Macau Casinos Dealing With Labor Crisis

Macau was once largely regarded as the gambling capital of the world. Before the pandemic wreaked havoc on the once-bustling gambling market, the region held the crown for the highest gambling revenues in the world. At its peak, revenues in Macau casinos were 6 times that of casinos in Vegas.

But unfortunately, pandemic restrictions, restricted tourist travel, as well as a host of other challenges have made it difficult for casinos in Macau to return to their former glory. To dampen the recovery efforts even further, casinos in Macau have also been dealing with labor shortages that have made it harder than ever to cater to the growing number of tourists.

The labor shortages have led to the shutdown of hundreds of hotel rooms. The casino hotels in Macau have also been forced to cut back the number of guest services with several 5-star casino hotels offering fewer rooms for booking. Many other casino hotels have been forced to stop daily housekeeping services due to the unavailability of employees to handle the work.

When the country finally relented on some of its harsh pandemic-related restrictions, many casino operators were caught unawares. Although tourism is once again booming in Macau, the industry doesn’t have enough casino workers to cater to the demand.

It is worth noting that while Macau’s stunted labor pool has been affecting nearly all the casino hotels in the region, some casinos have been able to withstand the storm better than others. For instance, Wynn Macau and the Sands China are said to be performing a lot better than some of its competitors.

Unlike some of the other casino brands, the Sands and Wynn did not commit as many layoffs as they did during the early stages of the pandemic. Of course, both the Wynn and Sands combined operate 7 of Macau’s integrated casino resorts including a few 5-star casinos. As such, both casino brands haven’t been as badly hit by the labor shortage as its competitors.

In addition to the labor shortages, the road to recovery has also been affected by the mounting debt. With the majority of casino operators in Macau taking on debt simply as a means of staying afloat while waiting for pre-pandemic recovery, Morgan Stanley evaluates the joint debt burden of operators in the region to have reached $24 billion.

This has made it especially hard for operators and concessionaries, especially those situated in Hong Kong, to access capital markets. The region boasts 40 casinos that are operated by various companies including Melco Resorts, Galaxy Entertainment, MGM China Holdings, Wynn Macau and Sands China.

But Casino revenues in Macau are finally on the upswing

For at least 3 years now, casinos in Macau have bene struggling to recover from the devastating impact of the pandemic. The seemingly never-ending effect of lockdowns citywide, are attributed as the primary causes of delayed recovery. The good news, however, is that the gloom that once covered Macau seems to be coming to an end.

Thanks to the end of the Zero-Covid policy in China, casinos in Macau are finally looking to recover the once-profitable tourist economy. Of course, the success of the recovery efforts that are initiated will depend largely on the effectiveness of ongoing efforts to contain the spread of the virus, as well as the willingness of international travelers to start visiting the region once again.

With the zero-Covid policy done away with, residents, business owners, as well as gambling operators appear confident and optimistic about increased tourism in the region. The large number of domestic trips that were recorded during the Lunar Year this January are proof that visitors are ready to return to the gambling Mecca of the world.

 One of the casinos in Macau that is reaping the rewards of the end of the zero-Covid ear includes MGM. MGM China and partner Melco Resorts recently reported improved revenues, even though profits in 2022 were still lower by more than 75% compared to 2019. With improved revenues, MGM China’s stock also recently experienced a boost of approximately 114%.

CEO of MGM Resorts Bill Hornbuckle during a recent earnings call reported that the company was even planning on expanding its market share by adding additional 200 gaming tables. This will effectively bring the total of gaming tables on the casino floor to 750. This couldn’t have come at a better time for MGM Resorts as its concessions were renewed for 10 more years in January 2023.

By renewing its contracts with 10 6 gambling companies for an additional 10 years, the operators have in turn agreed to invest roughly $13.5 billion outside their primary business. This is expected to help Macau diversify its local economy.

In an effort to attract even more patrons, MGM China also recently debuted 2 new betting zones designated for foreigners. MGM Resorts believes that introducing these new zones will go a long way in attracting additional overseas visitors. The increased visitors will help casino operators such as MGM Resorts 

According to analysts from JP Morgan, Macau’s gross gaming revenue is expected to normalize to more than 50% of the pre-Covid levels before the end of 2023. Casinos in the region have been showing promising results since the start of the year and this trend is expected to continue. For instance, in February, casinos in Macau recorded a 33% year-on-tear rise, which proves that the surge in revenue wasn’t just a result of the Lunar New Year celebrations.

Final Thoughts

Casinos in Macau still have a long way to go before they can return to their glory days. The good news though is that progress has been slow but steady. Although the situation clearly seems to be improving, casinos in Macau still have a long road before they can recover fully. 

The trouble is that mainland authorities have been opposing gambling while trying to curtail outward assets flow. If progress is to be made in Macau, it is evident that a lot of changes must be made.

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