MGM China reported a 130% year-on-year increase in net revenues to US$618 million in 1Q23, but the company says Q2 is already looking considerably stronger based on early figures from April.
Speaking on MGM’s Q1 earnings call on Tuesday morning (Asia time), MGM China’s President and COO, Hubert Wang, told analysts that daily mass market GGR is already tracking at 115% of 2019 levels with company EBITDA at “well over 90%”.
This, he added, was the result of a confluence of factors, including rising visitation following the easing of border restrictions in January, the allocation of 200 additional gaming tables to MGM China under its new 10-year gaming concession, and higher margins because of a better gaming mix – more precisely a greater contribution from mass than from VIP.
“The daily visitor count was averaging about 50% in the first quarter but in April it is already at 75% of 2019 levels,” Wang explained. “If you walk around the streets, you can already see the pre-COVID hustle and bustle has re-emerged.
“We have seen similar patterns in terms of daily GGR recovery, particularly in March and April and leading towards Golden Week. We think the market will continue to recover as more and more gaming customers and leisure travelers make their first post-pandemic trip to Macau.
“Obviously, MGM has led the market in terms of our recovery pace. In terms of daily mass GGR, it has already exceeded 2019 levels and the trend continued into April at an elevated level.”
MGM also broke down the change in revenue mix at its Macau resorts – MGM Macau and MGM Cotai – with VIP now contributing just 15% of all gaming revenues. Given the collapse of the junket industry, most of this is from direct VIP which Wang said produced margins of between 13% and 15%.
MGM Resorts CEO and President Bill Hornbuckle added that the higher contribution of mass play meant that consolidated margins were “settling into the mid-20s in terms of margin business overall.”
“We are obviously leaning into mass,” he explained. “I think the way [is] to look at the totality of the business … obviously the junket operatives were not cheap to do business with. They took a lot of the margin out of the business [but] we are now on our own doing this [via direct VIP].
“There is a formula that suggests that [by generating] somewhere under 100% of former GGR levels, we can drive over 100% EBITDA. It’s arguable where that is going to land, be it 85% or 90% of total top line [revenue], but we do believe that.”
Another source of recovery, the company said, is the “concerted efforts” of concessionaires to attract overseas players rather than relying primarily on mainland China as in the past.
“We do have a special opportunity, because we’ve been at it for 30 or 40 years, in terms of driving and knowing customers and where they live in Malaysia and the rest of Asia,” Hornbuckle said.
“We’ve just had a very significant group come in from Thailand that was driven by our branch office there, so we think it is net advantage. We think our margins will be better than what they once were given the nature of the junket business.”
