Nov 08, 2016 Newsdesk Latest News, Macau, Top of the deck  
The Macau VIP gambling market remains relatively weak and opening new VIP rooms under such trading conditions was likely “to dilute the market further,” said the chief executive of Macau casino operator MGM China Holdings Ltd on the parent firm’s third-quarter earnings call on Monday.
Grant Bowie (pictured in a file photo) was speaking on the conference call of MGM Resorts International, which has a 56 percent stake in MGM China. The latter firm currently operates a single Macau gaming resort, MGM Macau, in the city’s traditional downtown gaming area of Macau peninsula.
The executive had told local media in August that MGM Cotai – the new US$3.1-billion MGM China property currently under construction on Cotai – was likely not to have junket play when it opens.
The parent said on its second-quarter earnings call in August that the opening of MGM Cotai had been delayed to the second quarter of 2017.
In Monday’s call Mr Bowie said: “I guess the greatest challenge for us – for all of us – in the market at the moment is we’re still not seeing really any growth in the junket business. So simply to open junket rooms and dilute the market further and further doesn’t seem to be a very strong strategy.”
While VIP gambling has not shown year-on-year growth in casino gross gaming revenue (GGR) so far this year, the rate of decline has slowed recently, after two years of contraction.
In the third quarter 2016, VIP baccarat casino GGR decline – judged Macau market wide – moderated to 1.2 percent year-on-year, compared to a 16 percent retreat in the second quarter. A number of investment analysts have questioned whether the overall moderation in Macau’s GGR contraction seen recently can be sustained.
Nonetheless VIP gambling still accounts today for more than 50 percent of Macau casino GGR. The city’s GGR tally for the 10 months to October 31 stood at nearly MOP184.61 billion (US$23.1 billion).
No-VIP experiment
When Studio City – a property 60 percent owned by Melco Crown Entertainment Ltd – opened in October 2015, it did so without any VIP tables: the first large-scale Macau venue to try such a strategy.
On November 5 this year, Melco Crown commenced VIP gambling operations. A number of industry commentators said this indicated that – for Studio City at least – casino operations shorn of VIP gambling had not been a success.
In Monday’s call, Mr Bowie indicated MGM China aimed to cater for its VIP players in the more traditional setting of downtown Macau.
“We are working with our existing [junket] operators – that we’re very comfortable with in Macau – and we want to continue to work with them in our peninsula property… to make sure that they’re always profitable,” said Mr Bowie.
“That doesn’t necessarily mean just opening rooms for the sake of opening rooms. You’ve got to open them because there’s some performance,” he added.
Ian Coughlan, president of Wynn Macau Ltd, noted on his firm’s third-quarter earnings call on November 3, that Wynn Palace, its new US$4.4-billion property on Cotai, had had “a fairly significant impact” on the firm’s directly-managed VIP business at its Macau peninsula property, Wynn Macau.
MGM China’s Mr Bowie was keen to talk up the mass gambling segment on his firm’s third-quarter call.
“The growth is in the mass. We want to drive the mass and we want to get a very strong footprint in that regard,” said Mr Bowie.
Casino GGR in Macau’s mass-market segment expanded by 3.9 percent year-on-year in the third quarter of 2016, according to data released in October by the local regulator, the Gaming Inspection and Coordination Bureau.
Junkets later?
Mr Bowie hinted that junket play might be introduced to MGM Cotai after it opens, and once overall foot traffic to the property had been built up.
“We’ve already indicated that we are not likely to open the property with junket[s], but we’re still in discussions with junket operators because we understand that it’s best that we build the momentum of the property and then we bring those participants into the business,” said Mr Bowie.
“So [the] focus [with MGM Cotai is] on the things that we’re really good at… on the things we can control, [to] drive foot traffic through the food and beverage operations focusing both on the Macau market, Hong Kong, and then expanding that reach into China, [to] drive traffic into the hotel, because we have a lot more hotel rooms.”
According to previous statements by MGM China, MGM Cotai will offer approximately 1,500 hotel rooms and suites, meeting space, a luxury spa, shops and restaurants. The property would also have what is described as “the first international “Mansion at MGM” – a branding term used to describe some luxury accommodation within MGM Resorts’ properties in other markets.
MGM Resorts’ chairman and chief executive Jim Murren – speaking on the third-quarter earnings call – gave some detail on the non-gaming amenities that will be available at MGM Cotai.
He stated: “We’ve known that we needed to diversify away from gaming. We knew that we needed to create an entertainment spectacle that is free to the public and that is something they have not ever seen before; and we are.”
He added: “We knew we wanted to bring the DNA of MGM’s entertainment: to build a theatre that does not exist in the world, let alone in Macau; a multi-functional theatre that can transition from a major ballroom to an exhibit hall to a theatre for sports and entertainment, and into a nightclub.”
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