Melco to continue VIP operations at Studio City throughout 2020

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On Tuesday, Melco announced the continuation of Studio City VIP operations for one year – an unexpected move after Melco announced one year prior that it would be discontinuing VIP operations at the Macau casino on January 15, 2020. The new agreement lasts until January 15, 2021 but is subject to termination by a 30-day notice, giving Melco more flexibility to redistribute to the stronger performing City of Dreams

Melco did not specify its reasoning on either today’s continuation notice or last year’s discontinuation notice.

“Melco will be rolling out new junket rooms and Premium Mass gaming areas at City of Dreams over the next few months, and we believe it is likely Melco redistributes Studio City’s VIP tables as new facilities are opened,” noted analyst Edward Engels with Macquarie Research.

Studio City has leased 45 tables from Melco since Q4 2016 and has maintained a 2.0-2.5% market share in Macau’s VIP segment over the past twelve months. However, City of Dreams went from a market share of ~8% to ~16% in less than a year despite the number of VIP tables remaining relatively unchanged.

Q3 2019 figures released by the company show that while VIP tables at Studio City generate US$670,000 volume per table per day, City of Dreams is netting US$1.2 million per table per day. This possible redistribution could see Studio City tables sent to City of Dreams “supporting market-share gains companywide,” said Engels.

Melco owns 54% of Studio City which opened in Cotai in 2015.