Melco Resorts, an Asian-facing gaming operator, reported a 28.7% increase in losses year-on-year, totaling $743.1m for the 12-month period ending on December 31. Despite these losses, the company expressed optimism about the recovery of the Macau market, which historically contributes a significant share of its revenue. Melco’s full-year financial statement highlighted the suspension of testing for visitors arriving in Macau as a factor that led to a substantial rise in gaming revenues in the region.
1. Macau Market Recovery:
1.1 Turbulent years and pandemic impact: Melco Resorts has faced challenges in recent years, exacerbated by the Covid-19 pandemic that began in 2020. The company’s performance suffered due to travel restrictions and lockdowns.
1.2 Encouraging signs of recovery: Melco CEO Lawrence Ho described the company’s performance in 2023 as highly encouraging. Gaming revenues in Macau experienced a significant surge, increasing by 233% in January 2023 compared to December 2022, following the suspension of testing for visitors from mainland China, Hong Kong, and Taiwan.
2. Performance During Chinese New Year:
2.1 Strong earnings during Chinese New Year: Lawrence Ho highlighted the company’s earnings during the peak days of Chinese New Year, with gross gambling revenue reaching MOP6m per day in terms of EBITDA.
2.2 Sustained performance post-New Year: Melco Resorts continued to perform well after the Chinese New Year period, maintaining a daily average volume in February that was consistent with the previous month. This supports the belief in the return of pent-up demand and the future development of Macau as an international entertainment and leisure destination.
3. New Concession and Investment:
3.1 Commencement of new concession: Melco Resorts officially began its new 10-year concession on January 1, 2023. The company expressed gratitude for being awarded the new license and highlighted its commitment to leveraging its strengths in entertainment and non-gaming attractions.
3.2 Investment propositions: Melco Resorts aims to enhance its existing entertainment offerings and non-gaming attractions to further develop its position in the market. The company recognizes the importance of diversification beyond traditional casino revenue streams.
4. Financial Performance Analysis:
4.1 Fourth-quarter performance: Melco Resorts reported a 30% decrease in revenue, amounting to $337.1m for the three-month period ending on December 31. Operating costs and expenses also declined by 8%, driven by reductions in casino costs, amortization of gaming sub-concession, and food and beverage expenses.
4.2 Full-year results: Revenue for the year fell by 32.8% to $1.35bn, with the majority derived from casino operations. Food and beverage revenue and room revenue made up a smaller portion of the total. The pandemic-related travel restrictions in Macau and mainland China significantly contributed to the decrease in overall operating revenues.
5. Impact of Covid-19 on Performance:
5.1 Travel restrictions and lockdowns: Melco Resorts attributed the decline in total operating revenues primarily to heightened travel restrictions in Macau and mainland China during the quarter. Large-scale lockdowns implemented during the summer had a significant impact on the company’s revenue.
5.2 Long-term outlook: While the pandemic has negatively affected Melco Resorts’ financial performance, the company remains hopeful about the recovery of the Macau market and its ability to position itself as a leading destination for entertainment and leisure.
Melco Resorts continues to navigate the challenges presented by the Covid-19 pandemic, as evidenced by its increased losses. However, recent positive developments in Macau, including the surge in gaming revenues and the commencement of a new concession, have provided optimism for the company’s future. Melco Resorts aims to leverage its strengths in entertainment and non-gaming attractions, diversify its revenue streams, and capitalize on the pent-up demand for leisure and entertainment experiences in the region.