Melco Resorts and Entertainment is seeing players who were formerly VIP players from junkets entering its premium direct program.
Speaking during an earnings call with analysts, Melco Resorts CEO David Sisk said that the team has been working hard over the last few years to grow their premium direct business, even attracting junket players.
In July last year, the gaming operator announced that its casino hotel, Altira Macau, would focus on the “high-margin premium mass segment,” making it the company’s first integrated resort to have a broader focus in the market.
Melco has already shut down VIP operations at Altira Macau, and the junket and premium direct VIP operations have been moved to City of Dreams and to Studio City.
“This transition has actually worked out fairly well for us as we’ve gotten out of the VIP junket business and […] continue to see more and more growth in our premium direct business. It’s worked very well for us,” said Sisk.
As the gaming operator has been premium mass focused, the junket business has “always had a very minimal amount of impact to our bottom line overall, so again this transition was a very natural and fairly easy transition for us.”
The turmoil in the junket sector following the high-profile arrest of mogul Alvin Chau led to gaming operators halting their agreements with junket operators.
Melco Resorts was one of the first gaming operators that reportedly notified junket operators that, from late December, they intend to shut down the gaming rooms where high rollers are brought to play.
Altira, meanwhile, was expected to emerge as a “stronger, higher-margin, more stable property in the portfolio.”
However, with current tourism levels in Macau, CEO and chairman Lawrence Ho believes that “it really doesn’t justify, I think, many properties – not just Altira – being there. But we do think that with Covid normalizing, hopefully, and within the calendar year 2022, Macau getting closer to the traditional visitation that we would get, Altira has a niche positioning.”
No plans to relax borders
Ho is not expecting China to relax its border restrictions, noting the Chinese policy is going to be “very conservative” this year with regard to opening up its borders.
“It’s a very unique year in China, it’s a very important year. Of course we went through the Olympics and then of course there are the two session meetings happening this week,” Ho explained.
Other significant events coming up include the Hong Kong Chief Executive election and the 25th anniversary of the Hong Kong handover, and then, by far the most important event for the country, the Chinese Communist Party National Congress meeting set to happen in October.
With Hong Kong seeing its fifth wave of Covid-19 and tens of thousands of new cases, Ho said, “I don’t have a lot of hope that group tours or eVisas are going to be normalized before the Hong Kong-China corridor, meaning the Hong Kong-Macau corridor will be open.”
Melco records USD812m loss in 2021
Melco Resorts and Entertainment Limited’s total operating revenue for the fourth quarter of 2021 was USD480.6 million, a decrease of approximately 9% from USD528 million for the same period in 2020.
The decrease in total operating revenue was primarily attributable to “softer performance in the rolling chip segment,” the company said in a statement.
The group reported a full-year net loss of USD811.8 million, an improvement on the USD1.26 billion loss in 2020.
In an earnings call with analysts, CEO and chairman Lawrence Ho said that results in the fourth quarter have continued to reflect Covid-19-related disruptions and their impact on travel and customer visits. Volume across all segments in Macau has therefore increased in the fourth quarter of 2021 compared to the third quarter, despite structural changes in the VIP segment.
Group Adjusted Property EBITDA also showed meaningful sequential improvement during the fourth quarter as it was recorded at USD94 million, compared with an Adjusted Property EBITDA of USD53.4 million in the fourth quarter of 2020.
“Going into 2022, the Covid flare-up in Zhuhai led to softer performance in the pre-CNY period; however, volumes across our segments increased year-over-year during the Chinese New Year holiday period and this carried over into the weeks following the holiday,” said Ho.
He added that premium direct business at City of Dreams Macau was more than double that recorded in the Chinese New Year period in 2021, and continued to outperform the following weeks. Mass table drop also demonstrated strength, increasing around 20% compared to the Chinese New Year in 2021. LV
