Melco Sri Lanka casino investment aims to capture Indian market

Melco Resorts & Entertainment has announced its strategic plan to primarily focus on the Indian and Sri Lankan market with its casino venture in Sri Lanka. The company projects that the annual gaming revenues could soar up to US$250 million.

The Government of Sri Lanka has awarded Melco a 20-year casino license. This allows Melco to design and manage the casino and a portion of the hotel rooms at Sri Lanka’s US$1 billion Cinnamon Life Integrated Resort. The casino is slated to start operations in mid-2025.

During the company’s Q1 2024 earnings call, Lawrence Ho, Melco Chairman and CEO, shared his vision of Sri Lanka emerging as the Macau of Asia. He believes that by leveraging India’s vast population and developing economy, Sri Lanka, being the nearest gaming jurisdiction to India, can provide a unique gaming experience.

Geoff Davis, Melco Executive Vice President and CFO, added that India is undoubtedly the most intriguing feeder market with immense potential. While there is a certain level of domestic spending, the company’s objective will be to cater to those feeder markets in India and the wider region.

Davis anticipates that international play will eventually make up two-thirds of the company’s Sri Lankan revenues, with GGR comfortably in the US$200 million to $250 million range annually.

Melco has plans to invest US$125 million to design the casino, which Ho described as a “small bet for a potentially huge opportunity.”

The company, in collaboration with local partner John Keells, is significantly raising the bar to a world-class standard with this integrated resort and the casino they’re designing. While it’s a bit early to provide specific returns, the company is expecting returns that are very attractive and shareholder-friendly, that will also enhance shareholder value and probably offer returns that would be challenging to achieve in most mature markets.

This strategic move by Melco is seen as an excellent method to tap into a market with enormous potential in a capital-efficient manner.

Comparative study of Sri Lanka and Macau

Sri Lanka’s Flourishing Gaming Industry: Sri Lanka’s gaming industry, especially the online gaming sector, has been witnessing substantial growth in recent times. The surge in mobile gaming is attributed to the popularity of smartphones and affordable mobile data plans. The government is actively working towards establishing a regulatory framework for the online gaming industry. However, the industry faces a significant challenge due to the low internet penetration rate in Sri Lanka. Despite these challenges, the rising disposable income in Sri Lanka has led to an increase in spending on leisure activities, thereby driving demand for online games.

Macau’s Thriving Gaming Industry: On the other hand, Macau, often referred to as the “Las Vegas of Asia,” is the only region in China where gambling is legal. The gaming industry in Macau is one of the most vital industries, providing over 54,000 job opportunities. Macau’s gaming industry generated 19.3 billion patacas (US$2.37 billion) in its first monthly tally of gross gaming revenue (GGR) in 2024.

Comparative Analysis:?While Sri Lanka’s gaming industry is still in its growth phase with a focus on online gaming, Macau’s gaming industry is more mature and primarily centered around physical casinos. Both markets possess their unique strengths and opportunities. It will indeed be intriguing to observe how these industries evolve in the future.