Macau casinos have no choice but to cut costs: MS

Morgan Stanley analysts said casino management have no choice but to focus on cost cutting after gross gaming revenue fell 44 percent in15Q2, with no signs of bottoming.

“Cost cutting measures have intensified in the last six months after companies realized that some of the revenue losses are permanent,” MS Research said in a note.

Staff cost is the biggest portion of the controllable cost at 60 to 70 percent of total operating cost excluding tax and junket commission.

The second most important cost cutting measures were seen in case of advertising.

MS said total staff costs rose six percent half-on-half in 15H1 for five companies, excluding Melco Crown, despite natural attrition of five percent HoH mainly due to wage inflation of five percent during 1H15. 

“Galaxy has announced salary freeze for senior management, but we think wage inflation is inevitable in future unless the companies become lossmaking.”

“Many companies mentioned about staff attrition due to excess labor and opening of new casinos in Cotai. However, only Sands China has seen a material decline of full-time employees by 11 percent or 3,000 staff HoH by end of June 2015. Staff numbers for other companies have barely moved as they need to keep excess staff for Cotai expansion.”