Melco Resorts & Entertainment: A Q3 Revenue Surge
During its Q3 earnings call on Tuesday, Melco Resorts & Entertainment announced an impressive total revenue of $1.18 billion, marking a 16% increase compared to the same quarter in 2023. This uptick can largely be attributed to robust customer engagement in Macau, bolstered by the recent Golden Week holiday that saw over 993,000 visitors flocking to the region. Such figures highlight a remarkable recovery that rivals pre-pandemic levels, offering a glimmer of optimism for the gaming industry in one of its largest markets.
Macau: The Heart of Growth
In Macau, Melco has notably exceeded third-quarter estimates, illustrating a strong beginning to what the company anticipates will be a successful fourth quarter. The extended holiday period from October 1-7 showcased remarkable performance at its flagship property, City of Dreams (CoD), which recorded three of its best mass-table drop days ever. Additionally, CoD’s sister property, Studio City, experienced four record-breaking days of its own during the same timeframe. These achievements are critical indicators of the reported resurgence in leisure and tourism activities in the region, marking a hopeful turn for the integrated resort sector.
Diversifying into New Markets
Beyond Macau, Melco’s footprint continues to expand internationally. The company operates City of Dreams Manila in the Philippines, which launched in 2015 and has performed steadily. More recently, it opened City of Dreams Mediterranean in Limassol, Cyprus—a project touted as Europe’s first integrated resort. Although the Cypriot resort has been slow to start, it still reported a 20.6% increase in revenue, totaling $64.4 million in Q3, boosting Melco’s portfolio diversification.
The company is also making strides in developing a new casino resort, City of Dreams Sri Lanka. The first phase of this project debuted on October 15, with the opening of the luxurious Cinnamon Life Hotel. This initiative promises to enhance Melco’s offerings in South Asia, with further expansion planned for Phase 2, which aims to include a casino and additional amenities.
Financial Highlights: By the Numbers
The financials from Q3 reveal a healthy recovery for Melco Resorts. Companywide operating revenues reached $1.18 billion, up significantly from $1.02 billion in Q3 2023. Casino gaming was the largest contributor, accounting for $944.4 million. Other revenue streams included:
- Room Revenue: $111.0 million
- Food and Beverage Revenue: $73.5 million
- Entertainment and Retail Revenue: $46.3 million
Operating income also improved markedly, totaling $138.6 million, up from $94.7 million a year ago. Furthermore, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) rose to $322.5 million from $280.6 million, while net income reverted to a profit of $27.3 million, a significant turnaround from a net loss of $16.3 million in the previous year.
Strategic Initiatives Driving Engagement
Melco’s Chairman and CEO, Lawrence Ho, attributed the impressive results to several strategic initiatives aimed at enhancing customer engagement and driving visitation across its properties. This includes the introduction of a new Signature Club for premium players, an upgraded loyalty program offering exclusive benefits, and innovative gaming experiences like a premium slot area at City of Dreams and a new Dragon Zone at Studio City in collaboration with Aristocrat Gaming.
Additionally, Melco has introduced smart tables with radio-frequency identification (RFID) technology at its baccarat tables. Such advancements aim to streamline gaming operations and elevate the overall guest experience. To keep patrons visually engaged, a new light tunnel entrance at City of Dreams has been introduced, featuring live performances that enrich the ambiance.
An Optimistic Outlook
Analysts are recognizing Melco’s potential for growth. John DeCree, an analyst at CBRE Equity Research, perceives the positive results as part of an upward trajectory for Melco, emphasizing the operator’s renewed focus on attracting high-value customers. Such momentum is expected to accelerate with the continued introduction of high-tech gaming solutions.
Ho previously expressed optimism during the company’s Q2 earnings call, stating, “We’ve seen growth in GGR quarter-to-quarter and year-over-year,” underscoring their commitment to driving market expansion.
Looking ahead, Melco’s capital expenditures are projected to reach $400 million for 2024, with approximately $70-$75 million earmarked for the development of City of Dreams Sri Lanka. Current market sentiment around Melco’s stock is positive, receiving a “buy” rating from Zacks Rank, indicating potential for outperforming broader market trends in the near future.
Conclusion
Melco Resorts & Entertainment’s significant revenue growth in Q3 serves as a testament to the company’s robust recovery and strategic initiatives in the competitive gaming landscape. With continued investment in both its Macau properties and international ventures, Melco is positioned to enhance its market position and capitalize on emerging opportunities in the ever-evolving world of integrated resorts and entertainment.
