By Ben Blaschke
The long-awaited opening of MGM China’s new Macau integrated resort, MGM Cotai, is “vital” to the upcoming concession renewal process, according to CEO and Executive Director Grant Bowie.
His comments came during MGM Cotai’s Grand Opening on Tuesday, which saw guests and dignitaries including Chief Executive of Macao SAR Chui Sai On, Secretary for Social Affairs and Culture Alexis Tam Chon Weng and Secretary for Economy and Finance Leong Vai Tac on hand to celebrate the launch of the US$3.4 billion property.
Asked about the upcoming concession renewals, with the licenses of MGM China and SJM the first to expire in 2020, Bowie said that MGM Cotai “is vital in terms of the process of concession renewal.”
“The concession renewal will not be determined by how successful we are at running casinos, it’s how successful we are at diversifying and allowing Macau to become more than just a gaming town,” he said.
“When Edmund Ho (former Macau Chief Executive) opened up the concessions [in 2001] it was always about diversifying and providing a competitive advantage for Macau, so today with the opening of MGM Cotai, it’s significant to us.
“On the peninsula we have a beautiful property even if it has a limited footprint. In Cotai we have had a greater opportunity to create something significant. We still have a small footprint but if you look at the way it’s been executed, everything we have tried to do is to create multiple uses for every space – multiple uses and opportunities to create more visitation to Macau to recognize the diversity and approve the appeal and attraction for Macau as a non-gaming destination.”
The opening of MGM Cotai this week, coming almost exactly five years after the company broke ground on 27 February 2013, follows a series of delays, most notably as a result of damage suffered from Typhoon Hato which struck Macau on 23 August 2017.
The opening was subsequently pushed back from 4Q17 to 29 January 2018 before being rescheduled again to 13 February.
Despite the setbacks, Bowie said he was confident that MGM’s sizeable investment would pay dividends.
“We spent a lot of money on this property and our expectation is that we will meet our shareholders’ expectations in terms of our return on that investment,” he said.
“The critical point in terms of ROI is making sure your customers keep coming back and that they want to use your products. That’s why we‘ve tried to create a niche for ourselves at the upper end of the market. We believe there is greater potential for sustainability and core customers in terms of driving incremental revenue and supporting the significant investment we’ve made.”
MGM revealed earlier this week that it would launch MGM Cotai at around 70% capacity, with some gaming and hotel facilities to come online in the coming months. In particular, junket operations are not expected to start until mid-2018 – roughly the same time as the company launches its luxury The Mansion Villas.
Around 500 of MGM Cotai’s total 1,390 hotel rooms are open this week with MGM revealing those rooms are fully booked through the remainder of February.
Meanwhile, the gaming floor has opened with 982 slot machines and 177 gaming tables including 100 new-to-market tables and 77 moved across from peninsula property MGM Macau. Another 25 new tables will become available on 1 January 2019.
Asked about the impact of recent delays and subsequently launching below full capacity, Bowie said he doesn’t expect any long-term impact on MGM China’s bottom line.
“We’ve always wanted to open when the property is ready because of the challenges we’ve endured,” he said. “The biggest challenge for us was August when we had the largest typhoon come through here. It was a fairly sensitive time for us because we did sustain quite a bit of damage.
“The delay was not significant to us though because we’re here for the long term and that’s what I think is important.
“In terms of ramp-up, the one observation I would make is that clearly every time a new property opens, you would hope it creates an inflection in visitation but the reality we’ve also seen is that each property takes a little bit longer to ramp-up than he previous.
“Having said that, we’ve done everything we can and put in place many, many strategies which we believe will allow us to get up to our optimal performance as quickly as we can and the single most important facet in that will be the strength of the market.
“Those are the variables that exist, so what we will be doing is everything we can to respond to those opportunities and maximize the return for us and our shareholders.”