GGRAsia – Labour cost hike in Macau still manageable: Credit Suisse

Labour cost hike in Macau still manageable: Credit Suisse

Sep 12, 2014 Newsdesk Latest News, Macau, Top of the deck

Casino operators in Macau say the recent increase in labour costs “is still manageable”, stated a note on Friday by Hong Kong-based analysts at Credit Suisse AG.

“While the labour cost pressure has raised much market concern on margin and earnings, operators believe the cost hike is still manageable,” analysts Kenneth Fong and Isis Wong wrote.

“Robust growth in the market over the past few years has somehow built up a lot of ‘fat’ and inefficiency in the cost structure,” the note added.

Mr Fong and Ms Wong said: “Generally, operators are looking for an 8 to 10 percent increase in staff expenses into 2015, but it is contingent on how aggressive the wages offered by the new properties [in Cotai] are when they [the properties] open in 2015.”

The comments came after Credit Suisse on Thursday hosted a ‘Gaming Corporate Day’, attended by representatives from eight gaming companies – Sands China Ltd, Melco Crown Entertainment Ltd, MGM China Holdings Ltd, SJM Holdings Ltd, Paradise Entertainment Ltd, Macau Legend Development Ltd, NagaCorp Ltd and Louis XIII Holdings Ltd.

Executives from a “top-five” junket operator in Macau and an unnamed gaming consultant also attended the event, Credit Suisse said.

Labour issues – relating to shortage of manpower supply, wage demands and subsequent higher costs – are putting pressure on Macau’s casino operators. They are competing for new workers and offering better terms to the experienced ones they already have, in preparation for the big Cotai resort openings between 2015 and 2017.

Despite the higher pay and boosted benefits, many casino workers appear not to be satisfied and have taken to the streets in recent weeks. Labour activist group Forefront of the Macao Gaming, which has been successful in organising several street demonstrations, is calling for a 10-percent salary increase across the casino industry for non-managerial positions, especially for dealers.

The group has scheduled a new protest for Saturday, to demand changes to SJM Holdings’ pay and promotion policies.

The average monthly earnings for dealers at Macau casinos increased by 4.8 percent year-on-year to MOP17,530 (US$2,196) at the end of June this year, according to the Statistics and Census Service’s latest Survey on Manpower Needs and Wages of the Gaming Sector.

“We understand from several operators that they are aggressively revisiting budgets and cost structures of various departments for efficiency improvement,” the Credit Suisse analysts wrote on Friday’s note.

“Examples include: encouraging staff to take more holidays during downtime, reviewing advertising and promotion budgets (postponing those events that don’t bring immediate benefit), freezing headcount, [and] cutting down expenses on VIP marketing/players’ development.”

Mr Fong and Ms Wong said the positive impact of such cost-saving measures on margins should become visible starting from the fourth quarter of this year.