming tables. Recently, casino operators in Macau have observed headwinds from the ongoing demonstrations in Hong Kong and the unresolved U.S.–China trade dispute. Trefis analyzes trends in Macau’s Gaming Market in an interactive dashboard to compare yearly trends in gross gaming revenues and visitor arrivals with the recent declines to assess the impact of key parameters on MGM China’s casino revenues. Additionally, you can view our MGM Resorts’ Revenue dashboard to observe the revenue contribution from various geographies and key trends in MGM China’s gaming sources.

A Quick Look at MGM Resorts Revenues

MGM reported $11.7 billion in Total Revenues for full-year 2018. This included four revenue streams:

  • Casino: $5.7 billion in FY2018 (49% of Total Revenues). This segment includes income from regulated gambling activities at the company’s properties. MGM China, Regional Operations and Las Vegas properties contribute 39%, 36% and 25% of the casino revenues, respectively.
  • Rooms: $2.2 billion in FY2018 (19% of Total Revenues). This segment includes income from visitors/tourists who lodge in the company’s properties. Las Vegas and Regional properties contribute 80% and 14% of the room revenues, respectively.
  • Food and Beverage: $1.9 billion in FY2018 (17% of Total Revenues). This segment includes income from restaurants at the company’s properties.
  • Entertainment and Retail: $1.4 billion in FY2018 (12% of Total Revenues). This segment includes income from retail stores and live performances at the company’s properties.

Despite Special Junket Rooms, Mass Gaming Took A Lead In Cotai

  • MGM Resorts have a 56% ownership in the entity MGM China Holdings Limited, which operates two properties in Macau (MGM Macau & MGM Cotai).
  • In 2018, MGM China reported $2.2 billion of casino revenues – a jump of 26% compared to the previous year due to the opening of MGM Cotai in February.
  • MGM China’s casino revenues can be classified into three categories: VIP gaming, mass-market gaming, and slot gaming, which generated gross revenues (before incentives) of $1.2 billion, $1.4 billion, and $285 million in 2018, respectively.
  • MGM Cotai offers specialized junket rooms and other high-end luxury villas for its VIP customers.
  • Despite numerous luxury offerings, MGM China’s mass-market gaming volume increased by a staggering 46% as compared to just 18% for VIP gaming in 2018.
  • This can be attributed to the overall market trend, where VIP gaming volumes took a hit due to increased regulatory oversight.
  • Considering overall market trends, the declines in VIP gaming were equally substituted by mass gaming in Q1’19 and Q2’19, which can be attributed to shifting consumer demand.
  • Though MGM Resorts faces a short-term headwind from Macau, we believe that its Chinese operations are integral to its long-term growth, supported by a continuous increase in visitation and popularity of mass-market gaming.

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