The gaming operators Galaxy Entertainment and MGM China consider that the industry’s competition is ‘intensifying’ but remains ‘manageable.’
Both gaming operators attended the HSBC Global Investment Summit 2024 in Hong Kong, April 8-10, 2024. In the investment memo, HSBC notes that both operators observed ‘positive trends across all business segments,’ with notable upticks in VIP, which remains volatile.
They also noted some positive signs, highlighting that the length of stay and average spending per trip observed at their properties are both above the 2019 level. ‘Travel frequency is higher than before the COVID-19 pandemic for MGM but slightly below the 2019 level for Galaxy. Neither saw any visa issues.’
‘With the growing offerings of non-gaming events of a different nature, both expect to see travelers return more often to Macau and the seasonality trend to smoothen out.’
In the view of these operators, margins for the high-end mass segment could see more pressure from competition but be buffered by operating leverage as top lines continue to grow.
Regarding the market share development, after a very strong January with MGM holding 20 percent of the market share, MGM has seen its market share stabilize in the 15-17 percent range, which is also the company’s target.
The same note mentions that despite keener competition, MGM is confident of defending its market share.
Currently, MGM is renovating its Peninsula property and expects to introduce 28-suite villas next year. Total non-gaming investment commitment is up by 20 percent to $2.3 billion for MGM as industry GGR hit the MOP180 billion ($22.4 billion) threshold in 2023.
As part of the commitment, MGM plans to build a hotel tower in Cotai to cater to premium mass clients. The planning phase has only just started, so there is no timeline yet.
Galaxy adjusts strategy
Galaxy Entertainment is actively adjusting its strategy to fit the market trends. While the mid and lower-end mass markets have been growing nicely, Galaxy saw premium mass lose market share in November 2023 and January this year.
The management of Galaxy attributes this to disruption from the casino floor renovation as it tries to direct traffic to the previously quieter Southern part. Work started in November and finished before Chinese New Year (CNY).
Galaxy also admitted that they didn’t have enough hosts. Galaxy has since transferred 100 staff from its service team to hosting, ‘beefing up the host-to-player ratio’. It now has the biggest sales team in Macau. It will take a few months for the new team to ramp up.
In addition, management notes that the reinvestment rate was too low and, according to Galaxy, among the lowest in the market in 4Q23. Galaxy has recently lifted marketing spend to match offerings to top-tier clients against industry peers.
Galaxy is working to improve its market share trend in the coming quarters, with the changes in place. Some initial improvement was recorded in Feb and Mar. Smart table upgrades are due to be completed by 4Q24.
