The strong growth in labor productivity enjoyed by Macau’s casinos is likely to slow down soon, according to investment brokerage Telsey Advisory Group.
In its annual outlook for the gaming industry, the New York firm says it will be hard for the industry to extend the “considerable strides in improving labor productivity” they have made in recent years, according to a report on the findings by English-language Macau Business Daily.
Telsey estimates that since 2005, productivity as measured by head count per table game, improved by 38 percent, which helped offset a 92 percent overall increase in salary over that time, resulting in an increase of only 19 percent in labor costs.
The firm says that initially casinos were inefficient and workers unseasoned. But experience and the introduction of international operating standards have resolved those issues. What this means is that gains in efficiency are beginning to flatten out, and as those gains ebb, casino profit margins will follow.
Casinos continue to search for new ways to increase productivity on the casino floor, says Telsey’s senior gaming analyst Christopher Jones. “But this won’t yield the sort of improvements we saw years ago.”
On the plus side, he says, “The pace of margin improvement will moderate, but remain positive. We believe that as we continue to see improvements in table yields—as we have for the last several years—these improvements will outpace the pace of cost increase.”
The city’s chronic labor shortage isn’t helping.
“The lack of manpower resources in Macau created a situation where human resources are less of a strategic initiative than a firefighting process,” says MSS Recruitment, a human resources company. “This has created a less-than-conducive environment to invest and develop talent, which is one essential way to increase productivity.”
MSS suggests casinos can still make significant productivity improvements if they outsource more non-core functions.
