Macau is Hiring
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Well Las Vegas Sands (NYSE: LVS) is getting another extension on their new Cotai property, now going by the name of "Parcel 3." The new deadline to finish construction by April 17, 2016, amended from April 2013, amended from April 2011, should hopefully allow Sands to finally get ahead of a project into which they have already sunk $96.7 Million. But does approval from the government mean the property is pretty much as good as built? Not quite.
One of the huge problems Mr. Adelson over at Sands faces now is what is amounting to be a pretty serious labor shortage in Macau. Currently, the government gives preference to firms that hire from Macau's tiny labor force (about 350,000). If a firm wants to hire a non-resident worker they have to apply for permission from the government, and in some cases only residents are allowed to be hired. This proves to be a problem when you have Sands, Wynn (NASDAQ: WYNN), and MGM (NYSE: MGM) all vying to develop a tiny bit of reclaimed land. The ravenous pace of growth in Macau saw a 42% increase in gaming revenues in 2011 and it now dwarfs Vegas 5 to 1. Lucky Macau. The development has given the tiny islands a 2.1% unemployment rate; which, if we dig back to our high school economics classes is effectively full employment of the population.
So, Macau is pretty much already tapped out in terms of workforce, and a smörgåsbord of new development is in the works. LVS' Parcel 3 will have 4000 rooms, Wynn Cotai 2000 rooms, Melco Crown's (NASDAQ: MPEL) Studio City 2000 rooms, and MGM Cotai 1600 rooms. Putting this into perspective, Macau currently has around 24,000 rooms. These large projects alone account for 9600 rooms, and most estimates suggest Macau room capacity will double in five years. Though Macau recently posted its slowest growth numbers in three years, there is still plenty of demand, and any slowdown by all accounts seems arbitrary. As highlighted by a recent Paragon Financial press release, "'Recent weakness in Macau gaming revenue and visitation growth could be partially explained by the visa restrictions and reduction in China UnionPay limits highlighted by the Macau Daily,' Cameron McKnight, Wells Fargo & Co. analyst, said in a recent research note. 'While expectations have recently moderated, we believe outperformance in the Macau stocks is likely to be limited here.'"
Will developers be able to keep up though? Luckily, the government of Macau is somewhat reasonable and takes economics into account in their labor decisions (how quaint). According to Article 9, Section 1 of Macau's Framework Law on Employment Policy and Workers' Rights, "The hiring of non-resident workers shall only be permitted if it is intended to overcome the lack or insufficiency of resident workers who are capable of rendering service of similar cost and efficiency, and it shall have a time limit." I don't see the government really screwing up a good thing, but of course they will certainly make progress more difficult than it needs to be.
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