Melco buys its brand and leans into premium Macau
- City of Dreams Macau is the center of the story, with 53.0% of 2025 operating revenue.
- Melco spent $375 million to buy its trademarks, removing a growing royalty fee.
- Management pushed the return of the dividend to 2027 to focus on share buybacks.
- The Manila sale did not happen, keeping the asset-light debt reduction plan on hold.
- The main watch items are Macau promotion levels, China demand, and daily Macau costs creeping to $3.4 million.
A better Macau mix, with higher costs
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. The new REM hotel has soft opened to support this luxury push.
Management is also trying to make the company lighter and return cash. They have spent $134 million on share repurchases in 2026. The company also spent $375 million to buy the trademarks for City of Dreams Macau, completely removing a costly license fee that was set to eat into profits.
The bear case is that the plan has hit a few walls. 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. Because of the heavy share repurchases, management also delayed the planned 2026 dividend restart to 2027.
Margins also need care. Management noted that Macau daily operating expense, including the House of Dancing Water show, is tracking at $3.4 million in 2026. Melco can still win, but it needs premium demand and cost control to hold together.
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.
The resorts that matter
City of Dreams Macau
This is Melco's flagship and largest revenue source. It targets premium and rolling-chip customers, and it owns its trademarks after a 2026 buyout.
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.
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.
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.
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.
REM Hotel
A new luxury hotel at City of Dreams Macau that soft opened in mid-2026, with a grand opening slated for October.
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.
2025 revenue is still Macau-heavy
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.
What could break the thesis
China demand weakens
High impact · Medium oddsMelco 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.
Macau promotion war returns
High impact · Medium oddsThe 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.
Asset-light plan stalls
Medium impact · High oddsThe 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.
Cost creep eats the recovery
Medium impact · Medium oddsManagement expects Macau daily operating expense to sit around $3.4 million in 2026. While the company bought out its trademark fees, base operating costs are rising. If revenue growth slows, these costs can limit margin gains.
Regulation and conflict hit non-Macau assets
Medium impact · Medium oddsManila faces policy risk from Philippine gaming regulation, including the POGO phase-out issue. Cyprus can also be disrupted by Middle East conflict. These assets are smaller than Macau, but they matter for diversification and cash flow.
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 the grand opening of the REM hotel in October 2026, the potential return of a dividend in 2027, and the continued ramp of operations in Sri Lanka.
Sources and research notes
This page combines Finn's company research with public filings and other cited materials. The thesis is reviewed when material company information changes; Finn Scores use the latest available scoring data.
- Thesis reviewed
- August 30, 2026
- Score data
- September 27, 2026
- Reviewed by
- Shivam Bharuka
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