The growing tension between market share acquisition costs and profit margin erosion
june26
Is Macau’s reinvestment race counter-productive?
Integrated resort executive David Bonnet further explores the growing tension between market share acquisition costs and profit margin erosion in the SAR and asks whether operators are focusing on the right areas in their quest to boost market share.
In an earlier article I wrote, called “Promo Costs: Market Share or Margin?,” we examined the growing tension between market share acquisition costs and profit margin erosion. At the heart of the discussion was a simple question: does increasing player reinvestment generate incremental growth or merely redistribute existing demand?
More than three years into the post-pandemic recovery, new data provides additional insight into the market’s evolution. Macau has largely completed the transition from volume to yield growth. Capacity is fixed, visitation patterns have matured, and premium hotel inventory is constrained. Quarterly GGR appears to be consolidating at around MOP$65 billion to MOP$68 billion (US$8.1 billion to US$8.4 billion), with year-on-year growth rates finding resistance in the mid-teens. The surge-level expansion of the recovery years has since moderated to high-single to low-double digit annualized rates, as volume approaches its physical ceiling.
Future performance is therefore becoming less dependent on attracting additional visitation and is ever more driven by the monetization of existing demand through the implementation of more sophisticated customer retention programs.
To a certain extent, however, debating the merits of one operator’s reinvestment strategy versus another’s misses the larger point. Macau is a market constrained by design, and increasingly the industry’s performance appears to be shaped less by individual tactics and more by the structural characteristics of the market itself. So, rather than examining operators in isolation, it may be more useful to view Macau as a single integrated resort operating under common physical constraints with an aggregated pool of qualified customers.
Viewed through this lens, the industry segmentation dynamics might be easier to understand. As recovery-driven growth begins to normalize, operators have gradually turned their attention toward the variables they can directly influence. While the specific tactics may differ from one property to another, the underlying levers ultimately driving performance remain remarkably consistent: utilization, optimization and pricing.
Utilization
Despite restrictions on gaming asset expansion, continued growth in visitation has allowed operators to extract greater productivity from existing capacity. While the number of gaming tables remains fixed, table position occupancy can be increased through longer operating hours, peak period table activations and encouraging a greater proportion of visitors to engage in gaming activities. By converting more non-gaming visitors into active players, operators have been able to generate incremental revenue without requiring meaningful additions to physical capacity.
Optimization
Significant investments have been made in bringing more quantitative rigor to the gaming floor, whose business model is simply dictated by mathematics. The introduction of exotic bets and deployment of smart tables to better understand customer behavior each have the same objective: to grow wagering and then to increase the yield or win on those wagers. Unlike utilization, which focuses on attracting more customers, optimization seeks to extract greater value from existing activity by improving the economic return of every gaming position, wager and customer interaction.
Pricing
Supply and demand fundamentals have also increased demand for premium products, providing operators with a mechanism to raise prices. Higher table minimums, increased hotel rates and a greater mix of premium slot products all contribute to higher average wagers and customer spend. As a result, operators are able to generate more revenue from existing capacity.
A tale of two segments
The interesting thing about the utilization, optimization and pricing mechanisms is that they are all primarily mass-focused initiatives. VIP, by its very nature, has efficiency built in, as its commission structure is formulaic, tied to gaming turnover and governed by a regulated cap, as discussed later.
In reality, therefore, the majority of operator resources should be dedicated to growing the mass segment. Yet the quarterly data tells a different story. It is the VIP segment that is doing all the heavy lifting.
It is the mass segment that appears to be stalling. Despite the range of initiatives focused on driving its productivity, mass GGR has plateaued at approximately MOP$46 billion (US$5.7 billion) per quarter, essentially demonstrating that increases in mass promo costs are effectively maintaining the current position rather than contributing to meaningful incremental growth. Indeed, over the same period, mass has fallen from nearly 76% of total GGR to just above 70%. Clearly, this is not the outcome regulators envisioned when they dismantled the gaming promoter ecosystem several years ago. All of that begs the question: why is this happening and where is the industry headed?
Premium tables propel productivity
With VIP driving the majority of revenue growth, it is instructive to examine just how uneconomic it is for a casino operator to comp a lower-value player. An individual ETG customer even playing for an entire day generates barely enough theoretical value to justify a single room comp before food, beverage or any other incentive is factored in. ETGs are therefore structurally excluded from the reinvestment equation. Twelve thousand machines generate largely uncontested, un-comped yield, while the industry’s competitive apparatus is focused on 6,000 tables. The irony is that Macau’s most profitable customers may be the ones receiving the fewest benefits.
Market share marginalized
So, after all those resources and efforts were deployed to meaningfully grow market share, what does that mean for the bottom line? Well, in what might be the start of a future trend, overall GGR increased year-over-year in 2025, but the overall industry EBITDA margin lost 40 basis points as costs increased faster than revenue. In a banner year like 2025, this is less of a concern, but it does point out some structural limitations and the need to potentially rein in rebates through a more structured product delivery system.
