The management of casino operator Melco Resorts and Entertainment Ltd has confirmed that its City of Dreams (CoD) Manila property, in the Philippine capital, is now operating at “100 percent capacity”, following the easing of restrictions to deter the further spread of Covid-19.
“It is the first time CoD Manila can operate at full capacity since March 2020,” said Lawrence Ho Yau Lung, chairman and chief executive of Melco Resorts, on the group’s fourth-quarter earnings call on Tuesday.
Since Tuesday (March 1), Metro Manila was placed under “alert level 1”, the lowest level of countermeasure against Covid-19. Under the lowest level of restrictions, due to be in place until March 15, businesses are able to operate at full capacity.
The company said City of Dreams Manila had recorded the “strongest quarterly” earnings before interest, taxation, depreciation and amortisation (EBITDA) performance in that market since the advent of Covid-19, “thanks to a full quarter of casino operations, albeit with capacity restrictions”, said Mr Ho on Tuesday.
The CEO noted the local authorities “reopened the Philippines border to fully vaccinated international tourists effective on February 10”.
City of Dreams Manila’s president, Geoff Andres, said on the call: “The challenge we have right now, though, is that our foreign tourists, with the exception” of those from the United States, “can’t get back to their home country without going through quarantine, so we’re still missing our customers from Japan and [South] Korea and some… Southeast Asia countries.”
He added: “Right now, it really feels very good to operate on a very normal basis and we’re seeing our volumes bounce back quite nicely.”
CNY boost in Macau
On Tuesday’s call, Mr Ho said “premium direct” gaming business at City of Dreams Macau “more than doubled” during the Chinese New Year (CNY) period in early February, compared to the same festive period in 2021, and “and continued to outperform into the following weeks.”
The term “premium direct” is commonly understood in the Macau industry to refer to directly-managed VIP players. Mr Ho didn’t mention what the base figure had been for such business before Chinese New Year.
Collaboration between Macau casino operators and government-licensed VIP gaming promoters – also known as junkets, and traditionally a source of much of Macau’s high-roller play – has mostly been suspended for now, according to various statements made recently by the city’s casino operators.
Mr Ho referred on the call to the “entire” VIP and junket industry having “imploded”.
Vitaly Umansky, an analyst at brokerage Sanford C. Bernstein Ltd, said in a Tuesday note after the results: “Management indicated Melco is an early adopter and a market leader in direct VIP.”
But he added: “Management remains conservative in 2022 guidance as they believe a zero-Covid strategy will stay in place for China and Macau,” with it “likely to be maintained,” until after October’s 19th National Congress of the Communist Party of China.
Mr Ho noted on the call mass table drop at City of Dreams during Chinese New Year, had also “demonstrated strength, increasing around 20 percent,” compared to the 2021 festive period.
The CEO said though he expected the performance during 2022 to be “range bound” due to the stop-start nature of travel rules covering Macau in the light of periodic outbreaks of Covid-19 regionally.
Studio City concerns
Management was asked on the call whether it had concerns that the group’s majority-owned Cotai property Studio City might be classified by the Macau government as a so-called satellite casino under the revision of the city’s gaming law currently passing through Macau’s Legislative Assembly.
Studio City International Holdings Ltd, the owner of Studio City, warned in an early-February filing in the United States, that it might have to transfer ownership of the physical casino premises to the gaming operator, currently a unit of Melco Resorts, due to a proposed change to Macau gaming law, requiring a Macau-licensed operator to own a casino premises.
A number of commentators has said the provision is aimed at third-party owned satellites that piggyback on the gaming licence of one of Macau’s existing six operators.
Mr Ho said on Tuesday: “We’ve never looked at Studio City as a satellite casino considering Melco Resorts owned the majority of the ownership of Studio City, and we believe that the gaming law revision also doesn’t see Studio City as a satellite casino.”
Though he added: “We are still seeking a lot of clarification from the government before the law gets approved… so we’ll be working with the government on that front.”
Geoff Davis, chief financial officer for the group, noted that in any case, there was a three-year transition period, even for those properties that were covered by the provision.
Mr Davis said Melco Resorts’capital expenditure for 2022 would be “about US$765 million,” with “about US$650 million of that” related to combined project spending on construction of City of Dreams Mediterranean in Cyprus, and on Studio City Phase 2 in Macau.
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