May 7, 2018 / 2:09 AM / 3 months ago

Melco's new $1 billion Macau hotel to operate without casino junkets: CEO

HONG KONG (Reuters) - Melco Resorts (MLCO.O) $1.1 billion hotel tower set to open in Macau next month will not resort to casino junket operators to lure in high rollers, as it bets on a resurgence in the city’s gambling sector to drive revenues, Chairman Lawrence Ho said.

A model of Morpheus as part of City of Dreams Macau is displayed in Hong Kong, China May 4, 2018. REUTERS/Farah Master

Melco’s move to ditch a usual casino practice - using middlemen known as junket companies to bring in VIP punters - comes amid a government push to diversify away from gambling and scrutiny of junket patrons on concerns over money laundering.

“Eventually it’s much better to develop your own database than rely on junkets,” Ho, also Melco’s CEO, said on Friday.

Melco’s 160-meter tall hotel Morpheus, to be opened at its City of Dreams casino resort, will house over 700 rooms, event facilities and casino tables, and will exclusively cater to premium mass customers.

VIPs bet about HK$1 million ($127,395) at a time while premium mass customers bet thousands of Hong Kong dollars. The VIP sector accounts for over half of Macau’s casino revenues.

A model of Morpheus as part of City of Dreams Macau is displayed in Hong Kong, China May 4, 2018. REUTERS/Farah Master

Gambling revenues in the Chinese territory have been going through the roof over the past year, with April’s 28-percent spike marking the 21st month of gains.

“Year-to-date growth right now is well over 20 percent. It will normalize but will still blow out the original expectations,” Ho told Reuters.

Ho expects Macau’s gambling revenue to grow around 20 percent this year, beating market projections for a rise in the high-single to low-double digits.

Ho is the son of the flamboyant 96-year-old tycoon Stanley Ho, who founded SJM Holdings (0880.HK) and is set to retire as chairman of Macau’s oldest gambling company on June 12 - a move analysts say could spark a power struggle.

The 42-year-old Ho has, however, always distanced himself from his father’s legacy and built a separate empire. His sisters are Pansy Ho, who co-chairs MGM China (2282.HK), and Daisy Ho who will take the helm of SJM from Ho senior.

“From day one, creating Melco was to be separate from that empire,” Ho said. “Everything we have done...we have tried to do it our way.”

MELCO OPERATIONS

Melco operates a casino in the Philippines and aims to set up in Japan. Ho is pushing to expand to Cyprus where he said Melco will open a temporary casino by this summer and a full integrated resort in 2021.

In Macau, Melco has three casinos, which have entertainment options such nightclubs and theater, in line with Beijing’s directive to develop more non-gaming amenities.

Melco, which has a market capitalization of $15.9 billion, has its Macau license until 2022. Its shares have jumped almost three-fold from 2016 lows.

Ho said the government had provided little detail on the upcoming license expirations, starting in 2020, for the six Macau casino operators.

“We are very interested in what the rebidding and the renewal process will be. The Macau government and even in Beijing they have kept it very close to their hearts right now.”

Reporting by Farah Master; Editing by Himani Sarkar

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