Macau's gaming industry is undergoing a profound transformation under the new licensing system. A recent peer-reviewed study published in "Global Gaming and Tourism Research" revealed a key trend: compared to pre-pandemic 2019, casino operators' revenues have not fully recovered, but their spending on intermediary commissions, incentives, and rebates has significantly decreased by 37% to 49%. This means that the industry is generating similar levels of gaming revenue at much lower costs.
Industry Transformation, Cost Structure Reshaping
This study by scholars points out that this change is not a simple cyclical recovery, but a "structural transformation" driven by regulatory changes. Under the new gaming licensing system and the revised intermediary law, gaming intermediaries can no longer operate on a profit-sharing model and can only cooperate with one licensed company, with their role significantly reduced to a capped, chip-based commission system. The research tells us that this regulatory combination effectively weakens intermediaries, especially in the VIP business domain, reducing their bargaining power and economic significance. Data shows that licensed companies can now achieve similar gaming revenues with much lower commissions, incentives, and rebates than before.
Uneven Financial Impact, Revealing Different Strategic Paths
This financial impact is not uniform among operators, reflecting their historical dependence on intermediary-driven VIP business:
Most significant change: SJM Holdings, where intermediary-related costs as a percentage of gaming revenue dropped from about 20% in 2019 to just 5%-7% in 2023-2024.
Following closely: Melco Resorts, reducing its ratio from about 22% to 11%-13%.
Galaxy Entertainment also reduced its dependence on intermediaries, while MGM China and Wynn Macau saw more moderate reductions.
The only exception: Sands China, which saw its ratio slightly increase from 19% in 2019 to 20% in 2023 and 21% in 2024. The study suggests that this reflects different strategic paths and dependencies on high-end midfield and intermediary-related business, rather than a reversal of the overall industry trend.
The Accounting Challenge of Non-Gaming Investment Commitments
In addition to gaming operations, the study also delves into the accounting issues of the 108.8 billion Macau patacas in non-gaming investment commitments made by the six licensed companies over a 10-year licensing period. These commitments, covering conventions, entertainment, sports, and other areas, are central to Macau's economic diversification. However, researchers warn that investment commitments should not be confused with recognized assets. Due to project details, timelines, and asset ownership still pending government approval and uncertainties, these commitment amounts should not be recognized as intangible assets on the balance sheet, but should be disclosed as contingent liabilities according to current accounting standards. This is crucial for investors assessing the true financial condition of gaming companies, as premature capitalization may overestimate asset values and underestimate risks.
The study further uses the government-designated six historical district revitalization plans (such as the one managed by MGM China in the Ma Kok Tong district) as examples, pointing out through "decision tree" analysis: If the revitalized assets still belong to the government and do not involve service concessions, operators' large-scale investments may need to be expensed rather than capitalized. Although this has long-term policy value, it will directly pressure the current profit and loss statement. According to the latest developments, the revitalization plans for Macau's six historical districts have begun to formally transition to management by civic organizations, confirming that gaming operators are investors in such non-gaming investments as community plans, but do not derive revenue from them.
Financial Winners and Laggards Under the New System
Although the overall profit margin of the industry is still tighter than before the pandemic, the study highlights significant differences in financial performance among the licensed companies. In 2024, the total net profit of the six operators was 29.447 billion Macau patacas, still 38% lower than in 2019. However, individual differences are significant:
MGM China is identified as the only operator with a net profit margin higher than in 2019, rising from about 8% to about 16% in 2024, mainly due to a significant reduction in depreciation and amortization expenses.
Galaxy Entertainment maintained the most stable profit margin, only slightly lower than before the pandemic.
Sands China's profitability was dragged down by higher interest expenses.
These comparisons provide important insights into how different business models and cost structures respond to tighter regulation, the collapse of the VIP intermediary system, and policy-driven non-gaming development. For more in-depth market analysis and industry data on global gaming and tourism, visit the PASA official website.
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