MGM Anticipates Investing Up to $150 Million in Macau by 2023
MGM Resorts International (NYSE: MGM) revealed that its China unit may invest around $150 million in Macau this year on capital expenditures.
MGM China, largely owned by the casino-resort giant from Las Vegas, manages MGM Cotai and MGM Macau in the special administrative region (SAR). The gaming company forecasts a 2023 Macau capex between $110 million to $150 million.
The operator expects to spend approximately $795 million to $835 million domestically this year, including expenditures under triple-net lease agreements, which require a specified percentage of net revenues to be invested at the respective domestic properties, and an estimated $110 million to $150 million at MGM China, as stated in the annual report filed with the Securities and Exchange Commission (SEC).
It's undetermined if the allocated $110 million to $150 million for this year is part of the $2.1 billion MGM China plans to invest as part of its new 10-year concession. According to Macau's recently implemented gaming laws, operators must invest around $15 billion over the coming decade on initiatives such as non-gaming attractions and attracting visitors from Asian-Pacific nations beyond China.
MGM China Anticipates Sizeable Non-Gaming Investments
MGM Cotai anticipates spending up to 90% of the proposed budget on non-gaming ventures, indicating a readiness to comply with Macau officials' demand for improved non-casino amenities.
The exact timeline for when Macau casino operators will commence capital investments is not immediately evident. Given the challenging three-year period due to the coronavirus pandemic, during which GGR and cash flow were significantly impacted, this is not surprising.
MGM's efforts to provide visitors more than just gambling options could draw a more varied customer base and lessen reliance on VIPS, a sector now challenging for Macau operators post-junket industry decline.
"We have primarily focused our business on main floor gaming operations, and VIP gaming operations were not a substantial revenue source in 2022, and we do not anticipate VIP gaming operations to be a significant source of revenue in future years," according to the annual report.
Other MGM China Non-Gaming Strategies
MGM China is devising strategies to attract more meetings, incentives, conventions, and exhibitions (MICE) to its integrated resorts in Macau. It's also aiming to lessen its dependence on mainland China visitors.
The operator is increasing the number of sales staff and expanding its international sales network, with a majority of locations situated in the Asia-Pacific region and the Middle East.
Analysts view Macau as essential to the MGM investment thesis because the SAR provides geographic diversity—something not found among some competitors on the Las Vegas Strip.
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