GGRAsia – MGM Macau to undergo multi-million revamp

MGM Macau to undergo multi-million revamp

Aug 14, 2014 Newsdesk Latest News, Macau, Top of the deck

MGM China Holdings Ltd is to invest more than HKD1.5 billion (US$194 million) up to the year 2016 to renovate its first and currently only Macau casino hotel, MGM Macau, the firm’s chief executive Grant Bowie announced during a media briefing on Wednesday.

Some time in 2016, MGM China is due to open its second Macau property, the US$2.9 billion MGM Cotai, located on reclaimed land at Cotai, an area that has become the city’s answer to the Las Vegas Strip.

“We are probably going to be spending in the order of HKD800 million each year, for the next two or three years,” Mr Bowie said, referring to the revamp at MGM Macau, in the city’s traditional downtown casino zone. “To maintain our [market] position, we recognise that we need to reinvent [ourselves] and reinvest – not only in our gaming product, but we also recognise that we need to try to expand and diversify our penetration in other components.”

The renovation plans involve several gaming areas inside MGM Macau and will add more retail space to the property. The changes will involve a total of 27 separate projects over the next three years.

“Before MGM Cotai opens, we will significantly reposition this property [MGM Macau], because we don’t want to lose any business,” Mr Bowie told reporters.

The casino at Wynn Macau, MGM Macau’s next door market rival, is undergoing its own US$60-million redevelopment due to be finished before the next Chinese New Year holiday, in February 2015. Analysts at Telsey Advisory Group said in a July report that the closure of part of the casino floor for renovation had resulted in fewer gaming positions on the floor. Wynn Macau is also currently building a US$4 billion Cotai resort called Wynn Palace due to open in the first half of 2016.

MGM China’s Mr Bowie, referring to his own firm’s refreshment of its current offer, said: “It is much more complicated doing a refurbishment in a running property than a grand opening… We will work extremely diligently to avoid any significant [negative] impact.”

The MGM Macau revamp includes upgrades to the property’s VIP facilities.

“The physical nature of the junket business is evolving,” Mr Bowie said. “Junkets and customers are no longer wanting large numbers of open tables – most people are moving to smaller table groupings.”

He added that despite recent contractions in market-wide VIP casino revenue, the segment would continue to play an important role in Macau’s gaming industry.

The MGM Macau renovation project also includes changes in entertainment. The Lion’s Bar, on the edge of the main gaming floor, is likely to close. Mr Bowie said the venue is “not doing well enough”.

He noted that nightlife in Macau “has still not found traction”. The executive added the company is looking for new nightlife concepts and noted that the Macau clientele seems to “prefer smaller, more intimate spaces, rather than large spaces”.

MGM Macau would also have more shops after the renovation is finished. “We are starting to identify a series of different spaces that we would be looking to put retail in,” Mr Bowie explained. The first phase of that will come online in November, he said.

The property is meanwhile preparing for the new rules governing smoking inside Macau casinos. They state that all mass-market casino floors in Macau must go smoke-free starting from October 6, following that month’s Golden Week holiday.

Mr Bowie said MGM China has already submitted its plans for the setting up of smoking lounges on the mass gaming floors of MGM Macau. “We will also have air curtains in all of our smoking tables,” he stated – according to the new rules, enclosed areas for premium and VIP customers will still be allowed to have smoking at tableside.

Cotai project

He added that the casino operator had this month received a permit from the Macau government for the building of the superstructure of MGM Cotai.

Macau building permits have become a hot topic for investors ever since Sands China Ltd announced in July that in June it had suspended work on its US$2.7 billion Parisian Macao site on Cotai, “pending receipt of certain approvals”. Las Vegas Sands Corp said in a filing last week it expected to recommence work in October.

MGM China’s parent MGM Resorts International said last week on a second quarter earnings call that it had “broadened“ its statements on the completion date of MGM Cotai from “early 2016″ to simply “2016″. The parent’s chairman Jim Murren indicated that too was because of question marks over timing of government permits.

On Wednesday Mr Bowie went as far as showing reporters a PowerPoint slide outlining the expected schedule to obtain the remaining licences for MGM Cotai. It included two further submissions in January 2015 and January 2016, followed by the final occupation permit and other relevant licence approvals from Macau’s tourism and gaming regulators in “mid-2016”.

Questioned if the company had shifted its opening target to mid-2016, Mr Bowie explained that the licence approval process was the “critical part” regarding the opening date of any of the seven casino resorts under construction in Cotai. “Based on the experience we have got, we think that mid-2016 is a good point for us”, he said, while sticking to the parent’s “opening in 2016” line.

Mr Bowie added MGM China expects to take on average fewer than five days to build each floor of the hotel tower superstructure. MGM China announced earlier this month it had already awarded around 50 percent of the construction contracts of MGM Cotai.

Mr Bowie said the property would feature “skylofts”, a concept MGM Resorts has introduced at its MGM Grand casino resort in Las Vegas. These luxury two-story lofts would be perched atop the middle tower of MGM Cotai and offer what the firm describes as a boutique hotel experience.

He also said MGM China is “working with the [Macau] government to develop additional non-gaming, hospitality and entertainment attractions” at the MGM Cotai site.

Commenting on the recent slowdown of casino mass revenue growth in Macau, Mr Bowie noted that the segment has been “pretty consistent” at MGM Macau, with a growth rate in July of 40 percent year-on-year. That is more than double the reported market-wide increase of 17 percent for the same period.

Despite Macau having posted two consecutive months of declines in market-wide casino gross gaming revenue – a first in over five years – Mr Bowie said there was no need to hit the panic button.

“We are not seeing anything significant in the overall trend,” he said. “I think going through a pause, a period of consolidation, is extremely helpful for this market. We went through that in 2008-2009 [the international financial crisis] and it was very positive. We are going through another period of consolidation. That is healthy for this market. We shouldn’t panic.”

Net revenue for MGM China grew by 12 percent in year-on-year terms to HKD13.7 billion in the first half of 2014. The company’s net profit increased 23 percent over the same period, to HKD3.0 billion.