Disgruntled casino workers are becoming a costly thorn in Macau's side.

As the Chinese territory races to build eight new resorts in the next three years, labor strains look set to intensify: workers are demanding higher pay and threatening strikes at a time when operators face a labor shortage.

Las Vegas kingpins Sheldon Adelson at Las Vegas Sands Corp (LVS.N) and Steve Wynn at Wynn Resorts Ltd (WYNN.O) together reported unexpected costs of $50 million (£29.6 million)last quarter for labor-related compensation at their Macau casinos.

Casino industry analysts expect the other four licensed operators in the world's biggest gambling hub - Galaxy Entertainment (0027.HK), MGM Resorts (MGM.N), SJM Holdings (0880.HK) and Melco Crown Entertainment (6883.HK) - to announce similar cost pressures when they post earnings this month.

Located on China's south coast, Macau is the only place in the country where casino gambling is legal. The special administrative region boasts 35 casinos and relies on gaming taxes for more than 80 percent of government revenues.

Home to a population of just over 500,000 people, the former Portuguese colony has one of the world's lowest jobless rates at 1.7 percent. Rigid labor regulations that prohibit foreigners from working at the gaming tables mean casino operators have little choice but to raise wages to attract and retain staff.

Workers at Galaxy were planning a protest for Tuesday at the company's flagship golden-turreted resort after a Macau trade union last week submitted a petition alleging its salaries were "disrespectful" to some employees.

More than 1,000 workers protested last week outside Adelson's showpiece Venetian, accusing the company of poor wages and unfair promotions. Both Galaxy and Sands China (1928.HK) have expressed concern and vowed to resolve the problem.

"For both Galaxy and Sands we are not ruling out a strike," said Ieong Man Teng, a baccarat dealer and president of the Forefront of Macao Gaming, the labor group behind the recent protests.

Local media have reported the Venetian's anniversary on Aug. 28 as a potential date for workers to strike.

BARGAINING POWER

Dealers in Macau earn an average of 17,000-18,000 patacas (£1,262 - £1,337) per month, about half the $4,000 that Las Vegas dealers get, according to U.S.-based industry analysts.

Morgan Stanley said in a July report that labor competition would intensify in the near term, pressuring margins and increasing start-up losses for the new resorts. It estimated a shortfall of 13,800 local employees by 2017, a figure unlikely to be met solely relying on local supply.

"We think the bargaining power of casino employees will keep rising in the coming few years amid labor shortages and demand of labor for Cotai phase 2 over 2015-17," it said, referring to the next wave of resorts set to open on Macau's Cotai strip.

Macau's labor troubles come weeks ahead of the expected re-election of local leader Fernando Chui at the end of this month. Highly sensitive to further protests, the government is keen to pacify discontented workers and has said it is paying close attention to the needs of casino workers.

Secretary for Economy and Finance Francis Tam said the government was focusing on gaming workers' requests for improved salaries and promotions, according to a statement published on the government website on July 24.

Government officials conducted a two-hour, closed-door meeting with workers from Sands China and union representatives from the Forefront of Macau Gaming on July 28, according to local media.

Macau's labor unions have been rapidly gaining strength over the past year, garnering support from young people who have grown accustomed to job security and government handouts.

Last October, more than 10,000 casino dealers took to the streets in one of the territory's biggest protests, dragging traditional Chinese coffins to symbolize the demise of local jobs and calling on the government to safeguard local workers after casino operators publicly despaired at the difficulty of expanding while adhering to Macau's labor conditions.

The job of a dealer, who runs baccarat tables for eight-hour shifts, has become highly coveted among local citizens as it requires little technical experience and the salary is more than double that in the manufacturing industry.

The government has been quick to reassure workers, saying the ban on foreign workers will not change in the near term. Yet the tussle highlights the challenge authorities face in appeasing protectionist forces and helping Macau develop into an international tourist destination.

BEST SHOT

Casino operators are competing for skilled workers and have announced bonuses and compensation schemes. Wynn Resorts awarded 1,000 shares to each of its 7,500 employees this year on top of company bonuses, while Melco said it would offer management courses to existing employees and scholarships to their children.

Steve Wynn told a conference call in late July that Macau operators would be able to overcome labor challenges.

"Everyone has got dealers and waitresses and cooks and housekeeping and we all got them from the same place...what do you think is going to happen 18 months from now? Exactly the same thing."