During this downturn, large strip casinos have kept hotel use high by cutting room rates and offering discounts and other promotions. However, this volume-driven strategy has a key weakness.
In recent months, revenue for some of the big casino operators has fallen faster than revenue, or total revenue before costs. It's a sign that those companies haven't cut costs deep enough to offset the decline in business.
In the third quarter, MGM Mirage's revenue fell 9% over the same period in 2007, and revenue fell more than 15%. Harah's Entertainment's revenue fell 12%, and revenue fell 17%.
Normally, businesses with declining profits cut costs at a similar rate. But large hotels looking to fill their rooms are hard to achieve. Even if customers cut back on spending, hiring staff and maintaining accommodation still requires thousands of troops.
A big part of the ongoing cost-cutting efforts at MGM Mirage and Harah's is eliminating middle management positions, rather than the usual tasks for employees interacting with customers. The two companies are also committed to operating more efficiently at all levels of business by negotiating more favorable contracts and uniting departments, including efforts that were not priorities in the good times.
Firing regular workers is the quickest and easiest way to cut costs. But it has been a last resort for strip casinos as they struggle to predict how well discounts, specials and other events will work in attracting fickle customers during this economic crisis.
As an alternative, more casinos are turning to technologies such as kiosks and marketing software to reduce labor costs. This is a strategy that manufacturers have been using for years. Some casinos have reduced entertainment schedules and closed restaurants or reduced hours. 파워볼사이트