Melco Crown’s Macau mass-market gains not enough to offset vanishing VIPs

TAGs: Macau, Melco Crown Entertainment

melco-crown-entertainment-lawrence-hoCasino operator Melco Crown Entertainment (MCE) saw revenue fall in both Q4 and FY 2014 thanks to Macau’s ongoing revenue slump. Full-year revenue fell 6% to $4.8b, earnings fell 7% to $1.28b and net income fell 4.5% to $608.3m. The company laid blame for the slump on lower VIP gambling volume, which was only partially offset by gains in mass-market revenue.

For the three months ending Dec. 31, revenue fell 20% to $1.12b as both VIP and mass-market gambling slowed. Earnings fell 29% to $278.6m and net income tumbled nearly 60% to $92.9m. In addition to less action at the tables, MCE says $26.3m came off the bottom line thanks to costs associated with the in-development Studio City project in Macau and the recently opened City of Dreams Manila.

MCE’s original City of Dreams property in Macau reported Q4 revenue down 18% to $895m as VIP turnover dropped 30%. However, mass-market table drop nudged up 1% to $1.3b and gaming machine handle rose 4% to $1.35b. Non-gaming revenue was basically flat at $71.5m.

Altira Macau saw revenue fall 30% to $173m as VIP turnover fell 24%, mass market table drop fell 14% and non-gaming revenue dipped slightly to $9.4m. Revenue from the Mocha Clubs slots parlors fell 15% to $32.8m thanks to a 400-unit reduction in active machines to 1,300, although net win per machine per day rose 6%.

MCE co-chairman and CEO Lawrence Ho (pictured) said 2014 had been “challenging” in Macau, but Ho took heart by the fact that MCE had been able to boost its share of Macau’s mass-market in Q4. Ho said he’d been “one of the more optimistic people” for Macau’s prospects in 2015, but he now expects the gaming hub to post “slight negative growth year-over-year” in 2015.

Ho suggested a decreased mass-market hold percentage in Q4 was at least partly caused by Macau’s smoking ban and players having to get up from the tables to go burn a butt. Ho wasn’t sure whether this impact would be temporary or permanent but noted that mass hold rate “has always been highly correlated to the length of play.”

Ho also referenced rumors that “the next integrated resort to open will get very little tables” from Macau’s government. The issue of new table allocation has been a thorny one, given the number of new mega-properties scheduled to open on Cotai in the coming years and Macau’s stated intent to restrict table growth by 3% per year until 2022 – which, if followed to the letter, means just 171 new tables in 2015. The math simply doesn’t work and Ho believes this will have “a significant impact on growth of the industry.”

Ho said MCE is convinced they “really do need 400 tables to make [City Of Dreams} happening and busy … We have worked on scenarios [involving] fewer tables than that, but it would be less than optimal.”

When the subject turned to junket operators, Ho said the Altira property had “finally kicked out quite a lot of the smaller and less high quality junkets,” going as far as to name Amax Holdings as one of these lesser lights. Chief operating officer Ted Chan said the company was now welcoming mega-junket SunCity and plans to add “another sizeable quality junket operator in Altira next week.”

Given recent remarks by Chinese officials, Ho was asked how heavily City of Dreams Manila intended to rely on Chinese gamblers, Ho said MCE’s plan for the property was “really underpinned by the strong growth in the domestic market.” Ho said the Manila property was “not very reliant on China, but at the same time, I think that’s a huge potential, especially when the perception of the Philippines change, and also when the relations between the two country change.”


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