MLCO Gaming and Resorts · Macau · Integrated resorts · Premium mass · Thesis updated July 17, 2026

Melco is narrowing its bet on premium Macau

City of Dreams Macau is the center of the story, with 53.0% of 2025 operating revenue.
Management is moving gaming tables and machines toward its strongest Macau resorts.
The Manila sale did not happen, so asset-light debt reduction is now harder to prove.
Sri Lanka opened in 2025 and is now a small but live ramp-up option.
The main watch items are Macau promotion levels, China demand, and daily Macau costs.

01 Running thesis

A better Macau mix, with one missing sale

The bull case is simple. Melco owns high-end resorts, and Macau is still the profit center. City of Dreams Macau and Studio City are gaining from a sharper focus on premium mass customers, meaning players who spend more than casual visitors but are less volatile than classic VIP whales.

Management is also trying to make the company lighter. That means selling or shrinking lower-return assets, cutting debt over time, and putting more money behind the best Macau floors. The 2025 closures of Grand Dragon Casino and some Mocha sites fit that plan, since tables and machines were moved to City of Dreams, Studio City, and Altira Macau.

The bear case is that the plan has already hit a real wall. Melco reviewed options for City of Dreams Manila, but chose not to sell because bids did not match the property's value. That removes a one-time debt reduction event investors had been watching.

Margins also need care. Management guided Macau daily operating expense, excluding House of Dancing Water, at about $3.2 million for the first quarter of 2026. City of Dreams Macau trademark fees also step from 1% in 2025 to 1.5% from the first quarter of 2026. Melco can still win, but it needs premium demand and cost control to hold together.

Mar 2026▲The 2025 Form 20-F confirmed Sri Lanka is now open and ramping, not just planned. It also showed Melco moving tables and machines from closed sites toward City of Dreams, which supports the focus on stronger Macau floors.

Feb 2026▼Management ended the City of Dreams Manila strategic review without a sale, removing a debt-paydown catalyst. Macau costs also look less easy, with daily OpEx near $3.2 million and the City of Dreams Macau trademark fee rising to 1.5% in 2026.

Nov 2025▲Macau momentum stayed solid after Golden Week, while management held the line on reinvestment. New premium spaces at City of Dreams and Studio City added support to the premium mass thesis.

Jul 2025▲Melco hit its $3.0 million per day Macau OpEx target in the second quarter and said it did not need to match rivals' heavier promotions. Sri Lanka was also set to open on August 1.

May 2025▲House of Dancing Water relaunched as a non-gaming draw for City of Dreams Macau. Daily operating costs also stepped down to $3.1 million, in line with management's cost plan.

Mar 2025→The 2024 Form 20-F refined the segment view. Studio City shifted fully toward premium mass and mass play after VIP rolling chip operations moved to City of Dreams.

Feb 2025▲Management made the asset-light strategy more explicit and began reviewing alternatives for City of Dreams Manila. It also guided to lower Macau daily OpEx and said the promotion fight was starting to calm.

Nov 2024▲Sri Lanka hotel operations opened, with casino and Nüwa still on track for 2025. Macau Golden Week data and the revamped Signature Club supported the premium mass view.

02 Business model

Gaming floors fund the resort machine

Melco makes most of its money from integrated resorts. These are large casino resorts with hotels, restaurants, shows, shops, and meeting space. Gaming drives the economics, while non-gaming attractions help bring people in and keep them on the property longer.

The company focuses on premium mass and VIP gaming, especially in Macau. Premium mass is attractive because customers can spend heavily without the same junket risk that hurt the old VIP model. Melco is using loyalty perks, private salons, high-limit areas, and better service to keep these customers close.

Technology is part of the playbook. Melco converted all Macau baccarat tables to RFID smart tables by the end of March 2025. RFID lets the casino track chips and play data more clearly, which can help it choose better table limits, reward the right customers, and improve floor yield.

The model breaks if customers stop spending, if rivals force Melco to raise promotions, or if costs rise faster than gross gaming revenue. The company does not want to buy market share with heavy giveaways, so it needs its luxury product to keep doing the selling.

03 Product portfolio

The resorts that matter

Growth engine

City of Dreams Macau

This is Melco's flagship and largest revenue source. It targets premium and rolling-chip customers, and it is getting more resources after table and machine reallocations from closed sites.

