Melco Resorts’ Lawrence Ho: Company “Cut Too Deep,” Lost Macau Market Share
Posted on: March 2, 2024, 11:45h.
Last updated on: March 4, 2024, 12:23h.
Melco Resorts founder, Chairman and CEO Lawrence Ho told investors this week that the casino company “cut too deep” regarding operational overhead amid its emergence from the COVID-19 pandemic in Macau. That led to market share losses in the Chinese enclave.
Melco, one of the six licensed commercial casino operators in Macau, this week reported its full-year 2023 earnings.
Though the Hong Kong-based hospitality and gaming firm expanded operating revenues by 180% to $3.77 billion? as Macau reopened in late 2022, Melco still reported a net loss of $277.5 million for the year. Along with City of Dreams and Studio City in Macau, Melco owns and operates City of Dreams integrated resorts in the Philippines and Cyprus.
Ho told shareholders and analysts that Melco’s Macau properties carried trimmed workforces into the post-pandemic environment. The reduced resort services hampered the company’s product and prompted some visitors to take their business elsewhere. That included coveted VIPs and premium mass gamblers.
Clearly we lost share in 2023,” Ho said. “I guess we continued to cut too deep to the bone in terms of our operating expenditures and how we conducted our business.”
The misfortunes cost Melco Chief Operating Officer David Sisk his job. Ho said Sisk did “a great job” during COVID, but failed to properly reimplement staffing levels to pre-pandemic conditions. Sisk resigned last month ahead of the earnings release.
Premium Mass Focus
With junkets largely gone, Macau’s casinos are undergoing the biggest customer refocus of their operating histories. Fewer VIPs mean resorts must bring in considerably more guests to ramp back up their gaming and property-wide revenue.
Ho said Melco invented the premium mass segment. It’s a concept targeting resort guests who aren’t necessarily there to gamble first, but have deep pockets and a willingness to bet big when they do stop by the casino floor. Ho explained that Melco lost premium share last year along with high rollers. The company is focused on regaining those losses in the year ahead.
“The goal for us is to really reclaim the crown in the premium mass sector. Frankly, post-COVID, we really did cut way too much of our offering. I think that’s why we lost some share,” Ho stated.
No one has lost more from Melco’s downfall than Ho himself. Melco shares on the Nasdaq are down nearly 49% over the past year from $13.87 to close at $7.12 on Friday.
Ho is Melco’s largest individual shareholder. Ho’s billionaire status is in question and he recently lost his spot on Forbes’ Hong Kong 50 Richest list.
2024 Outlook
Despite operating hiccups in 2023 and a stock plunge, Ho remains optimistic about his casino empire. Ho pointed to a strong Chinese New York last month in Macau and robust visitation to the region since “zero-COVID” was lifted.
Ho also said Melco benefits from being given the smallest nongaming investment requirement among the six casino operators made in 2022 in exchange for new 10-year licenses. Ho said the company already completed its required $1.24 billion investment in nongaming projects in Macau, and despite 2023 gaming win triggering a 20% increase, Ho said the firm is financially capable of following through on the additional $248 million.
I think its public knowledge that we had the lowest [nongaming] amount, and I’m pleased to say that we were the only one last year that fulfilled our full amount,” Ho said. “Going forward, even with the additional 20%, we’re comfortably below everybody else.”
The Macau government allocated the nongaming spending amounts based on each casino’s market share as of 2022.
Related News Articles
Most Popular
Most Commented
Most Read
LOST VEGAS: First Documented ‘Trick Roll’ by a Prostitute
Corey Levitan
— September 9, 2024
No comments yet