That being said, with the fixed supply of gaming assets, the supply-demand fundamentals are invariably in the operators’ favor. And with demand showing no signs of slowing down, those who appear to be underperforming in the market share table may be better positioned than headline numbers suggest. As the industry’s reinvestment arms race intensifies, operators sacrificing margin may ultimately find that incremental GGR does not translate into a proportional increase in EBITDA. Conversely, operators who are lower in the standings could improve their position in the profitability rankings through a more disciplined approach to reinvestment, even without materially increasing revenue.
Potential remediations
If the reinvestment issue is truly one that needs to be addressed, there are a few potential measures that could help alleviate some of the pressure. Each of these either has a precedent within Macau’s own regulatory history or in comparable gaming markets. These could include: hard costs comps caps, mandated cash room sales blocks and license tenure extension.
Hard costs comps caps
Lest anyone forget, all the way back in 2009, in an effort to regulate the VIP segment, the Macau government opted to cap junket commissions at 1.25% of rolling chip sales. This effectively placed a ceiling on the sector’s potential profitability. Long term casino win rates on VIP baccarat turnover averaged approximately 3%, so 1.25% commissions effectively meant more than 43% of gaming revenue was being paid to junkets. In the same vernacular, the regulator could opt for similar types of restrictions on hard costs comps in the mass segment, including luxury watches, gold bars, jewelry and of course promo chips, in an effort to put a ceiling on the hard cost benefits flowing to premium casino customers and set a similar type of commission ceiling.
Mandated cash room sales blocks
Gaming asset productivity is heavily skewed towards VIP tables. As a result, premium room inventory gravitates almost exclusively toward high-value table players, effectively pricing out both non-gaming guests and lower-yield gaming customers alike. As noted above, the daily productivity on one slot machine alone doesn’t even justify a comp hotel room at the industry average of 25% reinvestment rate and at indicative ADRs, let alone an average customer playing on that machine. In reality, the Macau story has really become a narrative only on the highest yielding baccarat tables. If the resorts were mandated to reserve a portion of their inventory for cash room sales only, this could at least partially remedy some of the premiumization of the rooms product.
License tenure extension
With a little over six years remaining on the current gaming licenses, now may be an appropriate time to begin a conversation about the longer-term future of the industry. An early extension of the concession terms could stimulate additional gaming capex over and above the non-gaming investment already committed as part of the 2022 license renewals. Any visibility beyond 2032 could reduce short-term competitive pressure and give operators more confidence to make longer-term investment decisions. In that context, license tenure extension may be the most commercially constructive regulatory intervention available.
Closing odds
The market has tried all three levers. Utilization has hit its ceiling. Optimization is the one lever that could genuinely protect margin, but the mass GGR plateau suggests it isn’t working yet. Pricing is effective in gross terms but is being competed away through reinvestment before it reaches the bottom line.
However, the commercial and sales perspective deserves acknowledgment as well. GGR and EBITDA are up in absolute terms and VIP growth of 24% in 2025 reflects deliberate and targeted investment in premium customer relationships that are clearly paying off. Non-gaming revenue, if scaled meaningfully, sits entirely outside the reinvestment equation and could offset some of the structural margin pressure.
Revenue growth has its own logic, and its advocates are not wrong. But those of us drawn to efficiency and operating leverage ask a different question: how much of that revenue growth is actually flowing through to the bottom line? In a record revenue year, the answer was 40 basis points of margin compression and some operators going backwards in EBITDA performance, despite growing the top line. Part of the problem is structural, and part of it is deeply human.
Behavioral economist Daniel Kahneman’s book Thinking Fast and Slow comes to mind, as it describes how even important human decisions are frequently driven by subconscious and impulsive behavior rather than pure deliberate thinking.
In Macau, when market share data lands every week, the instinct has been to immediately react in an effort to play catchup with the most recent information. Operators see their number moving in real time and then initiate any number of measures to tactically adjust to a highly dynamic situation. The issue is not necessarily irrational operator behavior; it’s that the implementation of short-term tactical revenue initiatives don’t necessarily lead to long-term profit growth. The latter requires managing to a long-term disciplined framework that weekly data cycles are specifically designed to short-circuit. In fact, the current environment doesn’t really allow any single operator to unilaterally slow down, since the others will invariably react. So, the current situation may be difficult to disrupt without some type of meaningful external intervention.
This is perhaps why some of the above-mentioned recommendations around increased regulation have less to do with policing the industry and more to do with giving operators enough cover to stop chasing the weekly GGR data with just another expensive rebate scheme.
https://asgam.com/2026/06/30/market-share-marginalized/
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