Tuesday, May 13, 2008 | 2 a.m.
- MGM Mirage chief cites 'challenging quarter,' reports loss (5-06-2008)
- Is Vegas recession-proof? (4-10-2008)
- Tourism juggernaut shows signs of slowing down (4-07-2008)
After the 9/11 terrorist attacks, thousands of hourly Strip workers were laid off as tourists stayed home, and profit at some casinos was halved. It took more than a year to recover.
Workers haven’t forgotten.
In the current economic downturn, casino companies are moving more cautiously. But workers worry the shoe is still going to drop.
• MGM Mirage has laid off more than 400 midlevel managers and reduced employees’ hours, but there have been no wholesale layoffs.
• Harrah’s Entertainment has laid off a few dozen people but says it hasn’t reduced individual workers’ hours.
• Steve Wynn, who is staffing up for Encore, has promised not to lay off workers at Wynn Las Vegas amid the downturn, saying it hurts morale.
• And the Venetian is hiring, not laying off, workers, executives boasted last week at an employees meeting.
One reason for such a measured response in the face of a possible recession is that companies expect the slowdown to be short-lived, and they don’t want to dismantle their ranks unnecessarily. The companies are shaving costs elsewhere. Also, even as consumers spend less money in casinos, hotel occupancy remains high, requiring hotels to maintain staffing levels.
Layoffs would be “difficult if they want to give the service they want to give,” said Terry Greenwald, secretary-treasurer of Bartenders and Beverage Union Local 165, sister union to Culinary Workers Union Local 226.
But workers nonetheless are glumly expecting layoffs because of dropping tourism or strategic, long-term cost-cutting.
“Everyone is terrified for their jobs,” said Shane Kaufmann, a dealer at Caesars Palace and a representative of Transport Workers Union Local 721, which has organized dealers there.
And employees worry that if their jobs aren’t cut, they will be worked harder than ever in a workplace that is shrinking from attrition.
“There’s a management style that’s all about discipline. It’s making the maid clean more rooms, making the barman serve more drinks and making the floorman supervise more games,” Kaufmann said.
MGM Mirage says it has reduced its payroll by the equivalent of 1,500 full-time positions, mostly through attrition.
Likewise, Harrah’s is employing 1,000 fewer people than a year ago, primarily because of attrition.
Both Harrah’s and MGM Mirage last week reported a 2 percent decline in first-quarter revenue compared with the same period a year earlier. Operating profit, before interest, taxes and certain other expenses, fell 10 percent for Harrah’s and 15 percent for MGM Mirage. MGM Mirage executives said they expected hotel revenue to decline in the second quarter but convention business to pick up slightly, though it will still be less than a year ago. Harrah’s Chief Executive Gary Loveman said last week business trends were mostly down but results had improved in some regions as casinos stole market share, cut expenses and upgraded.
“This thing is all over the place,” he said of mixed business trends.
Staffing their casinos and hotels at times like this is a dicey proposition for managers.
“You’ve got to be very fleet of foot to make sure you’ve got the right staffing levels in order to meet the needs of your guests,” MGM Mirage spokesman Alan Feldman said. “You don’t want to have staff waiting around for business that isn’t there.”
Both MGM Mirage and Harrah’s are continuing cost-cutting programs that were initiated before the economy went sour. The initiatives include seeking cost savings from individual properties and corporate departments.
“This really reflects a change in how we do business,” MGM Mirage President and Chief Operating Officer Jim Murren said. “Payroll is part of it. But there isn’t a company in our industry that hasn’t laid off people — regardless of what they say.”
The effort began in August, when the company anticipated economic turbulence. For Harrah’s, the move began in advance of taking the company private last year.
Casino companies — whose properties are expensive to maintain because of high fixed costs — are under more pressure to improve on record profits now that times are tough, Deutsche Bank stock analyst Bill Lerner said.
The Culinary Union is monitoring the cutbacks, though the number of actual layoffs, some of which aren’t normal for this time of year, isn’t alarming, said the union’s political director, Pilar Weiss.
Culinary contracts require that in times of layoffs, employees with the least seniority go first. They are then entitled to their old jobs, or equivalent shifts at sister properties, if the companies rebuild their staffs within a year. Workers who are laid off can also receive up to four months of health insurance coverage.
“Financially, everyone’s in a difficult position right now,” Culinary Union Secretary-Treasurer D. Taylor said. “There are so many years in which this hasn’t occurred it seems like a new phenomenon.”
Employees at nonunion companies, as well as nonunion workers, would have to reapply for their jobs once they are let go, losing any seniority and accumulated benefits.
Station Casinos and Boyd Gaming Corp., which operate locals casinos that don’t have Culinary contracts, have laid off workers and reduced workers’ hours, but won’t say by how much. Station also has moved some full-time workers to part-time status, which made them ineligible for health insurance coverage.
“Our goal during the process was to keep as many people employed as possible, knowing that people would rather work part-time than be out of work,” Station spokeswoman Lori Nelson said. “As business volumes return, which they will, those people will get priority to return to full-time status.”
In some cases, companies aren’t calling in other workers when employees are sick or go on vacation and they haven’t yet filled many new server or bartender positions for the summer pool season, as normally expected this time of year, Greenwald said.