MGM Resorts International has recently reaffirmed its commitment to strategic promotional activities in Macau, which have significantly contributed to its market share and performance. Chief Financial Officer Jonathan Halkyard addressed these issues during the Deutsche Bank’s 32nd Leveraged Finance Conference, emphasizing the company’s approach to promotional spending and its ongoing capital investment plans.
Understanding MGM’s Market Position in Macau
MGM China, the subsidiary responsible for operations in Macau, manages the MGM Macau and MGM Cotai properties. Despite holding only approximately 12.5% of the gaming tables and under 10% of the suites in the Macau market, MGM has consistently delivered impressive market share performance, achieving figures in the mid-teens.
Market Dynamics and Performance Metrics
Halkyard noted that MGM China has maintained a strong market share, despite the competitive landscape dominated by rivals with higher-end retail offerings. The company’s margins remain robust, currently in the high 20s. This performance can be attributed to strategic marketing initiatives that resonate with their customer base, without engaging in what Halkyard terms “intense high-end retail.”
Promotional Activities: A Delicate Balance
During the conference, Halkyard responded to inquiries about MGM’s promotional strategies, which have at times drawn criticism from competitors like Melco Resorts. He clarified that the company has not observed a significant increase in promotional spending in Macau, describing their promotional efforts as “smart moves” by the local management team. These promotions are designed to enhance customer experience without incurring substantial costs, thereby ensuring repeat visits to their properties.
Competitive Critiques and Market Responses
The promotional strategies have been a point of contention in the industry, particularly highlighted during Melco President Evan Winkler’s comments regarding rational and irrational behaviors among competitors. In response to these critiques, MGM’s CEO, Bill Hornbuckle, defended the company’s margin performance, attributing its success to a reasonable promotional spend that yields favorable returns.
Capital Investment Commitments: Looking Ahead
In addition to addressing promotional activities, Halkyard provided insights into MGM’s capital investment plans for 2024. The company has earmarked approximately US$200 million for capital expenditures, primarily aimed at fulfilling commitments made during the re-tendering process of Macau’s gaming concessions in late 2022.
Focus on Non-Gaming Investments
Halkyard emphasized that the capital investment commitments are largely focused on non-gaming areas. This strategy aligns with broader trends in the gaming industry, where operators are diversifying their offerings beyond traditional gaming to enhance customer engagement and revenue streams. The planned investments will continue into 2025, although at potentially lower levels than in 2024.
MGM Resorts International’s approach to promotional activities and capital investments reflects a strategic alignment with market demands and competitive pressures in Macau. By balancing effective promotional strategies with significant investments, the company is well-positioned to sustain its market share and drive long-term growth.