MGM: WEAKENED BACC SUPPORT

After an impressive start to the year MGM’s baccarat share is on the decline.

Strip Baccarat volume rose 52% in Q3.  Juxtaposing those numbers with MGM’s reported 6% decline in baccarat volume for its wholly-owned properties would show that MGM (ex Aria) lost significant baccarat share in 3Q.  With this year’s opening of 50% owned Aria, some cannibalization should be expected.  However, MGM’s baccarat volume share with and without Aria has now declined for two straight quarters.

Our analysis indicates a 14% baccarat share loss from MGM’s share (ex Aria) of 38% in 2009.  In our note, “STRIP BACCARAT TOOK A BIG BREATHER IN SEPTEMBER” (10/13/10), we wrongly concluded that September baccarat volume on the Strip declined, assuming MGM maintained its sequential share.  What we didn’t realize is that MGM’s baccarat volume share (ex Aria) had fallen so much that it was not at all indicative of the overall Strip trend.  In fact, Strip baccarat volume actually grew YoY in September.  Moreover, the chart below shows MGM’s (including Aria) baccarat volume share fell below its share without Aria in 2009.

MGM: WEAKENED BACC SUPPORT - mgm1

Aria’s baccarat volume share isn’t doing much better.  Although management said on the conference call that Aria had exceptionally strong baccarat play, we believe Aria lost baccarat volume share in 3Q.  Total table drop for Aria increased 48% in 3Q from 2Q.  If we assume Aria’s baccarat % share of Aria’s total table volumes remained at 44%, Aria lost 3% baccarat volume share in 3Q.  Since we know that on the Strip, baccarat % share of total table volume rose in 3Q, Aria’s share loss was probably not as steep. 

Baccarat was the one lifeline that kept Vegas from falling into the abyss during the financial crisis.  As seen in the following chart, baccarat volume has accounted for a higher % of total table volume over a two-year span.  If MGM’s wholly-owned property baccarat volume continues to move in the opposite direction of higher Strip baccarat volume, then its wholly-owned performance will be as depressed as Nevada’s tax coffers.

MGM: WEAKENED BACC SUPPORT - mgm2