MGM Resorts International (NYSE:MGM) can’t seem to catch a break. Macau is growing, but MGM’s resort is on the wrong side of town. New Jersey is going to allow online gaming, which will be great for operators there, but MGM was kicked out of New Jersey because of its ties to Pansy Ho in Macau. Finally, just as Las Vegas starts to slowly return to revenue and profit growth, Genting Group decides to build another massive resort and suck the air out of MGM’s sails.
Las Vegas isn’t what it used to be
In 2007, Las Vegas Strip gaming revenue peaked at $6.83 billion and MGM Resorts International (NYSE:MGM) looked like one of the big winners in the industry. Last year, the region gained 2.3% from a year before to reach $6.21 billion in gaming revenue, still well below the peak. The problem is exacerbated by the fact that CityCenter opened in 2009 and The Cosmopolitan opened in 2010, spreading both gaming and room revenue among even wider supply. The competition has shown on the income statement as recently as the last quarter.
Fourth-quarter revenue fell $2.3 million to $2.3 billion, and wholly owned domestic resorts saw a $10.0 million drop in revenue. The only good news is that the company was able to squeeze an extra $15.2 million in EBITDA from wholly owned domestic resorts during the year.
Las Vegas isn’t growing quickly, and MGM Resorts International (NYSE:MGM) and Caesars Entertainment Corp (NASDAQ:CZR) are struggling under heavy debt loads built during the financial crisis. They would be seeing a light at the end of the tunnel because of increased traffic and gaming if it weren’t for the recently announced sale of an 87-acre strip of land to Genting Group by Boyd Gaming Corporation (NYSE:BYD). Genting is planning to build a $2 billion-plus resort on the north side of The Strip, with another 5,000 rooms and 140,000 more square feet of gaming. This will grab a lot of the upside in Las Vegas from MGM and Caesars, just as they’re starting to get back on their feet.
Lagging behind in Macau
MGM is definitely happy about its investment in Macau, but the Macau Peninsula isn’t growing as quickly as its neighbors to the south on Cotai. MGM Resorts International (NYSE:MGM)’s Macau revenue grew just 2% to $731 million from a year ago, which actually outperformed Wynn Resorts, Limited (NASDAQ:WYNN), its Macau Peninsula neighbor. Operating income was up 8% to $83 million in the quarter.
The big prize for MGM is its Cotai property, which will hopefully open in the middle of 2016. The company recently broke ground on the resort with 1,600 hotel rooms, 2,500 slot machines, and 500 table games next to Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL)‘s City of Dreams and Las Vegas Sands Corp. (NYSE:LVS)‘ Sands Cotai Central. Both companies have been big winners in Macau recently as Cotai has grown and mass-market play has trended toward Cotai, so the resort should be a big hit for MGM. It’s just too bad the company has to wait another three years to see it hit the income statement.