Almost five years to the day since MGM first broke ground on its second Macau integrated resort, MGM Cotai finally opened its doors to the public on 13 February with the US$3.4 billion investment pinning its future on the premium mass market and an array of innovative features.
“THIS is vital in terms of the process of concession renewal,” stated MGM China’s CEO and Executive Director Grant Bowie at the grand opening of the company’s new Macau integrated resort, MGM Cotai. “The concession renewal will not be determined by how successful we are at running casinos, but by how successful we are at diversifying and allowing Macau to become more than just a gaming town.
“On the peninsula we have a beautiful property (MGM Macau), even if it has a limited footprint. In Cotai we have had a greater opportunity to create something significant. We still have a small foot print 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.
“When Edmund Ho 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 is significant to us.”
As Bowie alludes, the timing of MGM Cotai’s long-awaited launch couldn’t be more significant. Twelve months later than originally planned due to a series of construction delays, it comes just two years shy of MGM’s Macau casino license expiring in 2020. Ironically, the other Macau concessionaire up for renewal in 2020, Sociedade de Jogos de Macau SA (SJM), is racing the clock to open its new Cotai resort by late 2019, while the concessions of the four holders to have already opened resorts in Cotai – Sands China, Galaxy Entertainment Group, Melco Resorts and Wynn Macau – don’t expire until 2022.
That makes MGM’s US$3.4 billion investment – second only to City Center in Las Vegas among MGM Resorts’ 18 casino resorts worldwide – even more significant given the Macau government has so far given little away about its licensing plans.
Nevertheless, MGM sees this latest addition to the Cotai landscape as key to its license renewal aspirations.
“We increase the probability and continue to improve our belief that we are deserving of an extension by the actions we carry out,” Bowie explains, “so having to invest this amount of money is part of the process of demonstrating our commitment to Macau.
“Clearly when you’ve invested US$3 billion, the money can’t leave Macau. That’s a big indication from us at MGM and all of our shareholders that we are committed to Macau for the long term, we are innovating, we are responding to the strategic requirements.
“I think the government has been very clever in not giving too much away because it makes all of us work harder, do more and be more effective in delivering the strategic transformation the government has set out for us.”
Despite the ongoing uncertainty, there is also a palpable sense of relief at MGM that MGM Cotai is finally open for business, having broken ground back in February 2013. Originally scheduled to launch in early 2017 at a cost of around US$2.5 billion, construction delays first pushed that date back to 4Q17 before damage suffered from Typhoon Hato in August delayed the opening even further. Finally, having announced in September an official opening date of 29 January 2018, MGM Cotai instead opened its doors on 13 February after enduring one last wait for the Macau Government Tourism Office to grant the necessary hotel licenses.
For all the hold-ups, it will still be another three months before the property is fully operational, having opened with only around 500 of the 1,390 rooms and suites it will offer once complete. Among those still to come are the 27 villas, ranging in size from 215 to 570 square feet each, that will form luxury enclave The Mansion – modelled on the renowned VIP accommodation of the same name at MGM Grand in Las Vegas.
Likewise, MGM Cotai has delayed the launch of junket operations – five Macau junkets are currently confirmed – until mid-year when it will also have 99 suites (87 to 94 square meters each) and 16 Skylofts (128 square meters each) available.
While it waits to initiate VIP, the property’s casino has launched with a combination of mass and premium mass, with the latter being its primary focus. Granted 100 new to market gaming tables by Macau’s Gaming Inspection and Coordination Bureau, with another 25 becoming available on 1 January 2019, MGM has also moved 77 tables across from MGM Macau, taking the total number of tables in its gaming areas upon opening to 177. According to analysts, the mix currently stands at 100 mass market tables, 65 premium mass and 12 VIP direct.
What impact will MGM Cotai have on the company’s bottom line? The general consensus is that the property will be a game changer for MGM China, which has seen its mass market share shrink to around 7% over the past 12 months due to its lack of a Cotai presence. Macau-based analyst Govertsen has tipped MGM to “capture an outsized share with its Cotai property,” adding that, “No other company’s Cotai project will have as meaningful a market share impact as MGM Cotai, given how much leverage the company will have in terms of the increase in number of hotel rooms and the increase in gaming supply. The ramp of MGM Cotai is therefore likely to be as quick, if not quicker, than the peer group.”
