MGM Resorts International achieved an all-time consolidated net revenue record in Q2 2023.
The US-based casino giant reported consolidated net revenue of $3.9bn, up 21% on the prior year, primarily due to the lifting of Covid-19 entry restrictions in Macau.
However, it was MGM China that stole the show by outpacing Macau’s market recovery. Revenue from the property surged by 418% to $741m.
Moreover, its adjusted property EBITDAR increased by 21% compared to the second quarter of 2019, reflecting a healthy rebound from the last trading period before the pandemic.
Domestically, the company’s Las Vegas Strip Resorts reported encouraging results, with an uptick in average daily rates (ADR) and occupancy year-over-year.
Touching on the group’s online gambling joint venture BetMGM, MGM Resorts CEO and president Bill Hornbuckle said it had achieved its first positive EBITDA quarter and was on track for profitability in H2 2023.
The quarter also witnessed a strategic manoeuvre as MGM Resorts repurchased approximately 15 million shares for $626m.
In a bid to drive higher profitability, the casino operator announced a long-term licence agreement with Marriott International, tapping into the hotel specialist’s extensive global customer base and combining it with MGM’s loyalty rewards programme.
Despite a dip in operating income to $371m, down from $2.4bn due to a one-off gain related to the sale of MGM Growth Properties in the previous year, MGM Resorts still managed a net income of $201m.
The company’s diluted income per share stands at $0.55, and the adjusted EPS at $0.59.
“We expect to continue to pursue long-term growth opportunities by expanding our global online presence and digital capabilities and through our development efforts in Japan and New York,” said MGM Resorts CFO Jonathan Halkyard.
MGM Resorts has fought back against allegations that it gained from illicit online casino activities in Japan following its acquisition of LeoVegas.
The operator, in partnership with the city of Osaka, secured the inaugural casino licence in Japan in April and is planning to construct an $10bn integrated resort complex on the artificial island of Yumeshima.
However, a local lobby group known as the Society for Considering Gambling Addiction Problems (SCGA) has dramatically requested that MGM’s licence be withdrawn and has filed a petition to have the building project suspended.
The SCGA called a press conference to allege that MGM may have profited from illegal earnings garnered by LeoVegas in Japan, which it claimed unlawfully targeted Japanese players through online casino websites.
The group pointed out that MGM would be in breach of sections 11 and 18 of the Act on Punishment of Organised Crime in Japan, which could disqualify it from being approved as a key shareholder in a Japanese integrated resort, per the country’s gambling laws.
MGM vigorously denied the allegations, however, describing them as “groundless” and “completely unacceptable” in a statement on its Japan-facing corporate website.
It added: “MGM Resorts International has always prided itself on promoting responsible gaming at all of our facilities.
“MGM looks forward to working closely with all stakeholders to develop a world-class safe integrated resort in Osaka.
“Please note that the allegations made by some groups are baseless and may lead to misunderstandings.”
MGM last year acquired Swedish operator LeoVegas in a $607m deal. Prior to the purchase, both the flagship LeoVegas brand and the firm’s Royal Panda brand were active in Japan.
However, both brands committed to exiting the country by the end of August 2022 and the deal completed in September.
MGM Resorts has secured the next step in its bid to develop an integrated resort in Japan’s Osaka Prefecture.
Development plan gets green light
Japan’s Ministry of Land, Infrastructure, Transport and Tourism has officially certified an Area Development Plan submitted last year by Osaka Prefecture/City and Osaka IR KK, a joint venture between MGM Resorts Japan and ORIX Corporation.
The certification is one of the final steps in the licensing process under Japan’s Integrated Resort Development Act, and allows MGM Resorts Japan and ORIX to finalise agreements with Osaka Prefecture/City on the construction of a development project worth around $10bn.
Final details of the proposed development were submitted to the prefecture last year, and MGM suggested the project would help “transform the region into one of the world’s top entertainment and hospitality destinations and to serve as a hub for tourism across Japan.”
