Melco: running against the clock

In the case of Melco, the works are not optional or supplementary. The second phase of Studio City must end in a year and the clock is counting … 

MB March 2020 Special Report | Cotai 3.0 (2019-2022)

As we show in this special report, some of the operators are announcing projects for Cotai that will only see the light of day after renewing the concession. 

Melco’s situation is different: it has to build the second phase of Studio City and is pressed for time to complete it. 

“Regarding the second phase of Studio City, the Government of Macau was very nice to have granted us an extended construction time,” according to Lawrence Ho. “This is a project with a development area approaching 2.5 million square feet. Doing the work and getting all the necessary licenses from the different departments is not going to be an easy task,” he said. The deadline is July 2021. 

This second phase will include two additional hotel towers with about 900 rooms as well as a waterpark with indoor and outdoor areas. Other non-gaming attractions like MICE space, retail, and a cineplex are expected to be part. Is set to cost between $1.35 billion (MOP10,8 billion) and $1.4 billion (MOP11,2 billion). 

Lawrence Ho had previously announced that Phase 2 would be completely non-gaming, once “our gaming area in Phase 1 is enough. We can add slot machines if we want but in Phase 2 the business model needs to be a bit different. We can already accommodate the gaming needs in Phase 1.” However one year ago, Mr Ho revealed a change: “the further expansion of Studio City is expected to have two hotel towers, a water park, a cineplex and additional gaming space.” 

Perhaps because Phase 2 works are a priority, other projects have been postponed. 

This is the case with two City of Dreams hotel renovations, the former Hard Rock and Crown, now renamed Libertine (or at this transitional stage, The Countdown) and Nuwa. 

Last information given by Lawrence Ho show that Melco will only start work in 2021 on redeveloping the former Hard Rock hotel tower. In September, 2018, the firm had the facility would launch by Chinese New Year 2021. 

“I think in 2020, we will actually renovate Nüwa first. Then in 2021, we will do the Countdown [redevelopment] project. Because we don’t want to have too many hotel rooms to go offline at the same time,” said Melco Resorts’ chairman and chief executive, adding that the work to transform the Countdown hotel into Libertine should take about “one year.”  

“At Countdown we want to make something trendy, and… different. Nüwa is our nouveau-styled, Chinese-themed property. While Morpheus [opened June, 2018] is our most beautiful and contemporary flagship, Libertine is more outrageous,” the Melco Resorts executive  also confided. Or, in other words from the MELCO’s CEO, “Morpheus, the ultra sleek, cool modern hotel; Nüwa, the ultra chique classic Chinese; and Libertine, the ultra funky sexy rebel”. 

Apparently on the sidelines of these investments, Melco announced (May, 2018) the company will spend another US$100 million (MOP800 million) on upgrades to the gaming areas and non-gaming attractions at City of Dreams and Studio City over the next 12 months, in order to inject freshness into our resorts.” “We have identified over US$100 million of targeted enhancement CapEx in the next 12 months to upgrade the gaming areas and the non-gaming attractions at both COD and Studio City, which is aimed at maintaining the longer-term competitiveness of these two resorts,” Mr Ho revealed.  

There is little information about this investment and how it is being realized but it was said that the US$100 million is separate to the planned Phase II expansion of Studio City. 

Two years ago it was revealed the company planned “to reinvent the retail concept at City of Dreams “. “For the first time ever we are going to be creating our own shopping environment, running the whole place as a pop up, inviting the coolest brands in the world into a 1,500 square metres [16,146 sq feet] space, a wholly different concept,” Lawrence Ho said. 

Already this year Bernstein consultants wrote about a “IPO of Studio City,” as “a catalyst remains for a potential future buyout and/or a further fund raise to fund Phase 2 development.  

(Macau Business sought clarification from Melco Resorts for doubts about the costs of the announced projects, but without success)