Not everyone is so sure. Morgan Stanley suggests that rampup of MGM Cotai will be “slower than that of peers due to the late opening of casino/VIP tables and a lower number of tables being allocated.” A week before the property opened, Morgan Stanley analysts Praveen Choudhary, Jeremy An and Thomas Allen revealed that they had revised MGM Cotai’s EBITDA expectations for 2018 down from US$250 million to US$219 million, but had revised 2019 EBITDA up from US$507 million to US$525 million.
Brokerage Sanford C Bernstein offers a similar take, predicting “full value from the property is still some ways off as ramp up will take 18+ months to achieve.
“Our first impression of the property reconfirms our view that ramp up will not be achieved quickly. While the property brings some new elements to Macau and MGM’s food and beverage offering has greatly improved, the casino layout, in our view, is not ideal and suffers from the property’s long, narrow footprint. That being said, it is likely the property gets a better share of walk-ins than Wynn Palace as it is better located, but the high-end business will not be as impressive.”
From the company’s viewpoint, MGM Cotai has been all about providing a point of difference from its rivals.
“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,” says Bowie. “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.
“I’m not going to give any forecasts at this time but we’re very comfortable that this is a good investment, that it will return to our shareholders and will return to Macau itself.”
Bowie describes MGM Cotai as “a unique venue that will be popular for many different events,” most notably via its high-tech MGM Theater.
With capacity for 2,000 people, MGM Theater is a multi-purpose zone whose key feature is the world’s largest permanent indoor LED screen, displaying 28 million pixels over 900 square meters – equivalent to the size of three tennis courts. Home to three resident shows that showcase the space’s audio-visual and architectural dexterity, MGM Theater also offers 10 different configurations which allow it to be used for everything from live performances, stage shows and presentations to conferences and other formal events.
Jim Murren, MGM China’s Chairperson and Executive Director as well as Chairman and CEO of MGM Resorts, says the company will send over many of its resident Las Vegas acts, including the likes of Lady Gaga and Cher, to perform at the venue – a fascinating prospect if true given the intimate nature of the space.
“MGM is the largest MICE operator in Las Vegas and that gives us the ability to attract our vast network of Fortune 500 leaders to host their conferences here at MGM Cotai,” Murren added during his welcome speech at the grand opening. MGM China co-Chairperson and Executive Director Pansy Ho has previously touted MGM Theater as the perfect venue to host professional eSports tournaments.
At the heart of MGM Cotai is a huge public space known as Spectacle which takes MGM Macau’s Grand Praça concept and elevates it to the next level. Stretching four stories high and the length of a football field, Spectacle brings together elements from the natural world via an array of digital art and a massive indoor art garden. Twenty-five giant LED screens display over seven hours of continually evolving imagery which was captured by selected artists and aims to “highlight the beauty of the natural world.” Complementing this technological showcase is the world’s largest indoor art garden, home to more than 100,000 plants and 2,000 plant species including more than 200 different orchid species, many of which are native to Macau and Hong Kong. Intent on standing out from the crowd, MGM actually brought several extinct plant species from the 19th and 20th centuries back to life for Spectacle via botanical garden seed banks in Hong Kong and Europe.
Such indulgence is also on display in MGM Cotai’s art collection, carefully compiled under the watchful eye of Ms Ho. The collection, worth more than HK$100 million, includes modern and contemporary Asian paintings and sculptures by renowned artists, freshly-commissioned works by local and regional rising talents and large-scale installations, among them 28 Chinese imperial carpets dating from the Qing Dynasty that previously adorned the Forbidden City in Beijing.
Visitors in search of a meal are well catered for with nine dining outlets, ranging from 24-hour noodle and dumpling house Mia n Dui Mia n to the ultra-exclusive The Dining Room, available only to guests of The Mansion. If celebrity chefs are your thing, MGM Cotai has four of them – Grill 58° with a menu designed by Chef Mauro Colagreco; Aji, the first authentic Nikkei restaurant in Macau by Chef Mitsuharu Tsumura; Coast by Top Chef TV personality Graham Elliot; and pastry shop Janice Wong MGM.
“Many people over the past six years have asked us to describe MGM Cotai and I don’t think we’ve ever done it justice because this is a property that you have to experience,” says Bowie.
“This is a property we’ve designed with the intention of being able to transform constantly and continuously to be always relevant to the rapidly changing expectations of the Chinese consumer.
“The challenge was how to create something that is truly new. MGM Theater is an example of architectural and engineering excellence which allows us to create a venue to host many different creative opportunities.
“We are not trying to be everything to everyone, we are just trying to be important to those people for whom high quality, innovation and most importantly passion is an important attribute of creating their experiences and their interests.”