Market Challenges lead to Rising Costs and Delayed Opening of MGM Cotai Casino

MGM Cotai CasinoA new MGM Cotai Casino Resort has been in the works for three years now, and according to the latest talks during a conference call this week, the site’s grand opening will experience a minor delay. The opening of the new casino resort – MGM’s first on the Cotai Strip – has been pushed back from Q1 2017 to Q2 2017.

MGM Resorts International Chairman and CEO, Jim Murren, spoke to analysts during a Q2 earnings call on Thursday, confirming “We have decided to push out the opening date a bit for MGM Cotai, into the second quarter of next year,” said Murren.

He asked analysts to “recall that we’ve said, we are looking for March,” referencing the company’s original plan to open the new Cotai casino in Q1 2017. He went on to say that pushing the opening date back an extra quarter “will give us just a little bit more time.”

However, he also noted that the delay “does increase the budget slightly by 1 percent to US$3.1 billion, but we think the time is worth it.”

Rising Costs for Cotai Casino

MGM ChinaThe initial estimates divulged by MGM Resorts regarding the total cost of the new casino on the Cotai Strip – Macau’s equivalent of the Las Vegas Strip in Nevada, USA – called for HKD-24 billion (USD-$3.09 billion). That figure – and the new $3.1bn estimate – doesn’t include the cost of land or capitalized interest.

Table Games Allocation

Grant Bowie, CEO of MGM China Holdings Ltd, operator of MGM Cotai and 51% owned by MGM Resorts International, tackled questions from investors regarding the quantity of table games expected to grace the floor of the new casino. Specifically, he was asked if at least 100 new-to-market live dealer tables would be secured for the property.

Bowie was reluctant to make any definitive assessments at this time, saying it was “premature” to discuss specific allocation for MGM Cotai’s pending game variety. He did say, “we are working hard to make sure that we put everything in place and meet all of (the Macau government’s) requirements and objectives.’

The government has stated live table allocation for all new casino projects in Macau are subject to the region’s authorized caps, with actual numbers being indicative of the resort’s range of non-gaming entertainment and amenities.

Market Woes for Macau Casinos

The company’s market analysis shed the blame to numerous impactful events for diminishing the profitability of China’s limited casino industry. “The first half of 2016 continued to be a challenging time for the Macau gaming market as a result of the changing conditions that began to take effect from mid-2014,” read the report.

Those changing conditions included “smoking restrictions” introduced in 2014; “certain political initiatives introduced by the China Government, including an anticorruption campaign and currency transfer restrictions”; the Q2 2015 introduction of “tighter regulations for gaming promoters”; and a mid-2016 ban on “mobile telephone usage” at VIP gaming tables, among others.

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