Gaming operator Melco Resorts & Entertainment Ltd says it wants to shift to an “asset-light” model, and that is why the company is “exploring potential strategic alternatives” regarding its involvement in the operations of the City of Dreams Manila casino resort, in the Philippine capital. That is according to Lawrence Ho Yau Lung, chairman and chief executive of Melco Resorts, who added that the firm was not looking to increase its stake in the entity that owns the Studio City complex in Macau’s Cotai district.
In his comments on Thursday, Mr Ho noted that City of Dreams Manila had “continued its strong, solid performance” in the fourth quarter of last year, “with growth in EBITDA [earnings before interest, taxation, depreciation, and amortisation] and market share quarter-on-quarter”.
He added: “We are very proud of the business that we have built together with our partners over the last 10 years. Our decision to explore strategic alternatives is part of our strategy to be asset light where we can, capitalise on our investments, and reallocate our resources.”
Mr Ho said such a move would allow Melco Resorts to “enhance financial flexibility, strengthen the balance sheet, and support” the group’s “long-term growth initiatives”.
His comments were made on a conference call with investment analysts following Melco Resorts’ announcement of its fourth-quarter 2024 results. Fourth-quarter operating revenues rose 8.9 percent year-on-year to US$1.19 billion, the U.S.-listed firm said.
The group – which runs casinos in Macau, Cyprus, and the Philippines, and is soon to open one in Sri Lanka – reported that its fourth-quarter loss attributable to owners narrowed year-on-year to just under US$20.3 million, from US$205.9 million in the fourth quarter of 2023.
Just before the results announcement, Melco Resorts had stated that it was considering “strategic alternatives” regarding the future of its involvement in the City of Dreams Manila casino resort.
Melco Resorts Leisure (PHP) Corp, a subsidiary of Melco Resorts, manages and operates City of Dreams Manila based on an operating agreement with Premium Leisure and Amusement Inc, a subsidiary of Philippine-listed Belle Corp.
On Thursday, Mr Ho said the focus on an “asset-light strategy” for Melco Resorts had begun with the firm’s involvement in the City of Dreams Sri Lanka project, located in the centre of Colombo, the Sri Lankan capital. The complex is due to open later this year and is based on infrastructure developed before the Melco Resorts brand’s involvement with local partner John Keells Holdings Plc.
At the time of the announcement, it was stated that Melco Resorts would fit out and operate the gaming area at City of Dreams Sri Lanka, and would also manage the top five floors of the hotel component, under its Nuwa brand of ultra high-end luxury rooms.
It was also stated at the time that the initial investment in the casino portion of the project was expected to be approximately US$125 million.
“As a group committed to an asset-light strategy, we really started that with Sri Lanka, and I think that is a model we like going forward,” stated Mr Ho.
He added that the firm was “trying to shed weight at this stage” and, therefore, was also not considering increasing its stake in the joint venture that owns Studio City. “In terms of Studio City, taking on any more interest there is really no longer a priority.”
“Frankly, if Macau let me do a REIT [real estate investment trust] tomorrow, I would do it,” he said.
Macau ‘off to a great start’
Mr Ho also dismissed investor concerns regarding a potential slow start to 2025 in Macau’s casino industry.
“As a group, Melco had an amazing January. It’s probably one of the best Januarys we’ve had in recent years,” he said.
“I know Chinese New Year wasn’t as strong as people had hoped, but the ‘tail’ has been much longer” than in previous years, he said, echoing similar comments from executives at other gaming operators in Macau.
Mr Ho said Melco Resorts ended 2024 with a market share of “approximately 15.6 percent in December”, and property visitation exceeded pre-pandemic levels for the first time since the reopening of the borders.
The CEO added that Melco Resorts was “off to a great start” this year. He stated: “Our market share year-to-date continues to grow from fourth-quarter 2024 levels. We had a solid Chinese New Year: total GGR [gross gaming revenue], excluding junkets, outpaced both 2024 and 2019, and property visitation was up 17 percent compared to last year.”
The executive also said that, with “The House of Dancing Water” resident show at City of Dreams scheduled to reopen in May, “and other projects that we have in the pipeline, we expect visitation to grow further, driving revenue and EBITDA.”
Prior to the latest quarterly results, Melco Resorts announced on Thursday that its long-standing resident show, The House of Dancing Water, would return to City of Dreams in May.
Other projects mentioned by Mr Ho for 2025, involving the firm’s Macau properties, included a focus on “increasing visibility and accessibility”.
At the Studio City casino resort in Cotai, the firm was “nearing completion of the revamp of the high-limit area,” he said. Plans for City of Dreams included renovating the area outside the main casino entrance, with the firm aiming to “activate spaces around this entrance to enhance visual appeal and drive incremental traffic”.
Mr Ho also said that all baccarat gaming tables in Macau would be transitioned to a ‘smart’ table format “by the end of March”.
“Full deployment of this technology across our properties in Macau will enable us to further refine our approach to marketing and player reinvestment,” he added.
