Macau's gaming industry's report card for the last quarter of last year was a mixed bag. According to the latest investment memo released by Citibank, although the industry's total revenue is expected to grow nicely, a series of sudden operational expenses have genuinely squeezed profit margins. These expenses were primarily spent on hosting the NBA China Games and the 15th National Games, as well as dealing with the aftermath of some satellite casino closures. However, analysts remain optimistic, believing that the growth momentum will continue into 2026.
• Three major cost pressures, directly lowering profit margins
Originally, the market expected Macau's gaming industry to achieve stronger operational leverage from revenue growth in the last quarter of 2025. However, plans do not always keep up with changes. Citibank pointed out that several incremental costs have become "profit eaters": firstly, the NBA China Games, the landing of such top international events incurs significant costs for hospitality, security, and promotion; followed by the 15th National Games, which, although it drove hotel demand with a large influx of athletes and tourists, also pushed up overall operational costs and even had a slight softening effect on total gaming revenue (GGR); finally, the closure and integration of some satellite casinos under SJM also resulted in one-time expenses. Together, these factors led to only a slight increase in the industry's adjusted EBITDA profit margin to 27.5%, which could have been higher without these "unexpected" expenses.
• Divergent performance among giants, Galaxy Entertainment leads against the odds
Under the general cost pressure, the resilience of each operator varies. Citibank's report shows that Galaxy Entertainment Group is expected to be the biggest winner, with its EBITDA in the fourth quarter surging 31% year-on-year to about HK$4.24 billion. This was due to its series of concerts held at "Galaxy Macau" and a higher win rate in VIP rooms, with its market share also increasing by 1 percentage point to 21.7%. MGM China also performed strongly, with its market share expected to rise to 16.4%. In contrast, Sands China's EBITDA growth is expected to slow to 8%, partly due to its bearing more event-related costs. This clear differentiation highlights the importance of strong integrated operational capabilities and customer stickiness during industry adjustment periods.
• Market reshuffle, joy for some and sorrow for others
Beyond the cost test, the division of the market pie is also changing. In addition to the expansion of Galaxy and MGM, Sands China's market share also increased by 0.5 percentage points sequentially. However, Melco Resorts & Entertainment and SJM Holdings are facing share losses, with the latter recording the largest decline due to satellite casino closures. This shift in the landscape reflects the industry's move from past extensive scale competition to a deeper competition focusing on quality, efficiency, and non-gaming attractions. For more insights into global gaming market trends and compliance, follow PASA's industry analysis on their official website.
• Outlook for 2026: Short-term pains do not alter long-term confidence
Although the profit margin growth in the fourth quarter was less than expected, Citibank still holds a "constructive" view on the future of Macau's gaming industry. The bank expects the industry's GGR to maintain a 7% year-on-year growth in 2026, with EBITDA growth potentially reaching 9%. Driving factors include the continuous recovery of visitor flow to Macau, the completion of major infrastructure, and the long-term attractiveness accumulated by operators' ongoing investment in non-gaming elements (such as entertainment, conventions). The current cost pressures are more like growing pains and have not shaken the market's fundamental recovery trajectory. For investors, quality targets that can demonstrate strong operational resilience and clear growth paths in a complex environment may be more worthy of attention.
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