MGM Resorts announces plans for global expansion

by William Brown Last Updated
MGM Resorts announces plans for global expansion

One of the world’s biggest casino operators has announced plans for global expansion.

Inside Asian Gaming reports that MGM’s Chief Financial Officer Jonathan Halkyard said the company was actively steering itself towards an asset-light model that would see it focus primarily on gaming operations rather than ownership, while continuing expansion of its online gaming business BetMGM.

However, it is likely that this expansion will eventually continue overseas given the absence of substantial new land-based resort opportunities and MGM’s reluctance, outside of Macau and Japan, to invest in such resources.

MGM Resorts holds a controlling stake in MGM China, operator MGM Macau and MGM Cotai, and is leading a consortium looking to develop an integrated resort in Osaka, Japan.

“When I think about what this company needs to be, definitely the best-known brand, most trusted brand in gaming,” Halkyard said.

“Casual, high-end and hopefully in as many distribution points with the highest availability in this country.

“Then to the extent that it is regulated, online offerings internationally.

“Realistically the opportunity for integrated resorts is not going to be in a wide number of jurisdictions and the capital cost can be pretty extreme but in our spots, Macau and Japan, we would expect to be a player there.

“So the best brands, the most trusted brands available anywhere and premier in gaming.”

Vision for the future set out

Halkyard paid particular attention during his appearance at the Bank of America conference to the long-term prospects of the company’s online gaming entity BetMGM, a joint venture partnership with Entain PLC.

MGM is looking to implement an omni-channel strategy for BetMGM by which online customers globally would become members of MGM’s M life Rewards program and therefore receive points and rewards for their online play.

Halkyard said the company would continue to simplify its business model in the coming years.

“MGM has in the past flirted with non-gaming instances of its brand and we have over the past six months, Bill Hornbuckle and I and some o0f the management team, been unwinding and shutting some of those investments,” he said.

“They’re all small but they take financial resources and management resources, so we’re getting out of those.

“We’ve been through the CityCenter sale, the MGM Growth Properties deal, so less financial engineering and more simplified and clear about what we are, which is an OpCo.”

MGM recently entered into an agreement to sell the majority of the operating partnership units it holds in real estate investment trust MGP to VICI Properties Inc for almost US$5 billion, having already sold off the Bellagio in November 2019, MGM Grand and Mandalay Bay in January 2020 and reached an agreement to sell CityCenter in July.

MGM China committed to Macau

MGM China is committed to Macau and ready to invest further in the region as it begins its road to recovery from the COVID-19 pandemic.

MGM China Chairperson Bill Hornbuckle confirmed the organisation’s commitment in comments he made as part of MGM China’s 2020 Annual Report, published last Tuesday, in which he outlined the company’s progress through the latter half of 2020 and into 2021.

That progress included a return to positive earnings before interest, tax, depreciation and amortisation for both Macau properties, MGM Macau and MGM Cotain, in fourth quarter 2020 with MGM China having previously reported group-wide adjusted EBITDA of US$47.4 million for the quarter.

Hornbuckle said the company was ready to invest further in Macau in the future.

“Macau is our home,” he asid.

“We are committed to further growth in the region and will continue to invest in our employees, our communities and Macau itself.

“We see 2021 as a year of growth and further success, and we look forward to continuing our work with the Macau government and our community partners to help the region flourish and emerge stronger than ever.”

Noting that Macau had seen a steady improvement in market-wide gross gaming revenue in quarter four, down by around 70 per cent year-on-year versus a 93 per cent decline in quarter three, Hornbuckle said: “We expect that the rate of recovery will continue, driven by the premium mass market visitors whom MGM Macau and MGM Cotai are well-positioned to serve.”

According to Hornbuckle, the rise in Macau’s premium mass segment saw a shift in MGM China’s consumer mix in 2020, with mass now comprising 72 per cent of its GGR and VIP just 28 per cent compared with 64 per cent and 36 per cent respectively in 2019.

As a result, MGM China saw its overall gaming market share increase from 9.5 per cent in 2019 to 12.6 per cent in 2020.

While the increase in market share is tempered by the fact that revenues have been dramatically impacted by the COVID-19 pandemic, Hornbuckle made note of the fact that the company’s financial position remains strong with total liquidity of US$1.2 billion comprised of cash, cash equivalents and undrawn credit facilities as of December 31, 2020.

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