Despite a “slow” start at the beginning of the year, Melco Resorts & Entertainment Ltd was able to gain “some meaningful share” in the Macau gaming market in the second quarter, says Lawrence Ho Yau Lung (pictured in a file photo), the firm’s chairman and chief executive. “I think on mass drop and on premium direct growth, we are at over 100 percent of second-quarter 2019 level,” he stated.
Mr Ho was speaking on Tuesday on the firm’s conference call with analysts, following the group’s second-quarter earnings announcement.
The executive added that mass-market table games drop “further expanded into July, surpassing 2019 levels”, and “daily property reservation” last month “reached its highest point since Macau’s reopening” in January this year.
“So far, in the beginning of the third quarter in July, just like the entire Macau, we’ve had the best month since the reopening,” he noted.
Macau’s market-wide July casino gross gaming revenue (GGR) rose 9.6 percent month-on-month, to MOP16.66 billion (US$2.07 billion). It was the best monthly performance since January 2020, at the very beginning of the Covid-19 pandemic.
According to Mr Ho, the recovery has so far “exceeded everybody’s expectations, but it’s been driven really by premium mass”.
He added: “Once the grind mass layer comes in, I think that will give us incremental growth.”
Despite the sequential growth in GGR in July, the company was not yet at pre-pandemic levels in terms of adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA), said Geoff Davis, chief financial officer (CFO) of Melco Resorts.
“I’m confident that we have taken share from the second quarter into July. But we are not quite at the levels of GGR to get us back to 2019 levels of EBITDA,” he stated.
The CFO also mentioned on the call that the firm’s operational expenditure in the second quarter “increased to around US$2.4 million per day,” from about US$2 million per day in the first quarter. “This increase was largely due to the cost of running the residency concerts series at Studio City,” he explained.
Melco Resorts started in April a series of entertainment-show residencies at its majority-owned Studio City casino resort, in Macau’s Cotai district.
Cost savings, pledged investment
Mr Davis reiterated on Tuesday that the group intended to “retain at least 20 to 25 percent of the savings we achieved during the Covid period, as permanent savings,” in terms of company operating costs. The firm estimated it had approximately 2,000 fewer full-time employees compared to 2019, including with the launch of Studio City Phase 2.
Melco Resorts opened in April the second phase of Studio City. It included the launch of an additional hotel tower and an indoor water park. The W Macau at Studio City, a new tower with an extra 560 hotel rooms, is due to open in September.
Following the opening of the W Macau hotel tower, operational costs in the third quarter are estimated to increase to “around the US$2.5 million per day range,” noted Mr Davis.
On the call, Mr Ho also said that Melco Resorts’ investment plan for calendar-year 2023 had been approved by the Macau government in May, but said there were ongoing negotiations with the local authorities regarding the concrete implementation of the proposal.
The company has pledged to invest MOP11.8 billion in return for its new 10-year casino concession, which commenced on January 1. Of the total pledged by the firm, MOP10.0 billion is for non-gaming activities.
“We’re going to stick to the number for the investment proposal that we put in when we got our licence last December. So, we might make changes in terms of what we’re going to put in, but we’re going to stick to that number,” stated Mr Ho.
David Sisk, Melco Resorts’ chief operating officer – Macau resorts, explained that the firm was “executing on” its commitments regarding the investment plan. He also noted that the Macau government was “monitoring it quite closely, trying to make sure everyone’s doing what they’re saying”.
“But, as we’re going along, sometimes certain things may not make sense, [in terms of] what we said we were going to do back in 2022,” said Mr Sisk.
“So, we work with the government to go back and make adjustments and slide other things into the programmes or things that help kind of support some of the things the government is trying to do,” he added.
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