Who will buy Melco’s City of Dreams Manila?

Melco wants to free up capital for entry into Thailand, which is expected to pass casino legislation this year.

In a fourth-quarter earnings call, Melco chairman and CEO Lawrence Ho described an “asset-light” strategy that will “reallocate our resources… and support our long-term growth initiatives”.

That clearly refers to Thailand, the next holy grail in gaming.

Melco first on the ground in Thailand

Some analysts predict a Thai gaming industry could supplant Singapore as the world’s third-largest gaming market after Macau and Vegas.

In 2024, Singapore reaped $4.5 billion (£3.7 billion/€4.04 billion) in gross gaming revenue with just two integrated resorts (IRs), Marina Bay Sands and Resorts World Sentosa. Thailand plans five IRs or “entertainment complexes” in the first phase of development. Officials have already chosen four locations: Chiang Mai, Phuket, Chonburi and Bangkok. The latter may host two resort complexes.

To bid on a resort licence, would-be investors must demonstrate a minimum of $288 million in registered capital and commit at least $3 billion to development.

For Melco, which operates IRs in Macau and Cyprus as well as the Philippines and is currently developing a resort in Sri Lanka, Manila is the most dispensable asset.

City of Dreams Manila not an easy sell

“If you look at the Melco portfolio, there are very few options to open up liquidity for Thailand,” says Ben Lee, managing partner with Macau gaming consultancy IGamiX.

Sri Lanka will not open until the third quarter of 2025. And Cyprus “still has not hit its stride for a lot of reasons”, says Lee. (City of Dreams Mediterranean opened in 2023, shortly after Russia attacked Ukraine and amid the global pandemic recovery. The Gaza conflict also hindered tourism to Cyprus.)

But a sale of Manila could be complicated. Belle Corp, the leisure and gaming arm of SM Investments, “owns the land, the buildings and the licence”, Lee points out. “So all Melco can really sell is the management rights [and] maybe the assets within the casino. And even then, the sale would be subject to approval and acceptance by both [Philippine regulators] and Belle.”

“Outside Macau, the Philippines continues to generate cash [for Melco] but lacks real growth dynamics due to increasing Manila competition,” said Vitaly Umansky of Seaport Research in comments in January. Meanwhile, “Cyprus has been a disappointment.”  

Belle won’t dance – yet

Belle Corp is the logical buyer for Melco’s Manila stake. But so far, it has taken a pass.

In a 3 March filing to the Philippine Stock Exchange, Belle said it was “not in a position to confirm the accuracy of the statements about a possible exit of Melco from the Philippines”. It added coyly, “any buyout of Melco’s interests in COD Manila is not part of Belle’s plans for the immediate future”.

That seems to leave the door open for a deal, if the price is right.

A teaser released last month by Melco’s financial advisors, CBRE and Moelis Company, included no sale price. But a source told Bilyonaryo Business News that Ho’s Nasdaq-listed firm wants $1 billion for its share of the complex. The IR, which opened in 2014 in the Entertainment City casino district, cost that much to build.

The price may be too rich even for the Sy family, which owns SM Investments and Belle Corp. In 2024, the sibling dynasty had a collective net worth of $13 billion.

The “upside” of City of Dreams

The City of Dreams Manila teaser touted its “strong position in an attractive high growth Philippine gaming market, with significant growth potential and upside opportunities”.

The resort enjoyed a strong fourth quarter due to better performance in the rolling-chip and mass table segments. Total GGR was up 14% year-on-year to $149 million thanks to a 109% increase in VIP gaming revenues. Total non-gaming revenue came to $29.9 million, compared with $30.3 million in fourth-quarter 2023.

City of Dreams Manila offers three luxury hotel brands, including a plush Nobu Hotel, as well as “exquisite gastronomic experiences” in 20 restaurants “and a “spacious retail boulevard”. The resort includes the world’s first DreamWorks-inspired family entertainment centre, DreamPlay, 18,000 square metres of gaming floor and 2,300 square metres of MICE space.

But emerging Asian markets – including Thailand, Japan and the United Arab Emirates – could be a threat to the local gaming industry.

“In 2024, about 35.5 million tourists entered Thailand, while in the Philippines we have about six million. That’s a big threat,” Alejandro Tengco, head of the Philippine Amusement and Gaming Corp, recently told the Manila Standard. “Why would I go to the Philippines to gamble when I’m already in Thailand?”

Thailand: Land of “fabulous potential”

Other global gaming operators have also set their caps for Thailand. Is it all it’s cracked up to be?

“I’m still in a wait-and-see on Thailand,” says gaming analyst Brendan Bussmann, managing partner at B2 Global. “It has fabulous potential to be one of Asia’s leading markets, one that could compete with Singapore, Manila and the UAE.

“But it’s going to come down to one thing – the regulatory market. Until that’s determined and finalised, you won’t fully know where the market potential can be.”

Melco may have the right stuff for the jurisdiction when entertainment complexes are approved. According to The Thaiger, last year Melco’s global resorts saw 21 million footfalls. And Ho contends that Melco guests stay 30% longer and spend three to four times more money than guests at rival resorts.

“Their far-ranging global footprint denotes their ambition and appetite for new markets,” says Lee. “Melco has been the most aggressive and successful in developing entertainment that works for the Asian market.”