Casino operator MGM Resorts posted higher revenue in Q2 but analysts are fretting that the gains were largely due to new venues, not ‘same store’ growth.
MGM says revenue rose 16.3% year-on-year to $2.64b in the three months ending June 30, but operating income fell more than one-third to $501m and net income fell by more than half to $210m, the latter two figures having been artificially boosted by one-off items in Q2 2016.
The revenue gain was in part due to last December’s opening of the MGM National Harbor in Maryland, which the company says contributed nearly $178m to Q2’s total. The results were also skewed by a full contribution from the 50% of Atlantic City’s market-leading Borgata casino that MGM didn’t own at the start of Q2 2016.
As a result, while MGM’s domestic resorts reported revenue rising 22% to $2.1b, like-for-like revenue was down 1% due to a nearly five-point drop in gaming table win percentage. MGM CEO Jim Murren warned that Q3 faced a similarly “challenging comparison” due to favorable table win at MGM’s Las Vegas Strip properties in the same period last year.
Over at MGM China, revenue was down 1% to $449m while operating income was down 16% to $43m. MGM Macau enjoyed a 1% bump in VIP revenue and a 2% fall in mass market table revenue.
Murren expects MGM’s Vegas operations to get a bump in Q3 from August’s boxing tilt between Floyd Mayweather Jr. and Conor McGregor, which Murren suggested “could be the second biggest fight of all time.” Murren said MGM would look to “maximize every penny of profitability opportunity” from the event.
In Macau, Murren is adamant that the new MGM Cotai resort will open “in a couple of months,” despite ongoing construction. Asked whether the property was considering a partial opening, MGM China CEO Grant Bowie said that if “we thought that we could drive sufficient volumes to support it, we would open everything, but we’re pragmatic. Our target is to get everything as far as we can.”
Bowie said the company understood that its new venue needed to “tap into new customers to us who may already be in Cotai.” Bowie said MGM China would begin its “roadshows into China for the leisure markets and for the tour and travel business in September.”
As for the always contentious question of how many new gaming tables a new Macau property will be allocated, Bowie said MGM China had yet to make its formal submission to the powers that be. But Bowie believes MGM Cotai’s non-gaming components will be sufficiently “transformational” to justify a healthy table allotment.