Can Macau Spoil The Party For MGM Resorts International (MGM) In 2015?
MGM Resorts International (NYSE:MGM) is among the multinational casino operators with a heavy presence in the Chinese gambling capital of Macau. However, according to the latest market data, gambling revenue in Macau has declined in 2014, the first time for such a negative development in the region since gambling was allowed there in 2011. The development in Macau with regards to lower gambling revenue has hurt the shares of MGM Resorts alongside that of several other casino companies.
Annual revenue fall in Macau
According to a Reuters report, 2014 gambling revenue in Macau was down to $44.1 billion. The figure decreased 2.6% compared to 2013. In the month of December 2014, revenue declined more than 30%, marking another month in a series of several others in 2014 of revenue decline in the once lucrative gambling capital of the world.
Analysts pointed out that the decline in revenue in Macau had its roots in the anti-corruption crackdown in the region by the Chinese government. VIP gamblers avoided Macau during the crackdown period thereby hurting gambling revenue. The 2014 FIFA World Cup in Brazil also stole the show from Macau. Nonetheless, there is hope that things will get better for casinos in Macau in 2015.
No cause for alarm
However, even if Macau were to remain a challenging region for casinos, MGM Resorts International (NYSE:MGM) is well-placed to escape massive impact on its profits. First, the company currently depends on Macau for only a small portion of its profits, although it is seeking to expand in the market.
Second, a resurgence in Las Vegas is expected to cushion MGM Resorts International (NYSE:MGM) from any troubles in Macau. The company has also been investing to upgrade its properties in Las Vegas so that it can attract higher revenue per available room.
Additionally, MGM Resorts International (NYSE:MGM) is also expanding beyond the casino belt to the northeast regions such as Massachusetts and Maryland, because of emerging opportunities there. The strengthening U.S. economy is also leaving more Americans with higher disposable income that can be spent on gaming in casinos. Therefore, that takes away any serious concerns about what happens down there in Macau.