“It is an honour to be selected by the Government of Japan to develop a tourism project of this scale,” said MGM Resorts president and CEO Bill Hornbuckle.
“We couldn’t be more excited to get started on the development of one of Japan’s first integrated resorts in the great City of Osaka, and we look forward to working with our partner ORIX and Osaka Prefecture/City to realise this long-held goal.”
Integrated resorts in Japan
MGM’s proposal is the first to be approved by Japan’s Ministry of Land, Infrastructure, Transport and Tourism.
The government passed its Integrated Resort Implementation Act in 2018, allowing casino operators to bid for a limited number of local licences across the country.
At the time, MGM had a full-time development team in the country and had spent four years engaging in discussions with Japan’s cultural and business communities with a view to positioning itself for one of the licences.
In 2021, Osaka selected MGM alongside JV partner ORIX as the region’s integrated resort partner.
Once selected by the prefecture, MGM was able to unveil the details of its $10bn development plan.
A further decision on an application for an integrated resort in the Nagasaki Prefecture is expected from the Japanese government in the coming months.
The Nagasaki Prefecture has partnered with European operator Casinos Austria for its integrated resort bid.
Following that decision, authorities may also consider one or more further unissued integrated resort licences, with the possibility for a further round of licence applications to then take place.
Details of the project
MGM’s initial plans for the resort included a total 2,500 guest rooms across three hotels, the MGM Osaka, MGM Villas and MUSUBI Hotel.
The resort is also set to include a variety of dining and food and beverage offerings, retail spaces, a spa, fitness centre and banquet halls.
Plans for the resort include some 400,000 square feet of conference facilities and 330,000 square feet of exhibition space, with capacity to accommodate more than 6,000 visitors.
The 3,500-seat Yumeshima Theatre was also proposed as part of the resort.
The actual construction date of the resort is yet to be confirmed, but reports suggest the venue is unlikely to open before 2029.
MGM projected that the resort would welcome around 20 million visitors annually, while providing jobs for some 15,000 employees.
The operator also hopes to help establish Osaka as a gateway for wider tourism in Japan.
The city, which is situated on Japan’s largest island, Honshu, is home to around 2.7 million inhabitants. Osaka’s broader metropolitan area, meanwhile, is home to some 19 million residents.
According to CBRE equity research analyst John DeCree, the region’s large population leaves it well placed to surpass Singapore in terms of land-based casino GGR.
Osaka could generate annual EBITDA for MGM of more than $2bn, DeCree suggested, given the number of national and international visitors to the region.
The main concern for MGM should be building enough hotel rooms to be able to properly capture Osaka’s total addressable market, he added, which CBRE estimates at $5.75bn in GGR annually.
If done properly, DeCree concluded that MGM’s Osaka integrated resort could quickly become one of the most profitable casinos in the world.
Japan’s gambling sector
While the country is yet to open its first land-based casino, online gambling is popular in Japan.
Japanese companies are prohibited by law from offering online gambling, however there are no laws preventing Japanese residents from playing with operators based overseas.
The country is therefore a significant market for several companies in the international online gambling sector.
For affiliate group Catena Media, it is one of a few select markets offering stable, high-margin growth opportunities outside Europe and the US.
In its 2022 annual report, the business said it continues to observe exciting growth opportunities in Japan and sees strong scope for gaining market share as its market-specific expertise develops.
Catena remains focused mainly on online casino in the Japanese market, but has recently branched out into sports betting and esports sectors.
The market is also an important one for Bally’s Corporation, via its online-focused Bally’s Interactive subsidiary. The market has been a key focus of the firm’s international interactive segment, it said in its latest annual report.
In addition to the country’s grey online gambling market, there are some limited regulated options available to bettors in Japan. They include pari-mutuel betting via the Japanese Racing Association, and online lottery games via the Japanese Lottery.
Zimpler could pay price for payments approach
Swedish news outlet Dagens Industri (DI) has not held back in its reporting on payments provider Zimpler this week.
