MGM Resorts Bets on BetMGM Amid Rising Casino Costs
The Essentials at a Glance
MGM Resorts International is increasingly focusing on its online platform, BetMGM, to drive growth for 2025. Rising costs and growing competition are putting pressure on the traditional casino business. At the same time, MGM plans to improve profitability through strategic measures such as higher fees and optimized restaurant concepts. BetMGM, a joint venture with Entain, is at the center of the company’s digital expansion strategy.
Focus on BetMGM as a Growth Driver
MGM Resorts sees BetMGM as a key player in its future business development. The online platform, operated jointly with Entain, has become an integral part of the company’s strategy. Analysts such as Carlo Santarelli from Deutsche Bank emphasize that investors will increasingly expect more transparency regarding BetMGM’s performance. MGM may also consider increasing its stake in BetMGM, similar to its approach with MGM China in 2011.
Challenges in the Traditional Casino Business
MGM’s brick-and-mortar casino business is facing challenges. Rising operating costs and intense competition are putting pressure on margins. To counteract this, MGM recently increased fees at its Las Vegas properties, which is expected to generate an additional $70 million in revenue next year. Smaller measures, such as tiered seating options in restaurants, could also improve profitability.
Strategic Investments and Renovations
Despite these challenges, MGM continues to invest in its properties. Planned renovations, such as those at MGM Grand Las Vegas, aim to enhance the appeal of its locations. At the same time, MGM is increasing capital expenditures to remain competitive in the long term. If MGM secures a casino license in New York, the company will face a licensing fee of $500 million as well as additional modernization costs.
Developments in Asia: MGM China
MGM China, which had a strong start to 2024, is also facing rising costs. These are impacting profit margins, even though the region remains a key market for the company. MGM is pursuing a similar strategy in Asia as in the U.S., focusing on continuous growth and investments.
Shareholder Engagement Through Buybacks
Despite financial challenges, MGM remains committed to its shareholders. The company is conducting share buybacks, signaling its willingness to enhance shareholder returns. These measures aim to strengthen investor confidence and increase the attractiveness of MGM’s stock.
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BetMGM: A Critical Factor for Valuation
Deutsche Bank has set a price target of $48 for MGM. Digital, national, and international assets play a central role in this valuation. BetMGM is seen as a critical factor for the company’s future valuation. The platform’s success could significantly contribute to achieving MGM’s long-term growth goals.
Our Assessment
With its increased focus on BetMGM, MGM Resorts is making a clear statement about its future direction. The digital transformation of the gambling market offers tremendous potential but also comes with risks. While the measures to improve profitability in the traditional casino business seem sensible, it remains to be seen whether the planned investments and strategies will deliver the desired results. Both players and investors will find it exciting to follow the development of BetMGM and its impact on MGM’s overall business.
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