Casino operator Melco Resorts & Entertainment (MRE) reported record high earnings in the second quarter of 2019 thanks to a surge in mass market table action.
On Wednesday, MRE reported revenue hitting $1.44b in the three months ending June 30, a 17.4% rise over the same period last year. Operating income jumped 74% to $205.3m while net income shot up 75% to $100.3m.
Company-wide, gaming revenue was up 18.3% to $1.26b, while room revenue jumped 27.4% to $86.4m and food & beverage rose 24% to $57.4m. The only negative number came via MRE’s ‘entertainment, retail & other’ category, which slid more than one-quarter to $33.2m, thanks in part to MRE offering Studio City’s retail tenants one-time rent relief totaling $12m.
MRE’s flagship City of Dreams Macau property had a banner quarter, with operating revenue up 37% to $791m, spurred by the ramp up of its Morpheus addition (pictured) and the opening of a new VIP area on the property’s second floor.
That second floor helped City of Dreams’ VIP table turnover and revenue jump 42% and 55%, respectively, aided by an above average hold (3.16%). Its mass market tables were also on fire, with table drop up 16% and revenue rising 29%.
Studio City proved less popular with VIP gamblers, whose spending fell by half during the quarter. Fortunately, the property’s mass table drop rose 8% and mass revenue leaped 28% thanks to win surging nearly five points.
The ‘VIP bad, mass good’ trend was also on display at the Altira Macau, where VIP revenue fell 26% while mass rose 29%. The Mocha Clubs slots parlors reported basically flat revenue of $29m.
In the Philippines, City of Dreams Manila saw its VIP turnover decrease by more than one-third but an absurd 5.2% win rate helped stop the bleeding. Sadly, the mass market proved unable to ride to the rescue this time, as mass table drop dipped two points.
On the analyst call, MRE was asked whether the Suncity Group junket’s recent decision to suspend proxy betting would have any impact on its Manila operations. City of Dreams Manila senior VP Kevin Benning said the property had “ceased providing video feeds for marketing purposes,” without providing any timeline when this change was made. Benning said it was “too hard to draw any conclusions” on the impact of this decision.
MRE has done well enough in its VIP business over the past three years that it’s decided to up its normalized VIP win rate from 2.85% (the average of 2.7% and 3%) to 3% (between 2.85% and 3.15%).
MRE treated the second quarter of 2019 like a bear preparing for hibernation, gorging on everything in sight. In May, MRE acquired a nearly one-fifth stake in Australian rival Crown Resorts. The following month, MRE acquired the 75% stake in the in-development City of Dreams Mediterranean project in Cyprus held by MRE’s parent company Melco International Development.
MRE continues to hungrily eye the Japanese market, be it in Osaka or Yokohama, and promises to deliver a resort with a “unique Japanese touch.” In May, the company released artists’ impressions (below) of its proposed Osaka integrated resort City of the Future. This is just our opinion, but we’re not sure that a ‘dead sea turtle’ theme (check out the small round building on the right) sends the best message of what the future has in store.
