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Melco Resorts expecting some “loss-making days” in its Macau casinos, flags six-month recovery period

Ben Blaschke by Ben Blaschke
Fri 21 Feb 2020 at 06:29
Melco’s Studio City to host Asia-first residencies from superstars Aaron Kwok, Joey Yung and Leon Lai

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Melco Resorts & Entertainment has warned that it could experience some loss-making days at its Macau properties while the Coronavirus continues to depress visitation, despite re-opening its casino floors at City of Dreams and Studio City, as well as its Mocha Clubs parlors, on Thursday.

The impact of the virus was a major talking point during Melco’s 4Q19 earnings call overnight, with the company’s executive team providing detailed insight into the challenges ahead given uncertainty over when the situation will ease.

Asked about profit versus overheads following the re-opening of gaming facilities on Thursday, which followed a government enforced 15-day closure period, Melco said it has managed to reduce overheads via cost-cutting from around US$3 million per day to US$2.5 million in recent weeks, but admitted making that money back remains a challenge.

“I think our revenues are going to be impacted in a great way,” said Melco’s COO of Macau Resorts, David Sisk. “Obviously we’re going to try to minimize our costs as much as we possibly can, but we are going to be challenged and obviously, we’re not the only one out there. It’s going to be challenging for the next four to six months.”

Geoff Andres, Studio City Property President, added, “In the scenario that David just painted, it is certainly possible we could have loss-making days in the casino, even with the casino open.”

While a majority of Macau’s casinos opened again for business on Thursday, Sisk noted that customer numbers are currently at miniscule levels with the situation unlikely to improve significantly anytime soon.

“As we opened up at Studio City [on Thursday], we had about 10 customers that came in,” he revealed. “As we opened up City of Dreams there were maybe 10 to 12 customers there.

“And when I left the casino at two in the morning, we had 20 customers at City of Dreams. It’s just going to take some time given the safety protocols that we have in place. I don’t think we want anyone to walk away from the [earnings call] thinking that everything’s going to be just perfect and rosy coming out of this going forward.”

One of the major impediments to Chinese visitation to Macau right now has been cancellation of the Individual Visit Scheme (IVS), which allows mainland Chinese residents to enter Macau as independent travellers rather than having to enter as part of a tour group.

IVS visitors accounted for 46.8% of Macau’s 27.9 million mainland Chinese visitors in 2019, and according to Melco it will likely be April or May at the earliest before the scheme is implemented again.

But Sisk envisions other roadblocks to visitation even after border restrictions start to ease.

“One of the things we’ve seen that has not been mentioned is all the time the kids (in China) have been out of school to this point,” he said. “Typically, July and August are the school holiday periods. We think that a lot of the kids in China will probably be going to school during that July, August period, which we think is going to have an impact on our visitation, whether it be for hotel occupancy or just customers coming to see us.

“So, we’re not as hopeful in the next, let’s say four to six months. We think it’s going to be very challenging. As I said, we opened up last night and there was a trickle of customers.”

Chairman and CEO Lawrence Ho said he expects Macau to be “very, very quiet for quite a long time.”

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Ben Blaschke

Ben Blaschke

A former sports journalist in Sydney, Australia, Ben has been Managing Editor of Inside Asian Gaming since early 2016. He played a leading role in developing and launching IAG Breakfast Briefing in April 2017 and oversees as well as being a key contributor to all of IAG’s editorial pursuits.

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