Macau’s casinos lost an estimated $100 billion during 2014 and analysts predicted that casinos would continue to struggle in 2015 due to Beijing’s continuous anti-corruption crackdown in Macau. The biggest gambling hub in the world is on very shaky ground as mega casinos continue to report huge losses during the 1st quarter of 2015.
MGM China Holdings Ltd recently reported that it had accumulated close to US$630 million during the 1st quarter of 2015. Based on a year on year comparison during the same period, the MGM China’s revenue has declined by as much as thirty three percent. The drop in revenue coupled with the current market condition in Macau has forced parent company MGM Resorts International to announce a change of plans for it latest project which is the MGM Cotai resort.
MGM Resorts International confirmed that the MGM Cotai resort project would be delayed and will most likely start operations towards the end of 2016. MGM Cotai resort is being constructed on a massive scale and is expected to cost around $3 billion. The project was scheduled to go live during the fall of 2016 but poor market conditions and the decline of MGM China’s revenue has pushed the launch back.
Gaming analysts in Macau had predicted a significant market decline, so the numbers will not come as a major surprise to these mega casinos. Macau Sands has reportedly lost over 54% during the 1st quarter while SJM Holdings Ltd has lost close to 47% during the 1st quarter. Anthony Wong and Angus Chan, of UBS AG in Hong Kong stated that MGM China EBITDA met subdued expectations.
In a statement, the UBS team said “MGM [Resorts] now targets a Q416 opening for MGM Cotai, from ‘fall 2016’ before. We have highlighted before…risks that the project opening could be pushed back three to six months to later 2016 or even into 2017. In mid-February, management commented that construction of hotel towers was on [the] 16th floor. Since then this has only progressed to [the] 19th floor, which is slower than normal progress, in our view.”
The government of Macau has asked casinos to change their marketing strategy as high stake gamblers will continue to stay away from Macau’s casinos due to the anti-corruption crackdown. Casinos have been advised to make themselves more family friendly and adopt a new strategy to entertain families and increase their customer base. MGM China is yet to roll out an official change of strategy but will most likely have to make the change quick in order to arrest their declining revenue.