Las Vegas, a gaming destination known for its uncanny ability to reinvent itself, has long been considered recession-proof.
But, today, the world’s entertaining and gaming capital – like many other resorts destinations across the nation – has felt the economic pinch from the mortgage meltdown and escalating fuel prices. And like other industries, casino gaming is coming to terms with an economic downturn that is creating uncertainty and apprehension within its work force.
“I think that it was difficult for the industry to foresee the sharp increase in energy prices and the impacts, especially the effects on travel,” said Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas.
Gaming analysts agree that higher energy prices and a strained economy are pressuring Las Vegas casinos – especially those that cater to locals.
“Higher energy and food costs, job layoffs, few workable hours and reduced tips along with a faltering Las Vegas Strip economy as well as large household debt burdens will put continued pressure on the locals market,” Deutsche Bank gaming analyst Andrew Zarnett notes in a recent report.
The axiom that Las Vegas is recession-proof may no longer be true.
“Las Vegas has been impacted too. During this recession declining visitations has also afflicted Las Vegas, which was once considered impervious to economic swings suffered by the rest of the country,” Zarnett’s report states.
One who agrees is MGM Mirage Senior Vice President Alan Feldman.
“The notion that Las Vegas is immune from these downturns in the economy is completely false,” Feldman told the Las Vegas Review-Journal. “We may be better able to withstand it than other marketplaces. Through the years we've proven that we are, but we’re not immune from it."
Indeed, the Las Vegas Convention and Visitors Authority reports average daily traffic on Interstate15 is down 5 percent during January through May, compared with the same time period a year earlier, suggesting a decline in drive-in visitation from California, the state that accounts for more than half the drive-in traffic to Southern Nevada.
“Anyone who lives and works here knows there are fewer out-of-town visitors. The highways aren’t as crowded, and it takes less time to go to work,” said Pilar Weiss, political director of Culinary Local 226, which represents nearly 60,000 Southern Nevada hotel and restaurant service employees, including food and cocktail servers, bartenders and housekeepers.
Since the beginning of the year, casino operators throughout Southern Nevada have begun taken steps to trim payrolls wherever possible because of a slowdown in business. Gaming officials declined to discuss how many employees have suffered layoffs or cuts in hours, but they acknowledge there have been cutbacks, and they have tried to keep them to a minimum, relying on attrition whenever possible.
“Obviously, the local economy has softened, and the gaming industry isn't immune to the economic conditions,” Station Casinos spokeswoman Lori Nelson told the newspaper earlier this year. “It’s incumbent upon us to run our business the most efficient way possible. It is also our responsibility to right-size our operations to the current economic conditions. Unfortunately, that includes some layoffs.”
Weiss said some of those who have suffered layoffs are Culinary workers, but the union offers some protection.
“We certainly have been seeing layoffs throughout the industry, and we have a contract with clear language,” Weiss explained. “Our people have up to a year in recall rights.”
Industry experts believe that clear language and honesty are effective ways to help maintain employee morale during these difficult financial times.
“There is no panacea to address the uncertainty that employees have about their job security in the current economy. However, employers should be candid about their financial status and what they need to do to remain profitable,” said Beth Deighan, president of Casino Careers Online, which provides recruitment services to hundreds of gaming properties and companies and has placed thousands of employees from entry-level to executive management.
“Additionally, if employees can assist the company to increase its revenues by assuming additional responsibilities, then they should be advised of such and should be willing to do so,” Deighan said. A candid approach is certainly the policy at Station Casinos, where Valerie Murzl, company vice president of human resources and training, believes “honesty and openness about the operation” should be the hallmark of the work environment, and she doesn’t hesitate to communicate personally with employees, from top-level executives to hourly staff.
“Most of my communication is to the homes [of employees] because I believe that the spouse or the significant other plays a part in how team members react to things,” Murzl recently told Las Vegas Woman magazine. “My style is very direct and straightforward.”
Personalized notes include thank-you letters for employees’ help, and “We’re Here for You” postcards, emphasizing the company’s open-door policy. Murzl encourages any employee to speak openly and freely about concerns. She has distributed business cards, displaying her photo, in both English and Spanish, to the company’s 15,000 workers, inviting them to contact her at any time.
Easing the painAmong Station Casinos’ benefits to help employees are a home ownership program that provides free down payment assistance, citizenship classes, affordable 24-hour child care at four properties and a computer-buying assistance program.
In addition, Station has partnered with the Regional Transportation Commission to provide employees alternative transportation options. These include the opportunity to purchase monthly bus passes or to participate in the Club Ride Program, which promotes alternative methods of transportation to and from work such as bicycling, car pooling or occasionally taking the bus.
MGM Mirage also has instituted several programs to help relieve some of the strain employees might be feeling by the ongoing troubled economic climate.
The company provides scholarships for children of employees with financial need and flexible time schedules that allow working parents to take time off for school activities. Onsite child care is provided at the MGM Grand Child Development Center to help parents, especially working moms, balance the demands of a career and raising a family.
Another way to help employees perform better in a turbulent economy is by encouraging them to live healthier lifestyles – to avoid tobacco and other bad habits and to exercise. Last year, Harrah’s Entertainment opened a health and wellness center in Las Vegas.
Morale boosterIn recent months, officials at MGM Mirage have taken more steps to help improve company morale during the current economic slowdown.
“We are sensitive about the concerns of our employees, probably even more so during the current economic environment,” said Hilary McClain, vice president of internal talent, who explained MGM Mirage has instituted the “Summer Fun” program for employees. Each employee receives a ticket voucher and the opportunity to experience attractions at MGM Mirage properties.
In addition, the company has instituted programs to help employees save on escalating fuel costs. Several MGM Mirage properties in Las Vegas participate in the Regional Transportation Commission’s Club Ride program, as does Station Casinos.
“Not only are our employees saving money on gas, but they are helping to reduce air pollution and traffic congestion throughout our community, McClain explained.
Other gaming executives explain they have stepped up efforts to maintain hospitality and to provide exceptional service to maintain foot traffic.
“What the economy holds next is something we’re all waiting to see, but I can tell you our properties are crowded, and our people are providing friendly and high quality service,” said Gordon Absher, vice president of public affairs at MGM Mirage.
“Service is the differentiating point, more so on this one street (the Las Vegas Strip) than any other in the country in times of good and times of bad, and our goal is not to let that flip at all.”
That said, the long-term outlook for Southern Nevada looks brighter as MGM Mirage, Wynn Resorts, Boyd Gaming and Station Casinos are building or planning resorts and other projects in the near future. “The long-term is that Las Vegas has a bright future,” Nelson of Station Casinos told the Review-Journal. “We’re all looking at the tremendous growth in the industry and current projects under development.”
Still, the short term looks a little dicey.
In early August, Boyd Gaming suspended construction work on the Echelon project at the site of the old Stardust on the Las Vegas Strip because of souring credit markets.
Boyd Gaming executives hope to resume construction on Echelon sometime in 2009, which would delay the project by more than a year.