GGRAsia – MGM China, parent to set up additional marketing offices

MGM China, parent to set up additional marketing offices

Apr 03, 2023 Newsdesk Latest News, Macau, Top of the deck

Macau casino operator MGM China Holdings Ltd says it has entered into a so-called “international marketing agreement” with its parent company, U.S.-based MGM Resorts International, to conduct international marketing activities via existing and new marketing offices. The partnership aims to increase the number of “international customers visiting the Macau properties for non-gaming attractions and casino gaming”.

“Pursuant to the commitment by [MGM China] to the Macau government to expand overseas markets and to increase the growth of non-gaming revenue, the [firm] desires to utilise the know-how and international resources and reputation of MGM Resorts… to conduct marketing activities via the existing and future marketing offices,” the firm said in a filing to the Hong Kong Stock Exchange.

The new agreement replaces a previous marketing agreement between the Macau unit and the parent group. The new deal runs until December 31, 2025.

MGM China, which started its new, 10-year casino concession in Macau on January 1, operates two casino properties in Macau: MGM Macau (pictured) on the peninsula, and MGM Cotai.

“The Macau group intends to operate an international marketing network of marketing offices,” stated MGM China in its Friday filing.

The international marketing agreement sets out the collaboration framework for the operation and cost sharing of the marketing offices “in support of the expansion plans of the Macau group”.

The deal covers the existing MGM Resorts’ marketing offices, as well as “new sales marketing offices” to be established by the Macau group or the parent group “in accordance with a sales and marketing plan agreed between the parties”.

As per the deal, the MGM China group “will initially pay the full amount of the operating costs of the marketing offices, with subsequent apportionment of such costs between the Macau group and the MGM [Resorts] group based on the aggregate gaming and non-gaming revenues generated for each group,” stated the Macau unit.

Under the agreement, MGM China said it would pay just under HKD53.1 million (US$6.8 million) to the MGM Resorts group with respect to calendar year ending December 31, 2023. If the final expense amount for the relevant year is less than the amount set out in the budget for such year, the relevant excess amount shall be applied towards MGM China’s payment obligations for the following year.

The deal also sets an annual cap on the payments by MGM China regarding MGM Resorts’ expenses related to the marketing offices. The cap is HKD64.0 million for 2023; HKD82.0 million for 2024; and HKD113.0 million for 2025.

The MGM China group added that it would be entitled to receive reimbursement from MGM Resorts regarding the costs of the marketing offices, based on the referrals made to the parent’s properties. Such reimbursements are capped at HKD24.0 million for 2023; HKD29.0 million for 2024; and HKD38.0 million for 2025.

The overall management of the marketing offices’ operations will be led by Sean Lanni, MGM China’s senior vice president for international marketing.

The deal also includes putting in place “a Macau based sales and service support team” for the network of marketing offices, “as well as new sales incentive plans and more aggressive targets”.

Boosting the volume of foreign visitors was one of the key requirements for Macau’s six casino operators to fulfil as part of their respective concession renewals late last year.

Speaking in December, Pansy Ho Chiu King, managing director of MGM Grand Paradise SA, the local concession-holding entity of MGM China, said she was “very optimistic” about the efforts to increase the number of visitors to Macau.

She said at the time that MGM China would increase its “overseas sales networks to 30 locations and double the number” of its sales staff. “We will host events in our overseas sales networks in Asia and the Middle East to attract foreign tourists directly to Macau and make concurrent efforts to provide direct transportation,” including charter flights, stated Ms Ho.

The MGM group has pledged to invest a total of MOP16.70 billion (US$2.07 billion) over the course of the next 10 year-licence in Macau, with about 90 percent – or MOP15.0 billion – to be allocated to “non-gaming projects”.