Growth engine

Studio City

Studio City is positioned around mass and premium mass visitors, with a more family-friendly Cotai resort feel. The Epic Tower high-limit area and added machines support the push upmarket.

Cash cow

City of Dreams Manila

Manila still provides cash flow, but it is no longer an easy sale catalyst. Management ended its strategic review without a transaction.

Option

City of Dreams Mediterranean

The Cyprus resort gives Melco exposure outside Asia. It has been hurt by regional conflict, but management has pointed to a faster recovery than feared.

Option

City of Dreams Sri Lanka

Sri Lanka moved from future project to live business in 2025. The Sri Lanka Casino opened and Melco began managing Nüwa Sri Lanka in the third quarter of 2025.

Steady

Altira Macau and Mocha

These are smaller Macau operations. Some Mocha and Grand Dragon sites closed in 2025, with gaming capacity moved toward stronger properties.

Option

House of Dancing Water and premium amenities

The show relaunched in May 2025 and helps draw non-gaming traffic to City of Dreams Macau. The Signature Clubhouse adds private services for premium mass customers.

04 Business segments

2025 revenue is still Macau-heavy

City of Dreams53%modest

Studio City29%modest

Altira Macau2%declining

Mocha and Other2%declining

City of Dreams Manila8%declining

City of Dreams Mediterranean and Other6%growing fast

Other Operations0%growing fast

The mix below uses operating revenue by segment for the year ended December 31, 2025 from Melco's 2025 Form 20-F. City of Dreams Macau and Studio City together made up 81.6% of operating revenue, so the company remains highly tied to Macau.

05 Risk factors

What could break the thesis

China demand weakens

High impact · Medium odds

Melco depends on high-spending Chinese and regional customers. If China's economy stays weak, premium mass play, luxury retail, hotel spend, and VIP activity can slow. That would hit the core Macau profit pool.

We watchMacau gross gaming revenue, Melco mass drop, premium player spend, and China consumer data.

Macau promotion war returns

High impact · Medium odds

The bull case assumes Melco does not need to match every rival giveaway. If competitors raise rebates, rooms, food credits, or other perks, Melco may need to spend more to keep share. That would pressure margins even if revenue grows.

We watchManagement comments on reinvestment rates, Macau market share, and casino EBITDA margins.

Asset-light plan stalls

Medium impact · High odds

The failed City of Dreams Manila sale shows this risk is real. If Melco cannot sell or shrink assets at fair prices, debt reduction must come mainly from free cash flow. That makes the path slower and more dependent on Macau staying strong.

We watchNet debt, free cash flow, dividend timing, and any new asset-sale update.

Cost creep eats the recovery

Medium impact · Medium odds

Management expects Macau daily operating expense, excluding House of Dancing Water, at about $3.2 million for the first quarter of 2026. City of Dreams Macau trademark fees also rise from 1% in 2025 to 1.5% from the first quarter of 2026. If revenue growth slows, these costs can limit margin gains.

We watchMacau daily operating expense, City of Dreams Macau fee expense, and property-level EBITDA.

Regulation and conflict hit non-Macau assets

Medium impact · Medium odds

Manila faces policy risk from Philippine gaming regulation, including the POGO phase-out issue named in the internal risk view. Cyprus can also be disrupted by Middle East conflict. These assets are smaller than Macau, but they matter for diversification and cash flow.

We watchPhilippine gaming rules, Cyprus visitation, regional flight demand, and management's property recovery comments.

06 Quick answers

In one breath

What does Melco Resorts do?

Melco runs integrated casino resorts. Its biggest assets are in Macau, led by City of Dreams Macau and Studio City, with other operations in Manila, Cyprus, and Sri Lanka.

Why is Macau so important to MLCO?

Macau is the core profit engine and the largest part of revenue. In 2025, City of Dreams Macau and Studio City together made up 81.6% of operating revenue.

Did Melco sell City of Dreams Manila?

No. Management finished its strategic review and decided not to act because the options did not fully value the property. That removed a potential one-time debt reduction catalyst.

What are the next catalysts for Melco?

Investors are watching a possible quarterly dividend restart by the end of 2026, the Sri Lanka ramp, and the Countdown hotel renovation at City of Dreams Macau targeted for the third quarter of 2026.