MACAU SHOWS NO SIGNS OF SLOWING by Macau Business T
he once-upon-a-time-tiny Portuguese enclave Macau is today the single largest gaming cash cow in the world, ever. Having raked US $23.7 billion in gross revenues in 2010, it stands as a market worth four times that of Las Vegas (Strip and beyond) and twice that of the whole state of Nevada. Returned to China in 1999 this 29.5 square kilometre spat of land – the main peninsula and two
islands, Taipa and Coloane – has spawned no less then 34 casinos from six gaming operators: incumbent Sociedade de Jogos de Macau (HKSE:0880), controlled by health- stricken magnate Stanley Ho and it’s sub concessionaire MGM (HKSE:2282); Hong Kong based Galaxy Entertainment Group (HKSE:0027) and it’s fallout partner, Sands China (HKSE:1928); Wynn Macau (HKSE: 1128) and sub concessionaire Melco Crown Entertainment (NASDAQ:MPEL), a joint venture between Australian James Packer and Lawrence Ho, son of the same Stanley Ho. Macau has displayed an unwavering resilience throughout the years to all nefarious
factors that have plagued the gaming industry elsewhere. The global financial crisis had little or negligible impact on operators with revenues gained in Macau helping multi- jurisdiction operators keep their US properties afloat; and the opening of Singapore’s integrated resorts, once the-doom-of-Macau’s-boom, has come and gone with the Chinese Special Administrative Region adding record earning at almost every other quarter. Macau’s success is arguably due to the implementation of the individual travel scheme and the ease of other travelling policies – added by the simple fact that it’s the only place in China where gaming has been legalised. This combination allows for ravaging Chinese patrons to flock in grand numbers to Macau. Out of the 32.21 million Chinese mainland residents that made overseas trips in the first half of the year, 20 per cent landed in Macau. Many had one thing in mind: hitting the tables and changing their fortune. Overall, Macau was just shy of a 25 million visitors in 2010. However the top issue plaguing operators – and stretching through the whole fabric of the business community – is Human Resources. In a standing population of 556,800 the unemployment rate has taken a dip to 2.6 percent, an historical low since Macau’s handover from Portuguese administration. The dream scenario anywhere else means that Macau’s talent pool is all but dried up. There simply are not enough hands to go around and the local government, pressured by local populist sectors, has followed a Draconian
approach to importation of foreign workers in every sector. The policy is argued as a measure to protect local workers, especially in construction, which face fierce competition from the Mainland. In reality, the low unemployment is structural, the local talent pool generally inexperienced and unwilling to put in the extra effort to climb a progression ladder. Youngsters are dropping off school to fill in the croupier openings – reserved for locals by law – while veteran dealers are content to remain at the tables where pay is arguably better and little responsibility is asked of them. To make matters worse, there’s a very high staff turnover in the gaming industry, with personnel jumping ship to a competitor operator for as little as a £50 enticement to their monthly salary. The strain has proven to be the most constricting factor to the sustainable growth of the economy. Estimates from the largest gaming workers association state that at least a thousand more workers are needed to man the tables at new properties coming online in the near future. The construction sector has been hit hard with the Chinese legendary building speed been put to the test given the lack of workers. As a rule of thumb, a five star property requires a four-workers-to-one-room ratio and, should everything go according to plan, Macau still has a few thousand rooms to grow into anything resembling critical mass. For an ex-enclave that defies most laws of gaming markets, Macau has inverted the rule of
supply and demand basing its strategies in the premise of ‘build and they will come’. The medium-long term strategy for sustainable development of the industry is to shift from the VIP-based revenue into mass and grind markets but that’s arguably a two-sided blade. As long as China is on its self proclaimed path of peaceful ascension into a global super power – quietly but surely – Macau will continue to benefit for an almost unquenchable supply of upper class Chinese patrons willing to be ‘entertained’ with whatever Macau throws up at them.
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