Macau’s gaming industry has undergone a profound structural shift under the new gaming concession framework, with data showing that commissions, incentives, and rebates paid by concessionaires in 2023 and 2024 fell far more sharply than gross gaming revenue (GGR), amid a continued decline in the role of gaming junkets and changes in casino operating models.

According to a peer-reviewed study published in Global Gaming & Tourism Research, an academic journal of the Center for Gaming and Tourism Studies at Macao Polytechnic University, total industry-wide spending on commissions, incentives, discounts, and rebates amounted to MOP39.507 billion ($4.94 billion) in 2024 and MOP31.762 billion ($3.97 billion) in 2023. These figures represent declines of between 37 percent and 49 percent compared with MOP62.608 billion ($7.83 billion) recorded in 2019.

By contrast, industry GGR over the same periods fell by a smaller margin of between 22 percent and 37 percent, indicating that operators are generating comparable levels of gaming revenue with significantly lower intermediary-related costs.

The real cost and dividend of junkets’ retreat

The study examines these developments from a financial performance perspective, focusing on how changes in cost structures, revenue generation, and profitability reflect the industry’s structural transformation under the new regulatory regime and reshape the economics of casino operations.

The research, authored by academics Che Wai Long, Liu Ming, and Zhang Renzhe, frames this shift as a story of ‘structural transformation’ driven by regulatory change rather than cyclical recovery alone. 

Under the new gaming concession regime and the revised junket law, gaming intermediaries are no longer permitted to operate under profit-sharing models and may work with only a single concessionaire. Their role has been reduced largely to a capped, commission-based rolling-chip system.

As the study notes, this regulatory overhaul has effectively weakened the bargaining power and economic significance of junkets, particularly in the VIP segment. ‘The data reveal that concessionaires can now achieve similar gaming revenue with much lower commission, incentive, and rebate expenditures than before,’ the authors write, attributing the shift to both the fading role of junkets and the introduction of commission caps under the new framework.

The financial impact is uneven across operators, reflecting differing historical reliance on junket-driven VIP business. SJM Resorts shows the most dramatic change, with commission-related costs as a share of gaming revenue plunging from about 20 percent in 2019 to just 5 percent to 7 percent in 2023 and 2024. Melco Resorts follows closely, cutting its ratio from around 22 percent to between 11 percent and 13 percent.

Galaxy Entertainment also reduced its reliance on intermediaries, while MGM China and Wynn Macau recorded more modest declines. Sands China stands out as the sole exception: its ratio edged up from 19 percent in 2019 to about 20 percent in 2023 and 21 percent in 2024. The study suggests this reflects different strategic paths and varying degrees of dependence on premium-mass and junket-linked segments, rather than a reversal of the broader industry trend.

The accounting puzzle behind non-gaming investment pledges

Beyond gaming operations, the paper devotes substantial attention to the accounting treatment of the MOP108.8 billion ($13.6 billion) in non-gaming investment commitments made by the six concessionaires over the 10-year concession period. These pledges, covering areas such as meetings and exhibitions, entertainment, sports, culture, health, and themed attractions, form a central pillar of Macau’s diversification policy.

However, the researchers caution that investment commitments should not be conflated with recognized assets. Because project details, timelines, and asset ownership remain subject to government approval and ongoing uncertainty, the study argues that these pledged amounts should not be recognized as intangible assets on balance sheets. Instead, they should be disclosed as contingent liabilities under prevailing accounting standards.

‘This distinction is critical for investors assessing the true financial position of gaming companies,’ the authors note, warning that premature capitalization could overstate asset values and understate risk.

The issue becomes more complex in the context of the government-mandated revitalization of six historic districts, such as MGM China’s responsibility for Barra and Galaxy Entertainment’s role in Lai Chi Vun Shipyards. According to the study’s ‘decision tree’ analysis, the appropriate accounting treatment hinges on whether the revitalized assets ultimately belong to the government and whether the arrangements constitute service concession agreements.

If assets remain government-owned and do not involve service concession rights, large-scale investments by operators may need to be expensed directly rather than capitalized, placing immediate pressure on profit and loss statements despite their long-term policy value.

According to the most recent developments, in mid-December Macau’s six historic district revitalization program—previously driven and funded by the city’s six gaming operators—began a formal transition to management by a civic organization.

The move confirms that gaming operators act as investors in the community scheme but do not derive income from this category of non-gaming investment.

Financial winners and laggards under the new regime

While the industry as a whole continues to face tighter margins compared with the pre-pandemic era, the paper highlights marked divergence in financial performance among concessionaires. Aggregate net profit for the six operators reached MOP29.447 billion ($3.68 billion) in 2024 and MOP18.512 billion ($2.31 billion) in 2023, still down 38 percent and 61 percent respectively from 2019 levels.

Individual outcomes, however, vary sharply. MGM China is identified as the only operator to record a higher net profit margin than in 2019, rising from about 8 percent to approximately 16 percent in 2024, largely due to a significant reduction in depreciation and amortization expenses. Galaxy Entertainment maintained the most stable margins, albeit slightly lower than before the pandemic, while Sands China’s profitability was weighed down by higher interest expenses.

The study argues that these contrasts offer important insights into how different business models and cost structures respond to regulatory tightening, the collapse of the VIP junket system, and the policy-driven push toward non-gaming development.