In a series of articles, the scoop-hungry newspaper revealed that Zimpler was pursuing a sale and potential exit for its shareholders – many of whom have links to Betsson and Cherry – after the company skyrocketed in value over recent months.
DI alleged the drastic upturn in value is because Zimpler has continued to facilitate iGaming payments for operators targeting Swedish consumers without a licence. These companies have no obligation to link to the country’s self-exclusion register and are free to offer attractive bonuses to customers outside of the regulated market environment.
Zimpler’s growth is now 200% year-on-year according to DI, with an operating margin of 50% during Q3 2022, for example.
In the piece, DI points out the valuation of rival payments provider Trustly has plummeted over the same period after it ceased to offer payments to Sweden’s unlicensed operators.
DI suggested a raft of new rules being implemented by the Swedish Gambling Authority this year might make it harder for Zimpler to work alongside unlicensed operators, which could negatively impact any potential sale.
Zimpler said it had not been allowed to comment in DI’s coverage and swiftly put out a release of its own to address the claims.
“Zimpler has zero tolerance for illegal gambling activities,” said the firm. “Therefore, we work rigorously to ensure that all our customers comply with the legislation in each jurisdiction.”
Hinting at a potential loophole, the statement read: “Since 2019, when the law was introduced, Zimpler has never provided payment services to any company that the Gambling Authority has banned and thus can be found on the Gambling Authority’s website.”
Zimpler said reports regarding a sale of the company were speculation, although admitted it has a “constant dialogue” with investors, which is “natural” for a firm in the scale-up phase.
Gambling industry professionals have likely been following this story for some time and will have made up their own minds by now.
Footballer calls on sport to boot out gambling
Professional footballer David Wheeler penned a piece for The Guardian this week, expressing his distaste at the over-exposure of gambling brands in the sport.
In nearly all of his 500 appearances in professional matches, he claimed, he has had an online gambling advert either on his own shirt or surrounding him on the pitch.
This is not news to regular viewers of English football, of course, where Premier League fixtures can feature gambling logos and adverts upwards of 700 times per match through in-stadium and shirt advertising, according to the piece.
Wheeler called out the counter argument that gambling money helps pay for footballers’ often exorbitant wages, claiming: “I’d rather be paid less if it meant not profiting from addiction, harm and suicide – and I’m not the only one.”
Recent scandals among gambling operators – including Betway’s £400,000 UKGC fine relating to the appearance of gambling ads on the children’s section of West Ham’s website – show that teams are willing to take the money of companies who are failing to protect the most vulnerable members of society, according to Wheeler.
“It says all you need to know about how a sport and a country treat a public health issue that we name our national league after a gambling company,” he wrote.
“The EFL deal with Sky Bet ends next season and after Sky Betting & Gaming sent self-excluded gamblers free spins and exploited fans through sign-up offers, I would urge the league to look elsewhere for its next sponsor.”
And the fact that gambling firms contribute a relatively small proportion of their profits to supporting the sport while attempting to “lure in the next generation of lucrative profit makers” is “a bad deal for the sport and for fans,” he added. Tell us what you really think, David.
Underlining a peculiar irony of the sponsorship deals, Wheeler pointed to several scandals involving professional footballers being punished for placing bets on the sport.
“We are part of a strange world where we are expected to heavily promote products that could lose us our jobs if we use them,” he pointed out.
Japan’s betting boom
“All bets are off in Japan’s sports gambling craze,” argued Financial Times Asia business editor Leo Lewis this week.
Lewis shone a light on a curious growing trend in Japan, where legal options for sports betting are extremely limited.
There, boat racing, motor racing, horse racing and Keirin cycling are four of the biggest attractions for bettors, and growth in recent years has gone beyond what anyone might have previously imagined.
“All four sports, in terms of betting revenues and numbers of punters, have thrived to a remarkable degree over the past three years, primarily through online portals,” Lewis wrote.
