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October 19, 2019

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Gaming’s financial execs weigh in on tough times

Panelists detail recession’s woes during start of industry trade show

It’s no secret that the recession has hurt the gaming industry. It’s forced companies to adapt business strategies to the changing market, curb development projects and make some hard financial decisions.

Few notice the day-to-day effects more than those steering companies through the downturn: Gaming's financial executives.

“In today’s economy, the actions or inactions of chief financial officers can determine a company’s survival,” American Gaming Association President Frank Fahrenkopf said Monday.

On the eve of the annual Global Gaming Expo, four gaming financial executives spoke about how the recession has affected their strategies, their company’s workforce and what aspects of the industry are beginning to rebound.

Not all regions of the gaming sector have been hit as hard as Las Vegas, the panelists said. Las Vegas-based Ameristar Casinos, which operates regional casinos mainly in the Midwest, has seen the benefits of travelers opting to stay close to home.

“In our mind, we’ve benefited from the recession because big trips to destinations like Las Vegas were postponed or eliminated completely. We were able to get some play off of that,” Ameristar Chief Financial Officer Thomas Steinbauer said.

Steinbauer said Ameristar’s properties have seen lower visitor numbers but not the double-digit declines Las Vegas has seen in the past year.

“From our perspective, medium and larger metropolitan areas -- whose economies weren’t on fire in the last decade -- were growing at 1 or 2 percent. When the recession hit, they were not as negatively impacted like big tourist destinations like Las Vegas and Atlantic City,” Steinbauer said.

For gaming manufacturers, the recession has had a second-hand effect. As leisure travel declines and casinos bring in less cash, they are less likely to purchase new games. But WMS Gaming Executive Vice President, Chief Financial Officer and Treasure Scott Schweinfurth said he believes that will loosen.

“With the meetings that have been going on in the last three or four months, there is a much more positive tone than there was last year at this time,” Schweinfurth said of WMS sales talks with casinos.

In an effort to manage their companies’ balance sheets, gaming financial executives have made some tough choices. In many cases, that’s translated into layoffs.

MGM Mirage Executive Director of Investor Relations Daniel Foley said as MGM Mirage has made acquisitions, it’s been able to eliminate duplicate positions, helping the company to cut costs long before the recession.

But as it entered the downturn, MGM Mirage had to continue to make cuts in its workforce like many other casino operators in Las Vegas.

“We really had to take a look at some of our back-house, non-customer front-facing positions and eliminate some positions, and it’s never a fun thing,” Foley said.

MGM Mirage has cut 9,000 full-time positions in the past 18 months, Foley said, but will be adding a chunk back with the hiring of 12,000 employees at CityCenter.

Ameristar, too, has had to cut full-time positions because of the economic downturn. Steinbauer said the company has increased its share of part-time positions from 10 percent to 35 percent to eliminate costs. Because of cuts like these, Steinbauer said Ameristar has cut $55 million in overhead costs during the past 12 months.

“It has been at a cost and it’s a labor cost, unfortunately, but some have to be affected for the majority to stay employed. It’s just difficult but we’ve had to do it in all of our markets,” Steinbauer said.

While companies like MGM Mirage and Ameristar have cut staff, that hasn’t been the case for WMS.

Schweinfurth said during the 2009 fiscal year, WMS planned on hiring 300 new employees to accommodate the company’s growth. It later lowered that number to 200.

“We responded to what we were seeing [in the economy] by slowing the hiring process but we did not have to go through a round of cost reductions in our work force,” Schweinfurth said.

Casinos have made cuts to more than just their staffing levels. Resorts have slashed room rates and offered deep discounts at restaurants and entertainment venues to attract customers.

“Certainly, customers in the market place are much more price-sensitive and value- oriented in the near term,” Foley said. “Whether or not we get back to the heydays of $400 bottle service and $1,000 bills at restaurants remains to be seen. I think that is many, many years off.”

However, Foley said, MGM Mirage has seen an uptick in convention business to some of its resorts as companies begin to compare the meeting costs of Las Vegas to those of other cities around the country.

“We believe that ultimate lift will bring some of those other revenues back to some historical norms,” Foley said. “All will be depressed but hopefully we’ll see some pick up in food and beverage, entertainment and specifically the convention business.”

The Global Gaming Expo, the industry’s largest trade show, is expected to bring an estimated 25,000 attendees this year, down 5.7 percent from last year. The three-day show runs today through Thursday at the Las Vegas Convention Center.

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