The world financial crisis has been good news for Macau casino investors—at least on the operational costs front.
Staffing in some Macau properties has been reduced quite dramatically—in the case of The Venetian Macao, reportedly by 5,000 posts. This has been achieved arguably without a noticeable deterioration in the level of service provided.
The discovery in Macau of new operational efficiencies in a downturn must serve as a lesson to the managements of the two new casino resorts due to open in Singapore early next year. In Singapore’s case, however, executives’ wiggle room for staff reductions may be limited given that the concessionaires Genting Group and LVS are understood to have given guarantees to the city-state’s government on the minimum number of new jobs to be created for local people.
At the time of the global financial crisis in the autumn of last year, several Macau operators, including Melco Crown Entertainment, instituted a system of unpaid leave for staff in order to reduce operational costs.
Over at SJM, Dr Ho’s casino operating company, operating costs have always been smaller as a percentage of total overheads than those of the foreign-based concessionaires. That, however, has been because of the generally lower basic wage of most casino floor staff who traditionally top up their wage packet via tips from players. So ingrained was the system of tipping dealers within the SJM empire that in the days before market liberalisation, floor staff at venues including The Lisboa would sometimes complain to customers if they thought the tip they received wasn’t up to expectations.
Two of the factors that led to general overstaffing in some of the foreign-owned Macau casinos post market liberalisation were: the educated guesses on staff-to-guest ratios inevitably required by managements when building a new market; and the scramble among operators to sign up a limited local pool of talent and to import high quality outside workers in those early heady days of new venue openings.
Staffing is an important component of operational costs, but by no means the only one. Equipping a casino floor also costs money. There the growth of revenue sharing deals in a recession has had benefits for suppliers and operators. Such deals encourage cash-straitened casinos to order new machines from vendors while keeping down the capital outlay on those machines. Revenue sharing in turn gives equipment suppliers a direct stake in the success of a casino floor. As with any deal, however, the devil is in the detail.
In one smaller casino market in the region, Asian Gaming Intelligence hears a third party equipment supplier has been asked by an operator to pay money up front to install slot machines on its casino floor. That’s despite the fact the casino operator has negotiated a revenue share deal weighted 80:20 in its favour. That sounds less like industry partnership and more like old fashioned ‘take it or leave it’ strong-arm tactics.
