Melco Resorts & Entertainment profit plunges as VIPs get lucky


melco-resorts-macau-casino-lucky-gamblersCasino operator Melco Resorts & Entertainment (MRE) reported steep drops in revenue, earnings and profit as Macau’s VIP gamblers went on an extended winning streak.

Figures released Thursday show MRE’s overall net revenue hitting $1.22b in the three months ending September 30, an 11% fall from the same period last year. The company claimed that the decline would have been only 5% were it not for a new revenue recognition standard adopted on January 1.

Regardless, Q3’s adjusted earnings were down 26% to $295.4m, operating income was down 57% to $83.6m and net income plunged 91.7% to just $9.6m. It’s possible that part of this plunge came from a “one-time special gift” of an extra month’s salary to non-management employees that MRE originally mentioned in August.

During the analyst call, CEO Lawrence Ho said the payment was related to MRE’s “pension plan” but declined to confirm whether this disbursement would become an annual event. As proof that misery (at least, for management) loves company, Ho said he would discuss the issue with other Macau casino operators, which would likely cause those operators’ staff to clamor for similar windfalls.

At any rate, MRE’s overall casino revenue was down one-fifth to $1.03b, even as casino expenses fell 16%. Room revenue and food & beverage revenue both posted double-digit increases, while ‘entertainment, retail & other’ was down double-digits.

VIP gambling turnover was up at all of MRE’s Macau properties but VIP win rate was down across the board, with some properties down more than a full point year-on-year, pushing win rate below the statistical average of 2.7-3.0%.

On the flip side, mass market table drop was up across the board and, with the exception of City Of Dreams, mass table win rate was also on the rise. Gaming machine handle was also up across the board, although win rate varied.

In the Philippines, City of Dreams Manila reported revenue falling 4.4% to $141.7m, while earnings dipped 3.6% to $57.3m. VIP turnover was flat but win rate inched up 0.2 points. Both mass market table drop and gaming machine spending was up, while win rate for both categories suffered declines.

Ho told analysts that VIP spending “has fallen faster than we had expected,” in part due to eroding Chinese customer confidence, to which Ho feels the ongoing US-China trade war is contributing. The non-junket premium mass segment is also trending downward, with customer spending “not what it was.”