“Some analysts attribute the growth to the pervasive (but possibly temporary), entertainment-hungry ‘nesting’ dynamics that Japanese households settled into during the pandemic.”
Since the onset of the pandemic, more time spent at home among Japanese residents has led to a pronounced proliferation of sports betting, Lewis argued, with revenues rising slowly and steadily since 2013 before soaring rapidly in 2020.
And the action has not subsequently slowed down. Since March 2020, the index covering the four sports mentioned above has risen 60%, Lewis said, while the index for boat racing alone has jumped a whopping 134%.
“This expansion jumps off the page among data for sectors in which contraction – latterly because of Covid but fundamentally because of Japan’s shrinking and ageing demographics – is rife.”
But the growth has not come without cost to Japan’s unique gambling sector.
Over the same period, the former king of Japanese gambling games – vertical pinball-style game pachinko – has seen revenues plummet.
The game’s 2020 revenues were roughly half their 2006 level of $207bn, Lewis said (although a quick Google search reveals Lewis was likely referring to total stakes here, and not revenue).
In any case, it seems the limited options available are far from preventing Japanese residents from having a punt. Whether the growth continues as post-pandemic habits subside, that very much remains to be seen.
Hero Gaming has halved its workforce in a bid to dramatically cut operating costs, iGaming NEXT can exclusively reveal.
Approximately 60 employees have either left – or will soon leave – the company, through redundancy or resignation, after staff were urged to choose between two exit routes.
The streamlining process began at the beginning of last week, with two separate compensatory packages on offer for the majority of redundant or resigning employees.
CEO Patrick Jonker is understood to be one of the departing employees having resigned from his post. Jonker, a former William Hill International MD, spent just 10 months in charge.
Sarah Stellini has now been appointed permanent CEO of Hero Gaming. She initially joined the business as a commercial director in April of this year.
iGaming NEXT understands that multiple C-level staff and senior department heads have also exited the business as a result of the cutbacks.
The cuts were made across the firm’s two operational offices in Malta and Sweden.
Hero Gaming chairman Georg Westin: “We still have a very good company and believe in our focus markets. However, it is costly, which has led to the decision to downsize and get back to a profitable situation.”
One source – speaking to iGaming NEXT on the condition of anonymity – said the company was paying the price for aggressive new market entries that had not gone according to plan.
Hero Gaming sold its Swedish-facing B2C business, including its Speedy-branded casino assets, to Finnish operator Paf in August of last year. The company then refocused on B2B operations.
“Hero Gaming has gone through large changes in market conditions over the past years and our Swedish business was sold which has lead to a new situation,” Hero Gaming founder and chairman Georg Westin told iGaming NEXT.
“We still have a very good company and believe in our focus markets. However, it is costly, which has led to the decision to downsize and get back to a profitable situation.
“Patrick has done a great job for us, but Patrick and the board came to the conclusion that with a smaller size, we think Sarah is going to be a great CEO.
“I have just as much faith in Hero Gaming as ever and with the great people, technology and brands, we have we have a thriving future,” he added.
Stellini will take charge of the business effective immediately. Prior to joining Hero Gaming, she worked at Betsson Group as head of new business and also counts Catena Media on her extensive CV.
Stellini said Hero Gaming has been working through its strategy and structure since the sale of its Swedish B2C assets.
“As a result of this, it was a natural transition to refocus on the agility of the business and re-organising it to serve the current markets it operates in,” said Stellini.
“Together with the rest of the management team, we had been looking at ways in which we could focus on our core markets, and focus on what we do best, which is ultimately to offer our players the best gaming experience.
“This exercise led to the identification of markets which were not returning on the investment that was made, thereby affecting our customer experience in other core markets.
“We therefore decided to re-organise the company to achieve a more streamlined organisation while focusing on our core markets which, we believe, will take the company back to its years of success.
“This process led, unfortunately, to resignations from some employees, while other employees in our Swedish office were unfortunately made redundant following the required legal process, together with organised discussions with the respective employee unions,” she added.