The new multi-billion-dollar mega resort MGM Cotai in Macau’s glitzy Cotai strip on February 13, 2018. (Photo credit: ANTHONY WALLACE/AFP/Getty Images)

It’s not often that you can be two years behind schedule and have good timing. Five years after breaking ground, and 10 years after opening its first property on the Macau peninsula, MGM has its foothold in Cotai , the outer islands landfill that’s become Macau’s center of gaming gravity. The $3.4 billion MGM Cotai opened Tuesday, just ahead of Chinese New Year and in the midst of very good times for Macau gaming. Revenue rose 19% last year and a whopping 36% in January from a year earlier.

However, MGM still has hard yards ahead in Cotai and the clock is ticking on its gaming concession, due to expire in 25 months.

What analysts say

MGM Cotai has some impressive features, most notably The Spectacle. The four-story high atrium features 25 LED walls displaying natural settings, artworks and even visitor-generated content. Morningstar analyst Chelsey Tam, who saw it on opening night, observed how dramatically the lighting effects pop after dark. The 28 Qing Dynasty carpets, among 300 art pieces around the property, lend an air of elegance, she says in a note to clients.

The Spectacle, with its glass ceiling, LED wall and art pieces, is destined to be the signature feature of $3.4 billion MGM Cotai. (Photo credit: ANTHONY WALLACE/AFP/Getty Images)

Overall, Tam sees MGM Cotai positioning itself between its neighbors, Wynn Palace at the top of the market and Lawrence Ho-controlled Melco Entertainment’s City of Dreams at the upper mid-market/premium mass level, clustered at the head of what Union Gaming’s Grant Govertsen calls Millionaire’s Row along the eastern spine of Cotai. Tam believes the proximity of the resorts will promote traffic, making MGM’s ramp up faster than previous Cotai resorts. Govertsen shares that opinion.

Other analysts disagree. Sanford Bernstein’s Vitaly Umansky, also present on opening night, characterized the debut as “not a whimper, not a bang… but a long ramp up.” The investment advisory’s report said the occasion “felt more muted than prior openings on Cotai.”

Morgan Stanley analyst Praveen Choudhary writes, based on the property preview for the finance industry, “It is important to note that early impressions of the casinos have not been accurate in predicting the eventual success of a casino, but even so, many investors found this resort underwhelming.”

JPMorgan analysts DS Kim and Sean Zhuang praise MGM Cotai’s “boutique-esque feeling & refined decor, which could resonate well with its target market,” dubbed “masstige” plus luxury. “That said, we couldn’t find anything thesis changing.”

Still work to be done

Part of the subdued response could stem from scale. The government granted MGM Cotai 125 gaming tables (25 of them deferred until 2019), 25 fewer than Wynn Palace and Sands China’s Parisian, for a property designed for 500 tables. MGM moved 77 tables from its peninsula property for an opening night total of 177, 165 mass market and 12 for its direct VIP customers.

The government granted MGM Cotai 125 gaming tables (25 of them deferred until 2019) for a property designed for 500 tables. (Photo credit: ANTHONY WALLACE/AFP/Getty Images)

Additionally, despite opening two years late, MGM Cotai remains incomplete. The Mansions, its signature VIP accommodations, and VIP rooms for junkets won’t be ready until at least the second quarter. In fact, only about 500 of a projected 1,390 guest room were available at the opening, with the majority expected to be finished by the end of this month. At completion, Bernstein notes, only 142 rooms, 10% of total guest accommodations, are suites, far below the mix at other properties targeting the upper segments. MGM also has just 5,000 square meters of retail, a cash cow for other Cotai properties.

Until it’s completed and fully operational, whenever that may be, it remains premature to judge MGM Cotai. Even then may still be soon. Two big tests lie ahead.

First, as noted above, MGM’s Macau concession expires in March 2020. “Sometimes you have to have a leap of faith,” MGM Resorts International CEO James Murren tells Associated Press. “I have no answers but I have a lot of trust” in Macau’s government. If MGM gets a new concession, call MGM Cotai a success.

Second, as important as Macau is, there is a clear ceiling for MGM there (barring unlikely acquisitions or new resort opportunities). Its two resorts fall short of its rivals’ offerings in terms of footprint, guest rooms and gaming tables. But the company has been widely touted as a strong contender for Japan. MGM Cotai presents a prime example for Japan’s decision-makers of what MGM can create. They are a key target market, and they better not be underwhelmed.