The Chief Financial Officer of MGM Resorts International, Jonathan Halkyard, told investors overnight that the company remains comfortable with its promotional activities in Macau which he says continue to play a role in MGM China’s outsized market share.
Asked about the company’s sometimes controversial promotional activity in Macau during Deutsche Bank’s 32nd Leveraged Finance Conference, Halkyard said he had not seen “any real uptick” in such activity in the Macau market, “nor have we engaged in that other than what I consider to be some pretty smart moves by our local management team to introduce offers and products that our customers really like and that are not particularly expensive but keep them visiting our properties.”
This, he said, had aided MGM China – which operates peninsula property MGM Macau as well as MGM Cotai – in achieving “exceptional performance” in the two years since the pandemic.
“It’s the type of performance we’ve come to expect, despite the fact that we still only have around 12.5% of the tables in the market and under 10% of the suites in the market,” Halkyard said.
“These businesses consistently deliver market share in the mid-teens, which we expect to continue, and margins in the high-20s. And that’s without the benefit of some of the intense high-end retail that some of our competitors have that operate at a very high margin.”
The issue of MGM’s alleged promotional spend was raised by rival Melco Resorts earlier this year, with Melco President Evan Winkler stating during an earnings call, “We have general discussions with peers at other places [and] I think there’s a general feeling among the group and competitors in terms of what is rational and irrational behavior.”
In response, MGM Resorts CEO and President Bill Hornbuckle acknowledged that such commentary was “particularly aimed at us” but stated at the time that the company’s high 29% margins in the March were evidence that such spend was reasonable.
“I just query that [criticism] and I challenge it,” he said. “And frankly, if we had retail to the extent that two of our competitors do, [margins] would be in the low-to-mid 30s.”
Separately, Halkyard told attendees of Deutsche Bank’s conference overnight that MGM China was planning to spend around US$200 million in 2024 on capital investment commitments stemming from the re-tendering of Macau’s concessions in late 2022.
“Really what we are now experiencing and investing in is our capital investment commitments that we made, which are generally non-gaming, and we have over US$200 million in capex approved for this year in investment designed to meet the commitments that we made when we secured the retender license,” he said.
“That will continue into 2025, although perhaps not at that level, but that’s been the most impactful consequence of the re-tendering is on the capex side.”
