Everything about the new Galaxy Macau casino and hotel is big. The $2 billion complex, which opened in May, has three hotels with a total of 2,200 rooms. The gaming floor is 39,000 square meters, with 600 tables and 1,500 slot machines. A rooftop beach features 350 tons of white sand and a 4,000-square-meter wave pool.
Running the Galaxy takes some 8,000 workers—and in a city of just half a million people that boasts a jobless rate below 3 percent, finding them is not easy. From accountants and IT professionals to housekeepers and croupiers, there aren’t enough qualified people to meet the needs of the city’s casinos, says Trevor Martin, Galaxy Entertainment Group’s senior vice-president for human resources. “We do the best we can in a tight market,” he says with a sigh.
The former Portuguese colony (like Hong Kong, now a special administrative region of China) is the only place in the country with legalized casino operators. Since the government let foreign-owned casinos in, Macau’s economy has been on fire—real gross domestic product grew 26.4 percent last year and is growing at a 21.5 percent rate this year. In the first half of 2011, gaming revenue jumped 44 percent.
Macau’s gambling revenue is now four times larger than that of Las Vegas, and the gap should keep growing as more casinos open. MGM China Holdings, which operates one casino in downtown Macau and plans another on the Cotai Strip, a stretch of reclaimed land connecting two nearby islands, raised $1.5 billion on June 3 in a Hong Kong initial public offering. First-half profits rose 380 percent, to $236.6 million, the company reported on Aug. 19, with sales doubling. Macau “is the strongest gaming market in the world,” says MGM China Chief Executive Grant R. Bowie. Last year Macau gamers’ revenues reached $23.5 billion.
Yet the swoon in global stock prices in August has hit Macau-based casinos: Shares in Hong Kong-traded MGM China, for instance, dropped 26.5 percent since the start of August, compared with a 14 percent fall in the benchmark Hang Seng Index. The stocks of Galaxy, Sands China, and Wynn Macau suffered big falls, too. Signs are emerging that Chinese gamblers are growing more prudent. Gaming revenue is likely to grow at a more modest 30 percent the rest of 2011 and 25 percent next year, according to brokerage CLSA Securities. Deutsche Bank analyst Karen Tang estimates recession in the West and a sharp slowdown in China could cut growth in casino revenue to 10 to 20 percent.
A cooling-off period might be what this bubbly economy needs. Average home prices jumped 20 percent in the first half of 2011, according to property agency Midland Macau. That’s helped fuel the inflation rate, which the government announced on Aug. 22 hit 5.96 percent in July. Many non-gaming companies are struggling to find and keep employees. “It’s hard to run a business,” says Jiji Tu, managing director of MSS Recruitment, a local employment agency. Local small and midsize businesses “are really suffering,” says Joey Lao, chairman of the Macau Association of Economic Sciences, a local think tank. “The casinos can pay higher salaries, so labor flows to the casino business.”
The labor shortage is holding back Ronald Cheung, who oversees Midland’s six offices in Macau. The property agency opened a new branch in early June, and with demand for real estate so strong, Cheung says he would like to open more if only he could find the people. “There’s a lack of labor,” he says. “It’s quite a problem.” Cheung raised staff salaries 10 percent last year and another 10 percent this year to keep workers from moving. More hikes are likely. “Otherwise,” he says, “you can’t keep your people.”
The Macau government has been slow to open the market further to foreign workers, in part because of opposition from locals worried about outsiders taking their jobs and putting pressure on the housing market. A May Day protest last year turned violent, with police using water cannons and pepper spray against demonstrators opposed to foreign workers. Still, the government is slowly changing policy and allowing more foreigners to work in the city. There were 75,000 foreign workers at the end of 2010. That number is likely to rise by an additional 30,000 before yearend, Lau says.
Macau’s future may lie across the border in neighboring Guangdong Province. There, the governments of Macau and the city of Zhuhai are turning a large, undeveloped island into a tourist playground with plenty of room for theme parks and golf courses. The mainland’s population of 1.3 billion can readily provide workers for them. “Macau needs some hinterland to grow,” says Galaxy Vice-Chairman Francis Lui. “Next door will be the answer.”